Several years ago while waiting in a doctor’s office for a regular exam, I found on his magazine table an advertisement piece from Merrill-Lynch Investment firm. Having just started a career in selling insurance, I was naturally curious as to what this particular piece of propaganda was going to spin to a potential clientele.
It started out with a very positive picture of a happy lady looking over the shoulder of her husband who was opening an envelope from their financial advisor. The paperwork inside showed a bar graph of various colors depicting the results of the couple’s investment strategy. The note at the bottom of the graph congratulated the couple on their favorable choices in allocating their funds to various investment strategies.
On the next page, the caption began with the question, Should you invest? The question was answered with a one word response in bold type--maybe. This was followed up with a narrative which described several things to be considered before exploring the possibilities for investing.
I did not keep the article but do give credit for the information which led me to observe the monetary decisions one should make in preparation for the time one would want to attempt their hand of putting money to work in the form of investing. Here’s what I came up with:
Saving vs. Investing
To be clear one needs to understand there is a difference between saving and investing. In saving there is little or no possibility of loss of the principal amount being saved. Things like hiding cash under the mattress on your bed, placing cash in a coffee can and burying it in your backyard, hiding cash in a cookie jar, and the most common, cash in a savings account at your local bank, are examples of savings. What you put in you can take out without any requirements controlling your access to the funds–not very glamorous and certainly no bragging rights to beat your chest about when standing around the water cooler at work extolling your expertise at making money without working for it.
Investing on the other hand has an element of risk which in some scenarios could jeopardize all the money you are exposing to the risk. Venture capital, acquisition of common stock in a brand new upstart company, a promissory note payable when the company being invested in reaches a certain level of profitability are on the extreme, whereas an investment in a mutual fund which has been in business over 40 years with a track record of 6% rate of return, or bonds in a well established manufacturing firm, could ease the stress of investing.
Charitable Giving
So consider doing this before attempting your hand at choosing a venue to carry you to the “promised land.”
Whether you consider yourself to be religious or not, here is a jump off spot to consider. The last quoted prophet in the Old Testament, Malachi, left this admonition, ”Will a man rob God? Yet ye have robbed me. But ye say, Wherein have we robbed thee? In tithes and offerings. Ye are cursed with a curse: for ye have robbed me, even this whole nation.
“Bring ye all the tithes (a tithe being 1/10th of income) into the storehouse, that there may be meat in mine house, and prove me now herewith, saith the Lord of hosts, if I will not open you the windows of heaven, and pour you out a blessing, that there shall not be room enough to receive it.” (Malachi 3:8-10 KJV).
When one considers all he has, is giving back 10% to bless the lives of others too much to ask? That should be motivation enough to get us started, but consider the following as extra incentive to help us establish a habit of giving. Here is what Elizabeth Dunn, a psychology professor at the University of British Columbia in her treatise on being happy discovered, ”. . . people who donate are happier and healthier than those who don’t. Giving is not just heartwarming, it may be quite literally good for our hearts.” People who donate to charity are much happier — and healthier (nypost.com)
Here are some interesting as well as informative observations regarding philanthropic dynamics:
- Six out of ten U.S. households donate to charity, and the typical household’s annual gifts add up to between two and three thousand dollars.
- Per capita, Americans voluntarily donate about seven times as much as continental Europeans. Even Canadians give about half the total volume of an American household.
- Of the 358 billion that Americans gave to charity in 2014, only 14% came from Foundation grants, and just 5% from corporations; the rest 81% came from individuals.
- Study has found the biggest givers are found to be concentrated in the “Bible Belt” states or where Mormons (reference to members of The Church of Jesus Christ of Latter-day Saints) make up a large portion of the population.
Why this philanthropic phenomenon? Foremost is the fact that ours is the most religious nation in the industrial world. Religion motivates giving more than any other factors; second is our deep-rooted tradition of mutual aid; and third is the potent entrepreneurial impulse in the U.S. which generates overflowing wealth that can be shared.
Jim Calaway, a successful oil businessman told Philanthropy Magazine in 2015, “I came to realize that expanding my philanthropic activities could be both meaningful and fun,” while telling in an earlier interview with The Chronicle of Philanthropy, “making a lot of money and spending it on yourself is not a lot of fun. What is a lot of fun is to live modestly so that you can give to the common good. That’s where happiness really lies!”
(https://www.philanthrophyroundtable.org/who-gives)
Emergency Funds
Perhaps one of the most difficult experiences we will have as a global society is the one we are going through right now with the pandemic gripping the world with nothing short of terror. Going along with the fear of getting sick is the fear of losing everything we have labored to acquire; for we can get better, but what happens if we can’t make payment on our homes or vehicles? Even more than that, how am I going to be able to feed my family if the food distribution system breaks down? The following suggestions can help one sleep better at night, knowing these circumstances have been addressed.
Along with a 72 hour emergency kit consisting of fire starting apparatus, battery operated radio and other communication devices, sleeping bag, tent, compass, adverse weather clothing, water, and food, one should consider having on hand liquid funds available for immediate access. If electricity is out, your ATM card and your blue ribbon mutual fund bearing 8% return is useless if you need a tank of gas or something to eat.
The psychological toll this pandemic will hoist upon us will be far-reaching for even those who were prepared at its outset. It is really paradoxical that homosapiens who have the ability to foresee future risks of hunger are the slowest creatures to put something away for a rainy day. Some people have even thought of storing food supplies to be hoarding and therefore immoral somehow.
Disability Income
Did you know your chances of being disabled for 90 days, and up to 5 years, are greater than your chances of dying between the ages of 35 and 65? Such is the finding in the 1985 Commissioners Individual Disability Table A. 1985 Commissioners Individual Disability Table A – Bing
You are also more likely to lose your home due to disability than from a total loss by fire. Yet not many place a priority on purchasing disability income insurance over homeowner insurance. We all are to some degree inflicted with the illusionment of invulnerability–it can happen to you but not to me. The reality of this illusion sets in when one who becomes disabled is now consuming but not producing anything toward their well-being.
Our lives are balanced by being able to replace goods we use; but when we are faced with not being able to produce but only consume, life goes into a tailspin. Just look into the eyes of an individual who has lost his or her ability to produce and you can see what real fear is like. Not many things are worse than going from being an active producer to a depressed consumer.
So one doesn’t fall into that category, having access to at least six months of hard cash, credit cards or other quickly negotiable notes for expenses will allow you to sleep more calmly every night.
Guaranteed Rate of Return Instruments
The few monetary instruments which fall into this category are not flashy or exciting, but like a good work horse they are reliable and can be counted on. Outside of the normal savings accounts which don’t really qualify as investment instruments, items like treasury notes, savings bonds, and whole life or permanent life insurance fills this before investing category. They all have a set rate of return which one can look at on any given day to discover their value. When you purchase a treasury note or a savings bond, the certificate tells you what interest you are being paid and when it is payable to you. A permanent whole life policy has within the legal contract a table of guaranteed returns you can expect in any given year of the policy. Most also have a dividend projection, but it is not a guarantee, so that should be noted.
Stomach for Investing
At the end of the Merrill Lynch brochure, it concluded with this observation, “If you can meet these requirements before attempting to invest, have the discretionary cash flow to work with and ‘IF YOU HAVE THE STOMACH FOR IT, then good luck and welcome to the world of investing.”
Pretty sound advice and well worth considering.
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