How About Some Financial Health Insurance?

June 27 is is #FinHealthMatters Day for 2017.  You can join the movement to show what #finhealth means to you.  To me, it simply means being able to continue living within my means.

Almost half the adults in the country struggle to have enough income to pay their expenses, and unfortunately, there are really only two ways to deal with that problem:

  1. Raise your income.
  2. Lower your expenses.

A great first step it to simply set up a budget and follow it for a few months so you discover what your income and expenses really are, and then look for ways to stop any leaks.

There is an endless supply of online articles about lowering your expenses, but most of them focus on little things like eating out less or reducing cable or phone expenses.

While every little bit helps, I’ve got one suggestion that has worked for me that has a much larger impact: the last time I bought a new car was 1975 (when I bought a brand-new Plymouth Duster for about $2,400).  Ever since then I’ve simply bought cars that tended to be a few years old, usually paid cash for them, and driven them until the wheels were ready to fall off.  I’ve only driven six or seven different cards in over 40 years, and the last few were simply cars Bevie was replacing with something newer.  The strangest car I drove in that period was a hearse, and I wasn’t entirely sad to watch it towed away when its break linings went bad.

What’s the longest period you ever when without a car payment?  Wasn’t your budget easier to manage during that time?  Think of how much money you could save over a lifetime if you stretched that out.

The average car now costs over $33,000, almost $4,000 more than I paid for my first house.  The really bad news is that the average car loan is now approaching 72 months.While the average interest rate is below 4%, consumers with FICO credit scores less than 620 pay rates of 9% to 14%,

While the average car loan interest rate is below 4%, consumers with FICO credit scores less than 620 can pay rates of 9% to 14%, putting even more stress on their budget.

The largest debts people have are typically housing, student loans, and car loans.  Perhaps instead of reading a few articles on ten ways to save money in your budget, you should spend a little more time looking for ways to get the last piece of that trio under control.

With a more entertaining story about cars, here’s Johnny Cash singing about another way to get a car.

A Different Kind of Billion Dollar Idea

From time to time I post a billion dollar idea that merely requires the application of non-trivial resources.  Today I want to report on an idea somebody else had and suggest that you help them reach a goal.

Helping people stuck in poverty is a challenge we can’t easily overcome, but in 2005 a new non-profit group was founded that enables anybody to help.  Kiva makes small loans (from under $1,000 to just a few thousand dollars) to entrepreneurs who need money to start or expand their business.  While most of the loans seem to be targeted to third world countries, there are even some loans made in the United States.

Kiva takes money from donors (like me!) and lends it out to various recipients in over 80 different countries.  Kiva does not make all the loans directly themselves, but they also support a large number of other organizations that they have vetted and worked with successfully (similar to the way Second Harvest supplies food to other food banks that actually distribute the food).

Over 97% of the loans made through Kiva have been repaid, an exceptionally high rate for small businesses.  To reduce possible exposure for individual investors, Kiva usually only applies a fixed amount of $25 to a specific loan (you can loan more than that to a specific individual or group, but I’ve never tried to do that).  Thus, to fund a loan for $1,000, Kiva puts $25 loans together from a group of about 40 individuals.  Details about the loan process are shown here.

All the loans have been investigated and approved before Kiva lists them on their website.  You can easily browse the loans that are awaiting full funding.  For each loan, Kiva shows some useful details:

  • a picture of the person or group asking for a loan
  • what the loan will be used for
  • the amount that has been pledged so far
  • the remaining amount that Kiva needs to complete the loan
  • if available, how much of your donation will be matched

You can search for loans using a large number of categories, including retailers, agriculture, water and sanitation, men or women, groups, single parents, and you can even search loans that are closest to being fully funded.

Note that I refer to the amounts you put up as donations.  In actuality, you are making loans, not donations, and most of the money will probably be returned as the borrower uses the money to enhance their livelihood.  You get an email every time one of your loans gets a repayment. No interest is charged the borrower or paid to you, but seriously, when was the last time a bank paid you any appreciable amount of interest on the money you left in your checking and savings accounts?  Once the loan is repaid you can certainly have Kiva pay it back to you, but it’s a lot easier to simply leave it with Kiva and lend it to somebody else.  Seriously, the people asking for money to buy goods or supplies or tools will make much better use of that $25 than any of us would.

My first exposure to Kiva came about when one of my sister-in-laws made a Kiva loan in my name at Christmas one year.  I’ve continued making loans as the funds are returned to my account, and from time to time I’ve added another $25.  It’s really painless for me and can be life-changing for the people who get loans from Kiva.  I’ve made hundreds of dollars in loans over the years without ever having to come up with that much money.

When making loans there are some administrative costs, but 100% of the money you lend goes directly to the recipient you choose: Kiva does not allow any of that money to go to any administrative fees.  While Kiva “suggests” an additional donation to help defray Kiva’s expenses, you never have to do that to make a loan; donations made specifically to support Kiva’s expenses eventually cover those costs.

Rather than link to a song today, I want to link to a special page from Kiva: the total loan amount Kiva has made is about to roll over to a billion dollars #1BillioninChange.  Here’s the total today; take your lunch to work for a few days, or skip a movie or two, and simply take advantage of the link on their page to make the world a little better place.