Personal ponderings from a natural night-owl!

Posts tagged ‘Finance’

Small Drops Make an Ocean


Anyone still out there? Somehow, I got busy doing other things and blogging took a backseat to life for…um…almost 6 months. But I made an new discovery that I have to share with you, so my blogging haitus has to come to a close!

Just so you know, I believe that one person CAN make a difference.

I believe that the entire world is my neighborhood.

I believe in helping others to help themselves.

I believe that I am truly blessed and therefore have a responsibility to share my blessings with others.

I believe that the distribution of my two most precious resources – time AND money – shed a spotlight on what I truly value.

So…here’s the problem. I like to help others, but I am usually reluctant to give money because of the potential for misuse and abuse. And, too, a large percentage of cash donations is too often used for program administration and doesn’t directly benefit the intended recipient. The solution to this problem is to give of my time and talent, but it feels hard for me to make a difference in the wider world community with my time and talent alone. But I found a website that solves my problem.

Kiva LogoIt’s called KIVA and it helps willing lenders make loans as small as $25 to entrepreneurs in need in developing countries. Notice, I said LOANS – not gifts – so the money comes back to you. It’s called microfinancing. This person-to-person small scale financing is neat, but the site also allows you to browse the stories behind the funds requested and select your own loan recipient. So as a lender, I get to pick the entrepreneur I help to fund!

Here is one entrepreneur who got funded recently: “Mrs. Song Sron, 38, lives with her husband and five children [in Kampong Cham Province, Cambodia]. She raises pigs at her house and also owns a plot of farmland where she grows rice, making around $1.50 a day. Her husband, Mr. Chai Thu, 38, works as a palm juice collector. Everyday he climbs the palm tree to tap the palm juice, refines it to sugar cane and sells it in the market, earning about five dollars a day of income. Two children work in a factory earning $60 each per month. The others are students and help the parents work at home when they are not attending school. Mrs. Sron is requesting a loan [of $600] to purchase a cow to plow her field. This will help to reduce the family’s expense as she has been hiring a tractor to do this work.”

And here’s another: “Sonia is a beautiful woman who works breeding sheep and chickens in her home [in Tarma, Peru]. By selling the animals Sonia is able to keep up with her house expenses and her personal necessities. In her picture she is showing us a chicken while she waits for her sheep to return from their monthly visit to the veterinarian. She would like to build a better space for her animals and therefore is asking for a loan [for $150] to purchase the necessary materials.”

I think what I like about this site is that 1) you really feel like you are making a difference in someone’s life and 2) the money actually comes back (98% of the time) and can be reinvested, so it doesn’t feel like a bottomless pit of need.

You can also browse the profiles of lenders where some talk about why they participate in this site. One striking response: because small drops make an ocean.


Sub-Prime Surprise?

I don’t understand why everyone is so surprised by the sub-prime debacle. Let’s look at some decades-old factors which have gotten us where we are today:

1. Banks actively encourage people to buy more house than they can afford. All the reasonable people I know who have purchased a house in the last 15 years have been shocked by the amount of credit for which they were approved by the banks. We’ve been in our house for 11 years, but even back then most banks were willing to lend us 50% more than we knew we could afford on a month-to-month basis.

2. The President of the United States told people it was their duty to spend more to help the economy. Bush’s position during the economically shaky period after 9/11/2001 was to encourage people to spend more to prop up the economy, regardless of whether or not they they had more to spend. (Hey – why not? – the government does it every day!) Unfortunately, people listened and in 2005, the U.S. saving rate fell to 0%. More spending equals less savings equals less cushion for the inevitable downturns in life.

3. ARMS. Adjustable rate mortgages are profit centers for banks and bum deals for home owners. The only time an ARM makes sense is when you pay it off before the rate bumps, but no one does that. This modern “ARMS race” has made the market more active as people who normally would have held their mortgages for 30 years are now refinancing every 2,3, or 5 years looking for the best deal, resulting in unnecessary extra closing, appraisal, and title fees.

4. Financial Secrecy. Schools teach math, but not personal finance (at least, not on a high school level) and discussion of money within families is often as taboo as politics or religion. And not only do we NOT discuss finances, we often make monetary decisions based on what our parents did without knowing the financial reasoning. So if you can’t learn personal finance at home or school, where do you learn it?

So now banks and mortgage lenders are is in a bind of their own making. George Bush appears to be uncharacteristically responsive to public opinion, deciding yesterday to help bail out people who are in financial trouble. He’s probably working to help his big business pals, because he’s obviously not listening to the chairman of the Federal Reserve.

Bernanke maintains that it is not the government’s responsibility to bail out either individual borrowers or financial institutions who made bad loans. He said that it’s not “appropriate…to protect lenders and investors from the consequences of their financial decisions.”

Bad choices have consequences. What a concept! So what do you think? Do you as a taxpayer feel it’s a good use of your money to bail out people who made bad financial choices?

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