Trying to follow

Since joining Kiva, a website allowing users to provide micro-loans to entrepreneurs in developing countries, my family and I have made over 20 loans ranging from $25 to $75. Though we considered it a donation, the idea of it being a loan, and the fact that I can pull out my money after the loan has been repaid has definitely shaped my perspective on it to being considered more of an “investment” in doing good.

You can imagine my disappointment then when I found out that one of the loans had defaulted before repayment. It wasn’t terrible, just $12.60 that I didn’t get back in the loan repayment, but I still wanted to find out what happened.

The entrepreneur we lent to was a 60 year old woman named Joyce who used the $125 loan she was given to purchase additional animal feed in an effort to boost her cows milk supply and bolster her monthly income. She received the loan and managed to pay it back monthly through out the year, but according to the Kiva records, stopped just $20 short of repayment. It turns out the problem with the repayment came not from Joyce, but from WEEC, the field partner organization in charge of the loan. There is no further information on Joyce, I pray her cows are healthy and well fed, but here is what I found out about WEEC:

“WEEC is currently experiencing significant operational difficulties that have caused all active WEEC loans to default. It is important to note that in many cases the entrepreneur repaid the loan to WEEC in full and did benefit from your loan. However, WEEC has experienced operational problems caused by a number of factors, including the unexpected death of WEEC’s founder and Executive Director, poor management of funds, and economic and political unrest in Kenya. Together, these factors produced a situation where Kiva is unable to get a 100% clear account of your specific loan and recover your full loan amount from WEEC.” (read more here)

You, like I, might have heard some of the news regarding Kenya over the past few months. I even have a friend who works with Opportunity International in Kenya, so the news was even more personal then most international news. However, it still felt miles away, distanced, and surreal, just like nearly everything else I read about.

Now this might seem silly, but the defaulted loan and the $12.60 I lost in my Kiva investments, it made the world seem a little smaller. The situation in Kenya a little more real. I pray Joyce is okay, and that other entrepreneurs like her where not negatively affected by the unrest or the loan defaults. As for me, I’m going to keep investing, whether for false motives or true, I hope my vested interest will bring me closer to other people around the globe.

P.S. The $25 we loaned through comment love was fully repaid. I’ve reloaned it again, thanks for your support.

One of the things reading The Paradox of Choice made me aware of is how much of our conversation is about buying stuff. We talk about what we are thinking of buying, be it house, car, electronics, friends share their opinions of their own house, car, product or the other ones they tried when shopping themselves. Or, we talk about things we already purchased, whether we are happy with it or not, the deal we got, the money we saved. I don’t know how much of our actual conversations as a society consist of this kind of talk but I would estimate it to be 30-50%, is that too high?

Fortunately, not all conversations have to be about stuff, but I think we often find we don’t have anything else to talk about. I think there used to be the saying that Religion and Politics were Taboo subjects, because they where controversial, and so you should avoid talking about them. I wonder if the realm of taboo subjects has greatly expanded, that it pretty much includes everything except for buying stuff. Well, I guess it includes the weather, TV shows and sports, but other then that most surface level relationships and conversations never seem to get deeper then that.

Q: What’s your estimate of how much of your conversations in total is talking about Stuff and purchasing stuff.

I’ve been talking about the house and budgeting a bit and I wanted to get into some discussion about budgeting and housing. This will be more about how I ‘think’ about it it terms of my budget more then anything, you’ll find it will kind of pan out the same. I’m not doing anything magical, but I still think the discussion is important.

I’ve mentioned before that in our month to month budget we’ve allotted $400 to cover rent and all utilities (internet, phone, gas, electricity). In the past we’ve lived with other people, making this possible in multiple different renting situations. Now, we’ve purchased our first home, but I still see it in a similar way.

Each month we have a $400 budget to cover the cost of our utilities and other recurring house costs, like taxes and Mortgage insurance. Even though tax and MI is added into our mortgage payment each month I think of them separately because they are costs that will be recurring even after we’ve paid off our mortgage.

The rest of the mortgage payment, I think of as an investment. Currently, my wife and I are making a lot more money then we ever have before and a ton more then we’ve needed to live on our month to month budget. The question, as I’ve asked before, is what to do with that money. After considering it last fall, we felt that it would be wise to invest that money in a house. Sounds familiar doesn’t it?

We could’ve taken that money and invested it in the stock market, or we could have given it all away, but the opportunity to pay off a house and never have ongoing housing costs (minus the $400 or so recurring) seems like a wise investment.

So, in my month to month budget we obviously have a mortgage payment, but I’ve only been considering the recurring costs as part of the equation. It might seem silly, but it makes sense to me. (did it make any sense to you?)

My post about what they didn’t tell me when buying a house had some good dialog. One of the things that came up, because I mentioned it off handedly in my post, was about equity. I figured I mentioned it, so I might as well share a little of my thoughts concerning it too.
First of all, “Equity” is a word that gets thrown around a lot when you start looking for a house. I realized the big selling point to buying instead of renting is sort of focused in the “Building Equity” vs. “Throwing away your Money” debate. This debate is usually based on the assumption that you can find a house with a mortgage payment equal to what you were paying for rent and thus slowly be building equity in a home (granted it will take 30 years to get there) rather then giving all your cash to your landlord.
With one exception, we’ve spent less then $500 a month on rent (including all utilities and phone/internet), on average about $400. Granted, this has involved sharing our living space, but the reality is it was only $400 a month coming out of our pocket. I see their point about building equity, but I still see the argument being made with an assumption of how much you should or need to spend for your basic living cost.
Secondly, “Equity” is based on the idea that your home has X dollar value. That is you have Y equity because your home is worth X dollars and you only owe the bank Z dollars on it. However, like my mother always told me about my baseball cards growing up, “They’re only worth that if someone is going to pay you for them,” and more specifically to houses, “if your going to sell it.” I don’t plan on selling our house. Not now, and not for the long foreseeable future. That being the case, the only benefit the X dollar amount has to me is to determine how much I owe in real estate taxes.
Finally, “Equity” is valuable to most people, because it allows them to stay in a continuous cycle of debt pursuing bigger and better toys. If you have “Equity” in your house, you can get a loan from the bank to buy a boat, or a jet ski, maybe a vacation home. Granted that pretty much means your tossed your “Equity” out the window, but hey, it’s your equity so who am I to judge. This house is the last time I plan on borrowing money ever (I’m young and maybe naive so I might be silly for saying this).

So, Equity, Shmequity, I’ll just take the House, Thank you very much.

We’ve been moved into our new home for about one month now. I’m sorry I haven’t done well at keeping you up to date on how things have been going here, but you can tell from the lack of updating that it has been busy. I’ve discussed our decision to buy on the blog a bit, but I’ll probably try and articulate it more in future posts. For now, I wanted to start informing my non-homeowner friends of somethings I wasn’t prepared for. This might turn into a series, but for now I just have one important tidbit to share. It has to do with justification.

Those who know me well, or have read my blog regularly, know that I’m fairly frugal when it comes to making purchasing decisions. If the item can wait to be purchased it waits. If I can buy it at a thrift store, we shop till we find it. If it’s not a need then you just have to save you fun money for it. All in all, I don’t like going out and spending money too much. The month of December was all about spending money. I won’t give you a total dollar amount but let’s just say we spent more in the last month then we normally budget for an entire year (that’s not a joke). Most of what we spent money on were home repair items: working appliances, furnace, water heater, service visits, roofing, replace windows, plumbing work, working kitchen faucet, etc. The cost wasn’t a surprise, and though there where some things we could possibly live without (water heater?), generally speaking they were all ‘needs’ for a basic USA standard of living. What I wasn’t prepared for though, was the draw and temptation as I was regularly whipping on my checkbook, frequently shopping at Home Depot and generally thinking about home improvement.

I found myself looking around the house and thinking about what need to be fixed, repaired or ‘improved upon.’ Not that any of these things are bad, but they just fit into different categories. Having a working kitchen sink is one thing. Installing a waterline for your automatic ice maker is different. We’ll probably install the waterline at some point, but how I budget for it will be different since it is not a ‘need.’

Walking around Home Depot, I found my self ’shopping’ more and more. I wasn’t just going in with a list of the things I needed, I was walking the aisles, looking at prices, thinking about how certain ‘improvements’ would look in our home. Again, I’m not saying this is bad, just that you need to be aware and careful about it. We installed an electric thermostat, I feel like it was a good decision. Our doorbell chime is missing it’s cover, it’s just a black box with wires on the wall of our living area, but I don’t think it’s essential that it gets covered up. The ceiling fan in my daughter’s room is kind of ugly, but it’s not necessary that I change it. I might get a new ceiling fan, but I’ll budget for that differently then I will for a working refrigerator.

Just like most people, I want ‘nice’ stuff. The commercials and media have an affect on me too, and though most of the time I combat it, the desire is still there. What I find happening over the last month is a wide range of justifications seeping into my thinking. First, I would justify the thought of buying something as a ‘need’ because it was a part of fixing up my house. I’d try and convince myself that it was to ‘add equity.’ Or, I’d justify it by considering that we don’t plan on moving for years to come so a nice good quality item is worth it and justified. I’ve been coming up with all kinds of justifications when the real motivation underlying it all is that I simply wanted this item or that.

The point is not to say that any of these items or home improvements are bad, simply that we must be clear about whether they are ‘needs’ or ‘wants.’ And we must be careful about what our motives are, never deceiving ourselves into justifying selfish decisions in the name of something else.