A Christian’s Perspective on Debt-Free Living

A Christian’s Perspective on Debt-Free Living

Christ mural

[Morning! Please welcome to the site today, Larry Thomas, who shares his financial recovery going through Dave Ramsey’s baby steps program. If you can believe it this was actually a *comment* left in response to our post on 6 things Dave Ramsey is Wrong About, but had to share it here in the form of a blog post as I thought it made for an excellent counter-perspective. Here’s his note below briefly edited for clarity. Thanks, Larry!]


In January of 2005 I was organizing the financial information for the preparation of my 2004 tax return.

To my amazement, I found that during the 2004 year my wife and I’s income was just over $100,000 before taxes. I proceeded to add our joint income for the previous years from 1999 to 2004. It came to more than $540,000.

I was stunned.

Where did that over half a million dollars go? What did we have to show for it?

As much as I could tell, it was debt. How did we get into this mess? Why were we always broke? When we added our debts together they totaled over $68,000 not including the house mortgage.

When Barbara and I were married in 1992 we kept our finances separate. Since I was coming off of a divorce from my first wife, I had debt and alimony payments. Because of these issues, we decided to keep our finances separate. Since my income was more that Barbara’s income we divided the bills proportionately according to our incomes.

We both had car payments, so each of us paid our own car note. Since I made more money, I paid the house note and purchased the groceries. She paid the utilities and paid for household items and housewares. We each paid our own car insurance.

The disconnect in our separate finances caused us to build separate lines of credit and separate paths to going in debt. This disconnect had each of us thinking our debt was under control because we did not know what debts the other had accrued.

At some point in time, about 2002 or 2003, Barbara decided to work an extra job. I thought it was to earn extra money for Christmas spending. Little did I know that it was to mask over spending. I myself had run up credit card debt on household items for repairs and my hobbies of wood working, golf and liquid libations. But I thought I could handle the additional debt. What I did not expect was the continuous increase of interest rates on my multiple cards from single digits to double digits, with some of them reaching as high as 27%.

I thought I could borrow my way out of debt. So I took out lower interest credit union loans to pay off higher interest credit cards. But all that did was extend the amount of time that I remained in debt, and I still had the credit card and personal loan debt.

Looking back to ’05 I started listening to financial guru Dave Ramsey on the radio. I had seen him on a CBS feature on starting the New Year right by getting your finances in order. It intrigued me so much that I had to learn more about controlling my finances and not letting them control me.

Dave Ramsey prescribed what he calls the Baby Steps. The Baby Steps are no quick fix. They involve a lot of hard work over a period of time. But in order for them to work, both Barbara and I had to work together and combine our financial life sans debts.

To start the Baby Steps, we first had to commit to living on a budget and learn how to use budgeting tools. I also took on an extra job to help pay down debt by working part-time at Radio Shack. We have found that there is also a spiritual component to controlling ones finances.

Below are the Baby Steps in case you’re not familiar with them. I’ve added some bible passages to go along with them that help illustrate the point.

#1. $1,000 in an Emergency Fund

After you do your first budget, save up $1,000 as fast as you can. Just take care of the essentials (housing, utilities, transportation, food, and clothing) and make the minimum payments on your debt until you get the $1,000 saved up.

Why have an Emergency Fund?

An Emergency Fund will help you keep your head above water while you’re getting out of debt. As soon as you start this journey, life will happen. Murphy’s Law goes into effect. Murphy might even move in with you. For example, your refrigerator might break down but guess what? You have an emergency fund to take care of that so you don’t have to stop your debt snowball.

“We should make plans–counting on God to direct us.” – PROVERBS 16:9 TLB

#2. Pay off all debt (except the house) utilizing the “Debt Snowball”

The debt snowball is simple, yet effective. First, list all your debts smallest to largest. Next, make minimum payments on all the debts except the smallest one. Put as much money as you possibly can on that debt.

Once the smallest debt is knocked out, carry the money you were putting on your smallest debt up to the next smallest debt and attack that one. Over time, you’ll knock out debt after debt until they’re all gone!

“The rich rules over the poor, and the borrower becomes the lender’s slave. The Lord will open for you His good storehouse… bless all the work of your hand… you shall lend to many nations, but you shall not Borrow” – PROVERBS 22:7, DEUTERONOMY 28:11 NAS.

#3. 3-6 months expenses in savings for emergencies

Once your debt is gone, build a larger emergency fund of 3-6 months. This emergency fund is important as it will serve you in case loss of employment occurs. This fund allows you to continue living the way you are without stress and fear. It gives you time to choose your next step and place of employment. It allows you to stay on the plan.

“A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences.” – PROVERBS 22:3 TLB

#4. Fully fund 15% into pre-tax retirement plans and ROTH IRA, if eligible

Once you’ve reached this point, it’s time to put a little away for retirement! Take advantage of your company’s 401k if they have one; put money in mutual funds… whatever it is, just start putting away 15% of your income.

“There is precious treasure and oil in the dwelling of the wise, but a foolish man swallows it up.” – PROVERBS 21:20 NAS

#5. College funding

You have kids? Guess what… high school graduation comes before you know it! What better gift to pass on to your children than a college education. They might not understand now, but they will someday!

“Let each of you look not to your own interests, but to the interests of others.” – PHILIPPIANS 2:4 NRSV

#6. Pay off home early

It’s time to own a home! On Baby Step #6, you pay off your home as fast as you can. Put as much extra money as possible toward your house payment.

Once that house is paid off, you just gave yourself a raise because you have NO PAYMENTS, BABY!

#7. Build wealth and give!

Keep socking away money and making it work for you so that you can retire with dignity. By the time you hit Baby Step #7, guess what has happened? You lived like no one else so that later you could live and give like no one else.

“Don’t forget to be kind to strangers, for some who have done this have entertained angels without realizing it!” – HEBREWS 13:2 TLB.

The Baby Steps are no quick fix. They involve a lot of hard work over a period of time. But if you work the plan, it will work for you.

And trust us, being debt-free, being on the other side – is a wonderful feeling. It’s all worth it. I just got a layoff notice today amid the COVID-19 pandemic and don’t know when I will go back to work. If I did not have my debts paid off and have an emergency fund I would be in a bad situation.

(Though please note, I get a pension since retiring from the city in 2016, and I am also a part-time tax preparer now so I am not totally out of income. You can find my site here if you live in the Ohio area and need assistance – ThomasTax1040.com)


[Prefer to get these blog posts *weekly* instead of daily? Sign up to my new weekly digest here, and get other thoughts on life/business/money as well: jmoney.biz/newsletter]

from Finance https://www.budgetsaresexy.com/a-christians-perspective-on-debt-free-living/

COVID-19: The Butcher, the Brewer, and the Baker

By James Kwak

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

—Adam Smith, The Wealth of Nations

Image by Mandy Fontana from Pixabay

This is the most famous line from the most famous justification of market capitalism. Smith’s point is that it is individual self-interest that drives the economy. In the next paragraph, he goes on to describe how gains from trade explain the division of labor in a modern economy:

“The certainty of being able to exchange all that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men’s labour as he may have occasion for, encourages every man to apply himself to a particular occupation, and to cultivate and bring to perfection whatever talent or genius he may possess for that particular species of business.”

As I’ve said before, “whenever the butcher, the brewer, the baker, or the invisible hand is invoked, the reader should hear alarm bells going off.” The COVID-19 pandemic provides a particularly stark demonstration of the problems with Smith’s comforting fable and how it is used in contemporary politics.

Market capitalism depends on the happy assumption that everyone has some marketable skills: something that person can do that can be exchanged for money, with which she can then exchange for everything else that she needs to survive. If you believe that premise, then you can criticize poor or unemployed people as lazy good-for-nothings and destroy the social safety net with a clean conscience. This was the philosophical justification behind welfare reform, for example, which placed created work requirements for and imposed lifetime benefit caps on recipients, assuming that all they needed was sufficient incentive to find a job and get to work. Indeed, it is the philosophical justification behind the modern conservative economic platform.

But think about what is happening right now. At this moment, to a reasonable approximation, the only people with any marketable skills are those in health care, manufacturing of drugs and medical supplies, and food production and distribution, and certain critical infrastructure functions (electricity, gasoline, communications, etc.). That’s why tens of millions of people could suddenly be out of work, through no fault of their own.

So what do we do? We help those people. The Federal Housing Finance Agency suspends foreclosures and evictions for homeowners with federally-backed mortgages. States expand and accelerate unemployment benefits. Even the Trump administration proposes sending cash to every person in the country to help them pay the bills. (They also want to create a giant slush fund to help business owners, which I don’t agree with, but that’s not the point here.) We do what we can to make sure that people can stay in their homes, get enough food, and take care of their families.

At any moment in the past decade, there were millions of Americans who couldn’t find work, or couldn’t get enough hours to make ends meet—through no fault of their own. They came from broken households, or poor neighborhoods without good schools, or countries torn apart by war. Or they were disabled fighting in Iraq or Afghanistan, or they suffer chronic medical conditions that limit their ability to work. Or they held full-time jobs that suddenly vanished one day because people in other countries could do those jobs more cheaply. The prevailing attitude to these people—at least judging by the economic policies put in place by the politicians who were popularly elected—was: screw them.

But what happened to them is no different from what happened to most of us in the past week. The only real difference, as far as I can see, is that they were a small enough minority that most people could pretend they didn’t exist, or that their problems were their own fault. Now there are so many of us in the same bucket that we can’t—or don’t want to—say the same thing about ourselves. Sure, I could have become a doctor, which would give me a marketable skill right now, but I don’t think it’s a moral failing that I didn’t.

So the lesson I think we should all take away from this crisis is this: If someone cannot provide for herself and her family in a market capitalist economy, that is not a moral failing on her part. There are always people who struggle to get by, through no fault of their own. Indeed, I strongly suspect that there will be more and more of them in the future, as robots and artificial intelligence get better and better at doing things that were once the sole province of humans. As a society, our duty is to care for the welfare of all of our members—and, yes, that requires action by the government, just as tens of millions of people will soon be relying on government checks.

The problems of market capitalism are always there to see, though many people choose not to look. Perhaps this crisis will open our eyes.




from Finance https://baselinescenario.com/2020/03/24/covid-19-the-butcher-the-brewer-and-the-baker/

Project to keep you busy: Abraham Lincoln Penny Portrait!

Project to keep you busy: Abraham Lincoln Penny Portrait!

penny portrait kits

Okay guys,

Got something for you if you’re running out of ideas over there!


Feast your eyes on this bad boy:

The Abraham Lincoln Penny Portrait!

$19.99 + Free Shipping

abraham lincoln penny portrait

If that doesn’t scream “Great way to use your time” I don’t know what will! Lol…

But the best part? By the end of it you’ll have a work of art worth at least $8.46 😉


Here’s what the kit contains if you’re wondering (and I know you are), and a MAJOR shout to the fine folks at PennyPortrait.com for devising such a joy to work on…

You’ll have to supply the frame to feature your masterpiece in, but the rest they’ve covered + more.

Each kit contains:

  • 18 x 24 Penny Portrait Poster
  • Genuine 1943 Steel Penny
  • Assembly tips & tricks handout
  • Booklet with facts and info about
    • Abraham Lincoln
    • Lincoln Pennies & Coin Collecting (!!!!!!!!!!!!!!!!!!!!!!)
    • Chemistry Experiments with Pennies
    • Impressionist Art & Optical Illusion
    • & Much, Much, More!

Did you catch that?? Lincoln facts AND COIN COLLECTING info!! If you don’t buy it for the project, then buy it to help kick-start our hobby again! Haha…

And again, at $19.99 it’s a steal.

More info –> PennyPortrait.com

In fact, you know what? I’ll go out and pick one up for you as a fun little giveaway today 🙂

Tell me one fun fact or quote you like from good ol’ Abe and you’ll be entered for it!

I don’t get a commission off any of this, just genuinely love the idea and think it’s a fun way to distract ourselves from all the not-so-exciting-news in the world right now…

If you end up grabbing one, shoot us a pic when it’s done and show it off! 🙂

j. money signature

abe lincoln quote*Giveaway open to U.S. and international, however international winner will have to pay the shipping and I’ll just paypal you the $20 to cover the kit.

Other awesome ideas we’ve featured in the past:


[Prefer to get these blog posts *weekly* instead of daily? Sign up to my new weekly digest here, and get other thoughts on life/business/money as well: jmoney.biz/newsletter]

from Finance https://www.budgetsaresexy.com/abraham-lincoln-penny-portrait/

Paula Humberg: making visible the unseen victims of climate change

Paula Humberg is a photographer, bioartist and biology student whose works make visible a series of ecological realities we tend not to be aware of: the plight of endangered mammals in the Baltic sea, the drop in pollinator populations in the Arctic, the so-called pests that are deemed “scientifically meaningless”, etc.

Paula Humberg, Causes of Death, Untitled, 2016

Dispersal, Humberg’s latest photo series and field experiment, visualises the effects of pollinator decline in Greenland, an Arctic region where climate is warming faster and the ecological communities are simpler and, thus, more vulnerable to the effects of climate disruptions. Another of her photographic works -perhaps the most heartrending I’ve seen this year- documents necropsies that are conducted on two marine mammals facing a number of human-induced threats: harbour porpoises and the Saimaa ringed seals.

Moving, eye-catching and featuring humble creatures, her projects bring about the kind of conversations that we might not be ready for but urgently need to engage in.

Paula Humberg, Dispersal, Slot A2 at 0h, 2018

Paula Humberg, Dispersal, Slot A2 at 72h, 2018

I contacted the artist as soon as I encountered her work in the excellent book Art As We Don’t Know It published a couple of weeks ago by the Bioart Society and Aalto University. Here’s our exchange:

Hi Paula! You are both a biology undergraduate student and a photographer. How did you go from photography to biology?

Actually it was the other way around, although I’ve always had trouble deciding whether to choose art or biology. I started studying biology over ten years ago but switched to art before completing my degree. While still studying arts, I begun having regrets and decided to finish the biology degree as well. My dream was to pursue a career in arts and combine my practice with methods and topics that are borrowed from biological research. At first it felt a little unrealistic, but in the past two years I’ve come to realise that it’s almost exactly what I am doing now.

Dispersal, a photo series and bioart project that visualises the effects of pollinator decline and climate change, was developed at Zackenberg research station in Greenland in collaboration with biologist Riikka Kaartinen. How did you get to create an artwork in a research station and work with a biologist? Was it the result of a call? Or were you the one who contacted them directly, asking if they’d help you with your project? How did it start?

Riikka and I met when we were both on a journalism course that was targeted to biologists and biology students. She had an ongoing research project at Zackenberg station and I found that really intriguing. The course was mainly about how to communicate scientific topics to a wider audience, and we had that in mind when we started talking about collaborating. In my experience biologists are often interested in sharing their findings to the public but it can be difficult for many reasons. We wanted to create an experiment that visualises the effects of climate change and also present the results in a format that’s more approachable than research papers tend to be.

I managed to get funding for the project only a few weeks before we were supposed to leave for Greenland, so I had almost lost hope I’d get to go. Travelling to the station is very costly because it’s so isolated. When I was there, spending my days netting flies for the project, I sometimes felt a little absurd. But I think that with all the environmental problems, it’s important people try to make new connections and look for alternative approaches. I was apparently the first artist to ever visit the station.

Biologists at Zackenberg estimate that the abundance of pollinating flies has decreased by up to 80% in the area over the past few decades. How about bee populations? Did they undergo similar drops in population too?

There are only two bumblebee species in Greenland and apart from honeybee colonies that were brought by humans, no other bee species live there. This is why muscid flies are such important pollinators in Greenland.

I realise my remark is going to sound very naive but i had assumed that with warming temperatures, populations of insects would have increased in Greenland. How do scientists explain the dramatic decrease in fly populations? Are other types of insects appearing and taking their place?

No, that is a good question! There is still a lot of research to be done on the topic (and I’m not an expert) but it seems some insect groups are indeed benefitting. Some research done at Zackenberg indicates the numbers of parasitic insects and insects that consume plants are increasing. On the other hand also detritus-eating insect populations appear to be declining. The distribution of species is changing as well. Some are moving northward along with the warming weather and therefore new species can appear.

Climate change isn’t causing just warmer but more extreme weather and, in some parts of the world, increased precipitation. I visited Zackenberg in 2018 after a winter that had seen a new snow record. The snow melted so late that animals and plants widely failed to reproduce. We had trouble finding enough flowers and pollinators for the experiment and there were hardly any birds around. Even with less extreme years, climate change can shift the beginning of flowering season. As pollinators aren’t adapted to this, a mismatch between plants and pollinators can appear.

Why put fluorescent pigment on 20% of the flowers in each patch only?

The idea of the experiment was to see how pollination succeeds (that is, pollen is spread from one flower to another) with different pollinator compositions. To follow the spread of pollen, we dyed it with fluorescent pigment. The pigment was put on approximately 20 % of the flowers so that we could see how many new flowers would have the pigment after the experiment. In the tents that had less muscid flies the pigment spread very little.

Paula Humberg, Dispersal, Slot A1 at 0h, 2018

Paula Humberg, Dispersal, Isolation Tents, 2018

Paula Humberg, Dispersal, Dryas octopelata, 2018

Paula Humberg, Dispersal, Test Assemblages, 2020

Why did you decide to include in the final artwork a collection of pollinators that were used for the test? What do their little bodies bring to the overall work?

As nature at Zackenberg is tightly protected, we were required to collect all traces of the fluorescent pigment. This meant also collecting and euthanising the pollinators. I definitely didn’t want to throw them away, but I also thought it might be a good idea to show what kind of pollinators were used. If you look closely, you can see some of the insect pins are empty; I wanted the collection to reflect what’s happening at Zackenberg.

Paula Humberg, Causes of Death, Untitled, 2016

Paula Humberg, Causes of Death, Untitled, 2016

Causes of Death deals with the human-induced threats to two endangered mammals, the Harbour porpoise (the Baltic Sea subpopulation) and the Saimaa ringed seal, through necropsy conducted on these animals. It’s not a series that is easy to look at. We know animals die, we’re just not used to seeing them dead. Unless it’s on our plates and then we can pretend they are just “meat”, not sentient creatures and that they have ended their life peacefully. 
Why did you choose to focus your project on Harbour porpoises and on Saimaa ringed seals? 

I got interested in the harbour porpoise while I was writing my BSc thesis on the status of the species in the Baltic Sea. I realised not many people even knew what a porpoise is. It was quite surprising as they are the only whale species in the Baltic Sea. I was originally going to focus only on porpoises and the threats they face from fishing. However, I encountered some problems in Germany where, because of political reasons, I wasn’t allowed to photograph animals that had died from getting tangled into fishing nets.

I had to rethink the whole project. Since fishing is just one of the problems, I decided to emphasise more the complexity of the threats and the research work that follows. The Saimaa ringed seals also face human-induced threats but they are quite popular in Finland, and due to conservation efforts their population has been growing. So, in a way, their story is a more positive one, even though climate change continues to be a major threat.

Paula Humberg, Causes of Death, Untitled, 2016

Paula Humberg, Causes of Death, Untitled, 2016

What did you learn during these necropsies?

Every year just in the North Sea thousands of porpoises die because of fishing. However, because fishermen are worried for their livelihood, they can be reluctant about co-operating with researchers. Very many fishnet drownings never get reported. The researchers have to be quite discreet if they want to build better communication with the fishermen. I didn’t attend just the necropsies but also travelled with the research institute staff when they collected carcasses from local farmers. There are volunteers who collect and keep stranded corpses frozen until the institute staff picks them up. This system has helped with building trust between researchers and the public.

I also learned about the workflow – at the research institute in Germany the researchers go through a large number of carcasses and the work can be really hectic. The carcasses that are in best condition get examined more thoroughly. Porpoises are often loaded with parasites: they are in the lungs, stomach, ear canals, intestines and so forth. It’s suspected that pollution weakens their immune system, but unfortunately the institute’s budget doesn’t allow for regular analysing of environmental pollutants.

While reading the short text that accompanies your photos, i was particularly moved by the mention that one of the reasons why Harbour porpoises are endangered is disturbance from noise. Do you know anything about the sources of these noises? One would usually expect industrial pollution, overfishing, the presence of invasive species as reasons for the loss of a species. How bad are noise disturbances for the preservation of endangered (or non-endangered) species?

It’s still a topic that urgently needs further research. In the Baltic Sea the most common noise sources are traffic, construction and wind turbines. The Baltic Sea is very busy with cruise and cargo ships and other vessels which of course cause other problems beside noise too. Overall the cumulative effects of all threats are very worrying. For example, if the immune system is already compromised because of pollution, it can be more difficult for the animals to cope with any further stress.

And as far as you know, have measures been implemented to save those species since researchers have discovered the reasons for their slow disappearance?

The Saimaa ringed seal is doing a little better these days even though the population size is still small. Fishing is forbidden in the main breeding areas and some areas have been turned into conservation areas. When there’s not enough snow, volunteers help with plowing snow into piles in which the seals can nest. The harbour porpoise is in some ways a more difficult case. Things have been done but further action and collaboration from the Baltic nations are definitely needed.

Paula Humberg, Side Catch Collection I, 2015

Paula Humberg, Side Catch Collection II, 2015

Paula Humberg, Side Catch, Own Collection IV, 2015

I also found Side Catch strangely moving. The way you dispose of the insect bodies into the boxes gives them a life, even seems to reflect better their living conditions. Could you comment on some of them? Why is the earthworm in Own Collection IV all alone? Why are the harvestmen in Side Catch Collection II occupying the bottom of the box, for example?

The boxes look superficially similar to a scientific entomological collection but here and there the norms of traditional presentation are broken as I wanted the specimens to have a life (or death) of their own.

The series is in a way built around a comment from a beekeeper who gave me dead honeybees. She wanted to know how I would use the insects and was worried the queen would get separated from her workers. This made me decide the queen should be surrounded by her caring workers, but there is also another box with workers that appear “more dead”. Earthworm specimens are typically preserved in liquid. I pinned mine into its own box, as a kind of tribute to the ones that get constantly smashed under shoes or car tyres.

Any other upcoming events, fields of research or projects you could share with us?

I do have a very exciting field trip and project coming up! I’m travelling to a biological station in Peru and will work there for about one month. My current plan is to make video work that has to do with biodiversity decline and moths. I’ll try to use moth abundance as a proxy for biodiversity, and the final work will visualise how biodiversity is higher in primary than in intervened rainforest. This time I’m travelling alone but the final work will be done in collaboration with a researcher who studies machine learning.

Thanks Paula!

from Finance https://we-make-money-not-art.com/paula-humberg-making-visible-the-unseen-victims-of-climate-change/

COVID-19: The Statistics of Social Distancing

By James Kwak

It seems that social distancing is the primary strategy for slowing the propagation rate of COVID-19. That and widespread testing are the key tools for containing an outbreak, for reasons discussed repeatedly in the media.

Photo by Hans Braxmeier from Pixabay

But does it work? Or, more to the point, how well do different degrees of social distancing work? How strict does it need to be, and how tightly does it need to be enforced? It seems to me that this is an important and at least theoretically answerable question.

Thanks to ubiquitous commercial and government surveillance, there are staggeringly comprehensive databases of exactly where people are at all times. Google has one, for example. Picture for yourself an enormous aerial picture of some metropolitan area with a dot for every person’s location; then picture those dots moving around as time passes. That’s more or less what is available. (Some people are blocking their location data, and some people don’t have personal surveillance devices smart phones. But there are certainly enough people transmitting their location to do the analysis discussed below.)

Assume for a moment a can opener that we have a good measure of the number of cases of COVID-19 in any geographic area at any time. (We don’t have to know every case; it would be enough if we were testing a random sample of people every day.) Then the analysis is conceptually simple. We need some measure of social distance. Ideally we’d want to count the number of people that each person comes within one meter of for each day, then average that number across the entire population. GPS is only (theoretically) accurate down to about 5 meters, but it can give us a rough idea of how many people could be close to each other at once.  That’s the social distance variable, which we can measure each day. Then we basically need to regress the percentage daily change in the number of COVID-19 cases against the social distance variable, with some sort of lag to account for the fact that cases don’t appear for several days. Given the number of places where there have been outbreaks, we should be able to get some idea of how low the social distance variable has to be in order to flatten out the rate of new infections.

OK, that’s the easy part. Now back to that can opener. The problem is that official case counts depend on three major factors: (a) the underlying rate of infection in the population (what we care about); (b) the number of tests being done; and (c) the selection criteria for those tests. You get very different results if you only test sick people in the hospital as opposed to testing a random sample, even if you do the same number of tests. So the harder question is figuring out how the official case count relates to the underlying rate of infection.

Still, though, this is conceptually just a multivariate regression. On the right (independent variable) side, in addition to the social distance variable, you need a variable for the number of tests, and you need a set of dummy variables for the various testing strategies that different places have employed (i.e., one for the American test-only-the-sick-and-the-rich-and-famous strategy, one for the Korean test-everyone-within-range-of-the-outbreak strategy, and so on). You can probably think of other things you should control for, like the weather (readily available). Again, given the number of outbreaks that have occurred all over the world, there is a decent chance that there is enough variation to actually get results.

There are a couple of problems that the statistically-minded among you have already noticed. One is that once people are trying to implement social distancing, not only will they avoid proximity with other people (which is visible by GPS), but they will also behave differently when they are in proximity with others (not visible by GPS). There are also differences in cultural behavior—handshakes vs. la bise vs. a small bow—that affect propagation. You may be able to overcome that using variation within a single culture (e.g., the United States, where there is plenty of variation in how people in different parts of the country are behaving).

I haven’t the statistical or data management skills to do this myself. And maybe even if it’s done right the margins of error are too big to be useful. But if no one is doing it already, it seems worth trying.

from Finance https://baselinescenario.com/2020/03/23/covid-19-the-statistics-of-social-distancing/

Do you feel more prepared having lived through 2008?

Do you feel more prepared having lived through 2008?

time travel

Caught this stat in my draft folder and hit me harder re-reading it now than it did in November!

From a survey by real estate investing startup, Concreit:

“Over half of millennials feel “more prepared” for next recession having lived through 2008″

Over half! Not bad!

It would be interesting to see how these same people are feeling NOW as we’re currently in the thick of things (want to re-poll them, Concreit? :)), but regardless it’s a promising thing to see…

Had me asking whether I myself feel more prepared than back then too, which I can thankfully answer a hearty YES too since I’ve been obsessed with this stuff for the past 12 years now! There’d be a big problem if I *didn’t* feel prepared at this point! haha… (though not hard to beat where we were in 2008 considering we had just bought a house with no money down or no real budget or savings 😉 Thanks for saving me, blog community!! And for giving me a much more fulfilling job too!!)

Hopefully y’all are finding yourself just as prepared too? Even though it’s still a bit unnerving out there?

Here’s another clip that was refreshing to see from the survey:

“Nearly 50% of millennials (ages 32-38) are actively cutting back on spending and building an emergency fund to prepare for a recession. Only 20% report that they aren’t doing anything now.”

YES! Awesome!! A great way of feeling more confident in times of uncertainty! Those 20%’ers are in for it!

And then lastly here were the top 3 *regrets* millennials listed from the ’08 days:

  1. Overall lack of financial knowledge/preparedness
  2. Not taking advantage of investing opportunities
  3. Not building enough of an emergency fund

Overall knowledge — Pretty important, no doubt, but the base of everything people already know! You literally just have to SPEND LESS THAN YOU EARN! Not that complicated, but hard as $hit to actually implement. You really have to want it bad enough to carry through… From there it’s the details.

Taking advantage of investing opportunities — Want to know the best time to invest since 2008? 2020 🙂 You’ll never be able predict rock bottom, but with the major discounts already the opportunities sure are looking pretty! And there’s plenty of other options galore too if the stock market isn’t your thing… Like real estate investing which a lot of people make their wealth from!

Emergency Fund – Important in all times, however a lot more important during true emergencies… Like right now for some people with this pandemic! Though the silver lining? For once you don’t have to feel *guilty* for using it! Lol… It’s literally a state of emergency! 🙂 (Too soon?)

Moral of the story: the more you do now, the better off you’ll be later – recessions or no recessions.

I hope so bad you were one of the 50% preppin’ and saving!!

Never too late to start if not!

Here were some of the things we were blogging about back in 2008… pretty eerie how things are circling around!



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from Finance https://www.budgetsaresexy.com/do-you-feel-more-prepared-having-lived-through-2008-recession/

COVID-19: Not One Penny

By James Kwak

The airline industry is trying to hold up the federal government for $29 billion in grants and another $29 billion in loans. They threaten that if they don’t get the grants they will lay off employees, and that if they don’t get the loans they will use their remaining cash on dividends and stock buybacks.

Photo by Júlia Orige from Pixabay

First of all, the second threat is staggering in its audacity. At current course and speed, the airlines will go bankrupt. When you are in financial distress, the last thing you should do is take your scarce cash and hand it to your shareholders. That meets at least the spirit, and perhaps the letter, of a fraudulent conveyance in bankruptcy law. But it represents the pinnacle of the idea of shareholder capitalism: screw the workers, screw the creditors, just take the money and run.

More importantly: the federal government should not give the airline industry a single penny either in grant aid or in sweetheart loans. I understand the economic challenges here. Thousands of workers are at risk of losing their jobs and not being to pay for food or rent in the midst of the greatest crisis of our lifetimes. To the extent we want to help them, the top priority is to give money directly to them.

It is true that there is some value in preserving the airlines as viable entities rather than letting them go bankrupt. If there were other companies able to take over their assets and workforces and put them to productive use, then by all means they could just fail, but that is probably not the case right now.

If the government does choose to rescue the airlines themselves—and not just their workers—it should do so by buying equity in the companies, at prices that don’t already reflect the possibility of a bailout. (Most of the value that airline stocks have today is probably based on expectations that they can get a good deal out of the crony-capitalist Trump administration.) That way, when the economy someday recovers and people start flying again, the U.S. government—and hence its taxpayers—will benefit, not the people who currently happen to own stock in airlines. And the government should not dilute its ownership by finding creative ways to funnel cash to the industry on favorable terms, as it did with the megabanks in the financial crisis (most notably the third Citigroup bailout). Airline executives and their shareholders have no viable alternative; without a government bailout, their most likely future is bankruptcy and being bought by some private equity firm for a fraction of the face value of their debt (paid to creditors, not shareholders).

Either way, the principle is the same: not one penny of free money.


from Finance https://baselinescenario.com/2020/03/22/covid-19-not-one-penny/

COVID-19: Who Bears the Losses?

By James Kwak

Our business and household sectors are losing lots of money every day, and will continue to lose money for the foreseeable future. People no longer spend money at restaurants. Restaurant owners can no longer pay the rent or pay back their business loans. Restaurants fire their workers, who lose their paychecks and can no longer pay their rent, or their credit card bills, or their student debt. In an economic crisis like this, the overriding question is: who ultimately bears the losses?


Photo by skeeze from Pixabay

We’ve been through this before. In the 2008 financial crisis, we applied the usual rules of capitalism—unless you were a large bank. Businesses failed and their owners (including shareholders, for corporations) were wiped out. Renters were evicted. Homeowners lost their houses. Investment funds that had bought mortgage-backed securities and collateralized debt obligations lost their money. Workers lost their pensions. Small banks were shut down by the FDIC. Big banks, however, got unlimited cheap credit from the Federal Reserve to stay afloat, thanks the the people we all know.

Will things be different this time? Perhaps. The Trump administration seems more willing than the Obama administration to relax the rules of capitalism—which should not be too surprising with a president who flaunts any and all rules, is more than happy to dole out goodies to his friends, and is unable to add numbers together. I think the megabanks can rest assured that they are still too big to fail and can count on unlimited support from their friends at the Federal Reserve and Treasury—Title II of the Dodd-Frank Act notwithstanding.

The surprise so far as been the decision to suspend foreclosures and evictions of anyone with a federally-backed mortgage for at least sixty days. Fannie and Freddie also are suspending mortgage payments for up to a year. This, as far as I can recall, is more than the Obama administration ever did for ordinary people hit by the collapse of the housing bubble in 2008 and 2009. Again, it shouldn’t be that surprising that Donald Trump is willing to take losses onto the federal balance sheet—it’s not his money, after all. This time, though, it happens to be the right thing to do.

These rules, of course, don’t apply to the private sector. If you are a small business owner who owes rent to your landlord or interest to your bank, there’s no reason to think you’re going to be let off the hook. The same goes for tenants with private landlords. Which raises the question: When the economy is hit by what is essentially an “act of God,” why is it that the owners of capital are kept whole, and the renters of capital have to bear all the losses? It’s not efficient—the economy would be a whole lot better off if people didn’t have to leave their homes and businesses didn’t have to close—and it certainly isn’t fair. Yet that’s the way our capitalist system works.

There is only one entity in the country—and perhaps the world—that can absorb the losses being generated by this crisis: the federal government, with its unmatched ability to borrow money. This time around, the top priority of the government should be direct assistance to the people who need it most—both workers and business owners who need cash to buy food, stay in their homes, and take care of their families. It should finance that assistance by borrowing money—at record-low interest rates—and by taxing the rich people who can most afford to absorb losses. Landlords and lenders will be made whole because of the money their borrowers are getting from the government, but they or their shareholders, to the extent they are rich, will lose money in the form of taxes.

It’s not that complicated. But I doubt our society and political system are equipped to solve this problem.

This post was largely inspired by a friend who I think prefers to remain anonymous.

from Finance https://baselinescenario.com/2020/03/21/covid-19-who-bears-the-losses/

Thoughts About COVID-19: PPE

By James Kwak

PPE, as we now know, stands for Personal Protective Equipment, like face masks and gloves. Right now there isn’t enough of it, and that’s one of the constraints on being able to test people, which is one of the biggest problems we face.


Photo by ehpien (CC BY-NC-ND 2.0)

The only point I want me make here is this: This is how capitalism is supposed to work. If you’re a for-profit healthcare provider—or any kind of provider that is trying to provide the most value, however defined, with limited resources— you are not going to stock up on enough PPE to handle every possible scenario you might face. This is what management consultants and business school professors have been saying for decades. PPE, like inventory, is a form of working capital. If you can reduce the amount of working capital you need, you can translate that dollar-for-dollar into cash for your shareholders—or, if you’re a non-profit, into clinics for poor people, salaries for your executives, or that next gorgeous building you’re going to put up. Excess working capital is pure inefficiency.

Sure, there’s the risk that you might run out in an emergency. But capitalism works on expectations: If there’s a 1% chance of a $10 million loss, you’re willing to spend $100,000 to prevent it. If there’s a 0.001% chance (according to your latest models) of a $1 billion loss, you’re only willing to spend $10,000 to prevent it. COVID-19 was basically off the probability charts, at least as far as operational preparedness was concerned. This is exactly parallel to the factors that created the financial crisis. VAR models only attempted to estimate the potential risk in scenarios that were, say, 1% likely, and they were excessively optimistic because they were based on historical data from the Great Moderation. Hospital preparedness similarly was based on historical data with no pandemic.

In capitalism, you know you can only prepare for 99% of the scenarios. It’s just not value maximizing to worry about the others. If those others occur, you go bankrupt, dust yourself off, and start again.

But that’s why capitalism is a lousy way to run a healthcare sector.

What should we instead? Well, probably the federal government should have a big stockpile of medical equipment to be used in an emergency. You know, big government.

Brief note from the author: I haven’t written anything about COVID-19 because I have no particular expertise in medicine or public health. But there are some aspects of the crisis that are amenable to economic, statistical, or simply logical analysis. This blog, as a few people may remember, was born during the financial crisis as an attempt to help make sense of what was going on. (Hence the subtitle at the top of the page: “What happened to the global economy and what we can do about it.”) To the extent I think I have anything to say that I think might be useful, I’ll put it up here.

Be safe.

from Finance https://baselinescenario.com/2020/03/20/thoughts-about-covid-19-ppe/

#Overheard at the coffee shops… Remember those?

#Overheard at the coffee shops… Remember those?

coffee guy


GO US!!!

I wish I had something exciting to reward you with, but I suppose it’s rewarding enough just to read my clever notes here, eh? 😉 Can’t be too bad out there if The Sexy is still around! Lol…

(okay, that was bad)

In all seriousness, though – I miss coffee shops like a mother, so thought we’d go down memory lane and share some of the last #overheards I managed to grab before the chaos struck. Not many financial gossips in this batch, but I sure am saving more now that I’m not visiting cafes every single day! So that’s worth something, right?! RIGHT???!

Hope you get a good laugh out of these…

And that I didn’t catch any of you here in the act 😉


“A beard is like sweatpants for your face”

Nothing truer has ever be spoken, haha…

“Inside of every man there is a little junior high guy inside of them.”

Okay, except for this one 🙂 I admit I still see myself as a pre-teen still trying to figure things out! I’m certainly not a FATHER OF THREE as it appears to everyone else?! I still look around for the adult in the room whenever one’s needed!

“Do you have a radiator I can dry my hat on?”

Now this one was the highlight of my day…. 🙂 Just imagine a dripping wet 70-year-old coming in from a sudden rainstorm and asking the barista to dry his hat out for him. With a radiator no less! But while they couldn’t appease him in that regard, they did have something else that could do the trick – an oven. Lol… A few mins later it was dry and crispy again 🙂

“My husband finally got his PHD! I think I need a certificate for not divorcing him throughout it… He’s been A.D.D. for awhile now – All But Dissertation”

Low blow!!! But as a spouse who also lived through this, it def. does seem to go epically slow, haha…. Do NOT miss those days one bit while our growing family was living off my dwindling blog income at the time… But all that work’s since paid off and the Mrs. continues to climb and bring home that health insurance!! Oh, and also an income!

“Don’t make me cross the street just to kick your ass.”

From BJ:

Overheard on the streets of Brooklyn, New Yawk…

More than 10 years later and it still makes me laugh when I think of it!

“OK ping pong”

From Shnugi:

I’m on the train and a guy keeps saying “OK ping pong” as a catch phrase.

“If you are saving for retirement, you must be dead inside.”

From James:

Two young women having dinner together… Overheard at a restaurant by a friend who found it so ridiculous and knew I would appreciate it. I have many questions for this person! – James

“Sparkle Carcass.”

From Paula:

My favorite #overheard turned out to be a band name. I couldn’t figure out where my acquaintance came up with the name, and it turned out he loves to ride the trains and (possibly) mishear random things.

The band name? Sparkle Carcass.

And yes, there have been a few bourbon-tasting evenings where a few of us competed in a sketching contest for their new logo…

“STOP COMPLAINING! There are only two people in the world, those who don’t want to hear your problems, and those who are glad you have them!”

-“Mad” Max Speedwell

And then the line that still echoes strong all these years later:

“The challenge is not to touch it.”

Told to a 13 y/o by a 65 y/o trying to instill some good lessons while in the check-out line at Target, lol… Never a bad place or time to spread the financial gospel! And just as relevant today than ever!

Keep on keeping on everyone…

Life is still good despite the disruption!

For past posts in this series –> #overheard


[Prefer to get these blog posts *weekly* instead of daily? Sign up to my new weekly digest here, and get other thoughts on life/business/money as well: jmoney.biz/newsletter]

from Finance https://www.budgetsaresexy.com/overheard-at-the-coffee-shops-remember-those/