Archive | August 2012

Connect with the Community: Junior Achievement

Service to the community is an essential part of the business world, and should be an essential part of your personal financial world too. Why? It’s essential because if you know how to handle your finances and how to control your money so it doesn’t control you, you have a great opportunity to teach those who don’t. Indeed, in the case of school children, I’d say it’s more than an opportunity: it’s a social responsibility.

You see, no one’s teaching them. Their parents don’t know- I think the rather staggering credit card debt, bankruptcy, and foreclosure statistics of the last half decade prove that well enough. And the public schools most kids attend aren’t teaching it either. They weren’t a few years ago when I was still in high school, certainly, and I’ve no reason to think that has changed.

Junior Achievement (www.ja.org/) is an organization dedicated to this cause, and a personal favorite of mine. They’re a nation-wide non-profit organization that goes into schools from Kindergarten through 12th Grade and presents age-appropriate, fun learning experiences. The material ranges from learning how to write checks to the basics of how to work at and own a business to a simulated stock market challenge. It’s all volunteer based, and all JA asks for is your time and experience as a business professional. So if you or your company are looking for an opportunity to give back to the community, please check this out. The impact you have could last decades.

In the long term I think we, as businesspeople, also have a definite economic incentive for teaching personal finance to kids. Namely, business will benefit as they grow up to become more fiscally responsible, and therefore wealthier, than they otherwise might have been. Not to mention more reliable employees. Business benefits, the community benefits, and most importantly the kids get a better chance at future success- all for a few hours’ time. Seems like a good deal to me.

Thanks for reading,

-Taylor

Basic Tips: Compound Interest

I’m happy to introduce my first weekly series: Basic Tips on Personal Finance. In this series I’m going to cover the most basic concepts that one needs to master to learn further personal finance concepts. This week’s concept isn’t the most basic, but is probably the most important to long term wealth building: Compound interest. It’s actually a pretty simple concept once you understand how it works- and how it can work for you.

So let’s get hypothetical. Imagine you’ve got $100 to save. So you put it into, say, a savings account at your bank. For the example’s sake, let’s say that this savings account pays out 5% interest per year. It’s very rare that a savings account will earn that, but the number is easy to work with. Now you do one of the most vital things involved in saving: you keep your hands off the money so that it sits there and earns interest. After a year the monthly interest has come to a total of $5, which is 5% of $100. You now have $105.

But wait! The really cool part is coming next. Now you leave that $105 in the account for another year. At the end of Year 2 your earned interest of 5% of $105 is $5.25. You now have $110.25!

Okay…now stop giving me that look. It’s true that $10.25 isn’t much to show for two years of waiting, and that extra $0.25 is pretty underwhelming. But don’t underestimate what just happened. Let’s change the numbers by adding a few zeros. You invested $1,000,000 rather than $100, so that first year’s interest was $50,000. Not bad. Year 2’s interest is pretty neat, too: $52,500.

So the idea is this: compound interest is the idea that the interest you earned last year and before becomes part of the original chunk of money, so it earns interest too. You can earn interest on the interest from the interest of two years ago. Neat!

Hope that helps someone. Thanks for reading,

-Taylor

The Right Heart for Money

It’s entirely possible to do everything right and to build wealth efficiently, and still be completely miserable. In fact, the drive to be frugal and to micro-manage your money can even become a heavy burden in and of itself. There’s more to wealth than cold, hard cash. You’ve got to have an intentional, genuine heart for how it fits into your life.

We’ve all seen them: the people who, as Dave Ramsey has put it in his Financial Peace University, hold their money with a tight fist. They’re so afraid of losing any that they clamp down and become ulta-defensive of their wealth. They’re miserable. I think we’re all called to something better than that. Hold your money with an open hand, ready to give. Yes, some will leave. But, then again, your hand is now open to receive more. Those who bless others are often blessed themselves.

To quote a famous and often abused passage: “For the love of money is the root of all kinds of evil.” -1 Timothy 6:10 (Emphasis mine).  We’ve all heard this, but not always with those three vital words included. Money is a tool, and nothing more. It can be used for good or evil, and that depends completely on the user’s choice. The amount of money doesn’t matter. It could be a little or it could be a lot. Either way, the heart with which you approach interaction with it is what will decide whether it blesses or brings grief to you and those around you. Envy is as bad as greed, and both should be avoided wherever and whenever possible.

Image from http://wealthythoughtleader.com

Thanks for reading,

-Taylor

About Me

Profile Pic  It makes sense for readers to know who they’re dealing with, am I right? So here’s a quick blurb about me. If you’re curious, read it and get to know me a bit. If you’d rather not- go right ahead to the next post. You won’t offend me a bit.

My name is Taylor Kothe. At the moment I’m in my senior year at Oral Roberts University in Tulsa, Oklahoma. I’m looking forward to getting my BS in Accounting, MBA, and CPA’s license in the next two years or so. I’m passionate about financial literacy and see it as one of the greatest needs of my generation- we simply don’t know what to do with our money. We don’t control it, but are controlled by it instead.

So that’s what this blog is about. For a year or two now I’ve been itching to voice thoughts and tips on personal finance and business topics, and it’s my hope that this blog will give me a way to reach out and help educate people on how to handle their personal finances. Some of my content will be based on the Bible, and I’ll state up front that I’m a Christian and thankful to be so. However, the purpose of this blog isn’t evangelism. Money is one of the most common topics addressed in the Bible, and what it has to say about it is valuable to anyone regardless of their faith or background. It’s my hope that you’ll take those nuggets as they’re intended: as wisdom and common sense passed down through the centuries.

Now, just a bit more background and I’ll sign off for the night: I’ve had the good fortune to be relatively unaffected by the recession of the last five years or so, at least financially. My parents didn’t lose jobs or our home, which’s great. But I did watch and take notice as people around me, throughout the U.S. and the rest of the world, fell into serious financial trouble. I was already interested in personal finance, and knew enough to realize that most of these people unknowingly fell into just a couple of very common mistakes. If they’d avoided them, if they’d known better, their families would be much better off than they are. But that was just it- they didn’t know. No one taught them how to handle money: not the schools, not their parents. Everyone passed the buck and it only ever stopped when it landed on the floor.

I don’t want that for my generation. There’s nothing sadder that could be said of us a hundred years from now than, “They made the same mistakes their parents did.” I rebel against that with everything I have. So it’s my hope that through this blog and others like it, I and any others out there who share this passion can step in and teach our generation what no one else would: how to rule their money and not be ruled by it.

Thanks for reading,

-Taylor