Ask the grumpies: Should universities take Koch or Epstein money?

SLAC prof asks:

Is taking money from Jeffrey Epstein worse than taking money from the Koch foundation?  Which is worse?  Clearly we shouldn’t take money from the KKK.  Is it ok to take anyone’s money if there aren’t strings, or is there a line?  Who gets to decide the line?  Does Koch money ever truly have no strings?  Should personal morals be irrelevant when an institution takes money?

Oh wow, this is a hard one.  We’re really not ethicists and don’t have enough expertise to have an opinion on non-obvious cases.  That said… here are some thoughts.

First off, personally I think it’s fine to take money that doesn’t have strings attached (including naming rights!!) from the estate of someone who is dead.  So if you’re an institution that has a morally horrific but extremely wealthy graduate and he just gives you a couple million in his will but it’s completely unrestricted, go ahead and take it without advertising it.  Put it towards something completely antithetical to what he would have wanted (sexual assault prevention training for freshmen with a focus on how not to assualt) or spend it on something boring (utility bills) freeing up that fungible money for other things.  If he says you have to name something after him or hire someone specific etc., then don’t take the money (and advertise you didn’t take it).

If the bad person or group is still alive, don’t take money with strings attached.  No naming rights.  No final approval of tenure track hires.

When there aren’t strings it gets much more complicated.  Yes, one shouldn’t take KKK money (unless it’s used for training frats how not to do blackface or to pay for programs etc. that benefit black students and faculty– I’m a big fan of F-U uses of bad guys’ money).  But if Koch money is offered for something that isn’t evil (no strings scholarships)?  And they do fund things that aren’t evil along with their massive funding of evil… I’m not sure.  I mean, I’d like to encourage them to spend more money on not-evil and less money on evil.  But I don’t want them to get credit for the not-evil stuff as if it makes up for the evil stuff because it really doesn’t.

This is hard.

What do you think, Grumpy Nation?  Should institutes of higher education accept money from bad people and bad organizations?  Under what circumstances?

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Ask the grumpies: Getting started with money

Mel asks:

What books do you recommend for someone who is looking to understand the basics of investing for retirement and how much money a person should hold in their savings account for emergencies? Or to that end, also understanding which comes first: having savings you can reach for at a moment’s notice or putting money into a retirement plan? I’m looking for that sort of information in a book form.

I have a fairly (I think?) healthy relationship with money, carry no debt beyond the mortgage, and feel the word that best describes me is “careful.” So I don’t really need to understand budgeting or how to pay off debt, but I do want to make sure that we’ve saved enough for retirement, saved enough for college (and aren’t going to be locked out of applying for certain loans because we have too much in a savings account vs. moved over into a retirement account — is that even a thing?), and saved enough for emergencies.

I’m looking for big picture books to understand how the various plans work as well as books to avoid because they contain terrible advice.

A good primer on all things personal finance is JD Roth’s book, Your Money:  The Missing Manual.  The numbers will be out of date (you can now save $19K annually in a 401k and 6K annually in an IRA), and we now know that you can legally do a Backdoor Roth, but it is really good at explaining the basics.  Like the difference between an investment (ex. a specific stock fund) and the bucket you save an investment in (ex. a 401k).  It also summarizes many of the best ideas from the best personal finance books.

How much a person should hold in their savings account for emergencies isn’t something there’s 100% agreement on.  In general, most people agree that you should have at minimum around 1K (give or take, probably more given inflation) to cover small emergencies.  After that people tend to think in terms of months of expenses– you need 1 month of regular expenses in case your work has a billing mistake.  You need 3 months of expenses to cover things like car problems or a short-layoff.  You need 6 months of expenses to cover a lengthier spell of unemployment.  Some people will argue a year of expenses, but that’s a luxury.  Other factors are also important like how stable your industry is– if there’s more uncertainty, you need a larger emergency fund, if you are hard to fire then you need a smaller emergency fund.  If you have dual incomes and a spouse can increase hours or cover expenses you might need less.  If you own rental properties you might need more to cover tenant absences or large repairs.  Some people will keep part of their emergency fund in something safe like savings, but keep the bulk of it in an investment that could be tapped in an emergency without penalty, for example the contribution part of an IRA Roth or taxable accounts (or a 457 plan for government employees).  All Your Worth by Elizabeth Warren (yes, that Elizabeth Warren) and Amelia Warren Tyagi does an excellent job helping you think through what your monthly expenses are and how emergencies might affect them.

All Your Worth also does a great job in providing heuristics about how much you really can afford to spend given your income.  It provides great guidelines for what percent to put in required spending vs. optional spending vs. savings to provide stability in when there are emergencies.  It’s a really great read and a smart book.  As a note– one thing people often get wrong about her balanced money formula is that they think that they *must* spend what she says to spend and save only what she says to save, which isn’t true– if you read carefully, the spending amount is an upper bound and the savings amount is a lower bound.  She does note that if you are unhappy with your spending and you are saving the recommended amount then you can loosen up, but you don’t have to, especially if you’re considering early retirement.

Once you understand these big picture ideas, you can do one of two things.  You can read the Bogleheads Guide to Investing, or you can just figure out the cheapest target-date fund that your savings provider provides (ex. my work provides Fidelity so I use that for my 403b, outside of work the cheapest is usually Vanguard which I use for my backdoor Roth and taxable investments).  With the target date fund you can just pick a single date (when you plan to retire) and set and forget and it will take care of all the rebalancing and diversification and so on for you.  Easy peasy AND it matches the market, unlike the majority of active managers (who get out-performed by the market).

Here’s a couple of advanced posts on diversification of your overall personal portfolio (not just your retirement investments).  Here’s an ordering strategy of how you could choose to use your money.

In terms of college savings and financial aid, you definitely want to read this series of posts from Forbes Magazine.  Here’s one of our many posts discussing retirement vs college savings.  The short version is that depending on what schools your kids are considering and how much money you make (say, under 300K/year) then you are likely to want to shove as much money into retirement vehicles as possible.  (If I had to go back, I’d funnel some of our 529 money into 403b and 457 accounts, but I didn’t know we’d be as high income as we are now and I didn’t know that financial aid at fancy schools went so high up the income distribution.)

In email conversation you also mentioned that as a freelancer you wanted to know more about ways for self-employed people to save for retirement.  If anybody has book recommendations, that would be great.  I found a couple useful web articles on the topic.   You also mentioned you’d be interested in finding out more about how to tap into retirement money without penalty before age 59.5.  For that there’s something called substantially equal payments that you can use in some cases.  You can also always take money out with the 10% penalty.  Or take the principal out of a Roth (or 457 if you leave that employer).

In terms of what books to avoid:  Dave Ramsey is awesome for debt payment, but he is absolute garbage for investing.  Do not follow his advice for investing.

Grumpy Nation– What books do you and don’t you recommend for Mel?  Any web resources?  How should she get started?  Any advice specific to freelancers?

Ask the Grumpies: How to handle maternity leave for a mid-semester baby?

anonymous in the midwest asks:

I am a faculty member at a small SLAC. I am newly (spontaneously!) pregnant with my second child, and likely due at the beginning of week 13 of the 16-week spring semester (it’s so early that I haven’t had my first prenatal appointment yet). My first child was an IVF baby and due the day after the end of my academic-year contract, so I didn’t take maternity leave. In that pregnancy, I developed a complication that, if it recurs (and it has a 50-90% recurrence rate) would mean I would deliver at 37 weeks. My fellow female faculty members have managed to have an astonishing number of May babies – since I’ve been here and in at least the two years previous, no female faculty member has given birth during any other month.

The college’s maternity leave policy for faculty offers 6 weeks at full pay or a full semester at half pay. How have mothers at your institutions handled babies due mid-to-most of the way through a semester? I would love to hear experiences and ideas from the grumpy nation!

Congratulations!

My sister and were each born the first day of spring break. For me, my mother paid for her substitute out of pocket for the week after Spring break and then went back to work (she left that institution after it became clear that having a baby meant she would not get tenure).*  For my sister, the university where she was working paid for her substitute for that week. Your SLAC sounds much more humane!

I was lucky enough to have an end of winter break baby– actually this was only lucky because there was a freak snowstorm the first week of class so I got two weeks before going back to work (I had no maternity leave)– and an end of summer break baby which lead into “alternative work duties” (that is, not teaching) for the semester.  Most of my female colleagues have also had summer or sabbatical babies.  My colleague who was due in late April bought out her core course and front-loaded her elective and had a guest lecturer lined up, had them video tape their presentations for her to grade, and then cancelled her last couple of May classes.

I know a woman at a 1/1 school who team taught two courses the semester she was due (grad and undergrad versions of the same elective) and taught both the first half of that semester, then took the next semester off.  Come to think of it, that’s what one of my friends at a 0/1 medical school did as well– team taught the first half of the teaching semester, bought out the rest.

So, other than in situations in which there was no maternity leave, I don’t know how women with regular teaching loads generally handle mid-semester babies.  Men, of course, take a week or two off during the semester their wife (always a SAHM in my department) gives birth and then take the full maternity leave in the next semester.

Grumpy Nation, What have you seen academic women do when facing a mid-semester pregnancy due date? 

* For those not familiar, it takes about 2 weeks to stop bleeding and to be able to sit down in something other than a warm water bath after an easy natural childbirth.

Ask the grumpies: What do you watch on Netflix?

Leah asks:

Do you watch much Netflix? Any favorite Netflix originals? I really like One Day at a Time, and there’s several Netflix originals kids’ shows we love. Treehouse Detectives is the most popular right now in our house.

#1:  I don’t… um… watch anything on netflix.  DH watches Lucifer and when the next season of The Good Place is up he’ll be watching that.  DC1 doesn’t watch anything except the occasional movie that DH is watching (usually super hero or star wars based).  DC2 has mainly been watching youtube these days.  Zie is a fan of Arthur, Wild Kratts, and Johnny Test, though zie watched them all on Youtube.

What do you all watch on Netflix?

Ask the grumpies: How will the Republican tax thing affect charitable donations?

FGA asks:

Because I no longer have mortgage interest as a deduction, it actually was better for me to take the standard deduction. My charitable contributions were no longer deductible even though it was many thousands of dollars. I am frankly worried about how this will Impact nonprofits moving forward. Grumpy thoughts?

It should discourage charitable giving because there will be fewer taxpayers who will find it in their interest to itemize, and also with marginal tax rates down etc. the savings for people who itemize will also be lower.  If you’re getting 25 cents back instead of 33 cents, for example, you might be less likely to donate.

I’m not a tax economist, but there are actual tax economists who have predictions, including this article from the Urban Institute/Brookings tax center that has estimates.

There are a few complications of course.  Fears of the future, beliefs about what the government is or isn’t funding compared to what needs funding, and just how the economy is doing will all effect giving, even in the absence of the tax cuts and job act.  Additionally, the increase in donor advised funds has made it more beneficial to put money in the fund all at once to get a tax break and then to hold onto it before disbursing as it gains money.  It made sense for a lot of people who were going to be losing their mortgage deductions to put money in DAF before the tax law went into effect.  I don’t know if that actually happened though.  I assume sometime in the next year or two academic economists will be trying to sort this all out.

I’ve certainly increased my charitable (and political) donations because of Trump, but definitely not because of any changes to the tax code– all of our donations are going in without any tax breaks.  Which does make it easier to donate to places that aren’t tax-exempt (political non-profits, for example).

Ask the grumpies: Which is more important: Macro or Micro?

Leah asks:

Which is more important, macro or micro economics?

For most people, microeconomics is more important.  Both, however, are very important for the government, particularly the federal government.

Macroeconomics tells us about whether there should be a Fed, how should we peg the monetary system (if we should), when should the government spend and when should it pay back debt, how can the government lower unemployment and inflation using monetary policy, and so on.

Microeconomics tells us everything else.  How do we best invest in kids?  How to firms set prices?  How do we help marginalized groups?  How much should people save for retirement?  How do we best finance schools?  And on and on and on…

So… both are incredibly important, but there are a lot more microeconomists out there.

Ask the grumpies: teens today

Anoninmass asks:

[T]een daughter wants birth control but refuses to learn how to drive, is this weird?

No… not weird.  Kids today are less likely to want a driver’s license right away.  We don’t really know why. But this is documented all over the place, even including cities with crappy public transportation.  My guess is that kids like being chauffeured and their parents are more willing to do it (and the current generation of dads are more involved with their kids) whereas boomer parents were less likely to drive kids places so they needed a car to get anywhere.  But that’s completely uneducated based on no real research.  Maybe it’s easier to walk places now and no reson to go to the mall.  Who knows!

Even though teens are not more promiscuous compared to recent generations, apparently they’re being much better about using birth control.  Long term birth control is also much better than it used to be.  I also do not know why teen sex hasn’t changed (maybe a combination of a more permissive society being balanced out by more attentive parenting) or why kids are more likely to actually use birth control than in the past.  My guess there would be a better job of culture making birth control seem normal (you can tell a hero is a good guy because he puts on a condom in romance novels and tv shows) although there is still an erosion of non-abstinence based education or planned parenthood in much of the country.

So… basically your teen daughter is completely normal for her generation!