19th century literature and the difference between the ability to retire and to philanthropize
As I consider what to invest in tomorrow when the market opens, I look at my portfolio and consider its allocation. And I realize that although there are couple of small growth companies that I really want to add to my portfolio, I currently have a greater ownership of those kinds of companies in my portfolio and a lower portion of dividend paying companies like Pfizer (PFE), Johnson and Johnson (JNJ) and Kraft (KFT) than I would like to have in order to consider my portfolio well balanced. So I will sift through various TMF newsletter recommendations and pick a few good dividend payers from the Best Buys Now lists. I have dividends on my mind as a long term strategy for wealth creation and maintenance because I have recently seen on television and read in my books some 19th century references to financial success.
This year I have enjoyed the Jane Austen and Elizabeth Gaskell series presented by Masterpiece Theater on PBS. And last year it was more Bronte and Dickens. It occurs to me that we are living in times that would have spurred great literary works from these authors and I am glad to see them on PBS. In watching these and reading them, thoughts of how people make it through financially trying times turn over in my head. What exactly is the contemporary equivalent of a "gentleman"? Is it the ability to retire? Is it the ability to act as a philanthropist? What is the division between just being able to retire and being able to philanthropize?
A section in Gaskell's Cranford comments about "living off the four percents". I draw from this that the gentlemen back in that day were aware of something we learn easily from reading on TMF or on MorningStar today, that to determine how much you will need for retirement, you should multiply your annualized monthly expenses by 25, and then never use more than 4% of your total per year. Also I gather that in the 19th century, 4% was a rather common dividend rate paid out by banks and corporations. And that if a gentleman wished to have his fortune outlive him, he must never tap in to the principle, but just use the dividends. Also, to ensure a 19th century equivalent of a dowry for any daughters or to ensure an independent fortune for a son, a gentleman needed to not only use less than the 4%, but to save and invest from those funds in resources for his children and any surviving spouse.
The contemporary equivalent of a 19th century "gentleman" I must conclude, is someone who is able to retire. In these days of relaxation at the holiday season I remember that it is not necessarily the most fun for me to not feel useful - idleness does not suit my temperment. Therefore I set a goal that my second calling in retirement will be to actively philanthropize - to seek out those doing good work that makes me feel good and to help them attain the resources necessary to pursue that work. But what is the financial difference between being able to retire and being able to philanthropize? What was the difference in gentlemanly status between Mr. Bennet and Mr. Darcy in Austen's Pride and Predjudice? The difference is in the amount less than four percent that each man needed to use per year.
Any amount below the annual four percent amount that is not used to pay expenses can be used to fund philanthropic goals. For some people who have ammassed large fortunes (i.e. Mr. Darcy), the amount needed to support themselves may even be less than one percent of their total and threrefore, they would have a great amount more to give to their family members and to their philanthropic interests. To my sensibility, it would be great to help meaningful non-profit organizations to create more sustainable futures for themselves by helping create and provide for their endowments. But my goals are my own and others will have their own goals perhaps acheived through planned giving or other means.
What would Dickens write if he were alive today to see this mess we have gotten into, not just here, but world wide? I can hear the severity of his condemnation echoing back through his works as I read them again today. So I take special heart in his Tiny Tim of A Christmas Carol, blessing us everyone. Therefore as I contemplate which companies to buy tomorrow, I will consider carefully their Stewardship Grades in addition to their long term sustainable yeilds.