Freedom from Responsibility: Dependence Disguised as Liberty

Freedom from responsibility is becoming the new mantra for those who believe that the societies of the advanced economies are unfair.  They believe that certain classes of people have been victimized by society and therefore are entitled to compensation.  The welfare state is and has been an expression of this idea.  People are not held responsible for their choices in life, instead society is made to assume that responsibility.

Advocates for a guaranteed basic income want to take this idea a step farther; they want society, by means of a government stipend, to pay every member a guaranteed basic income to cover the basic necessities of life: food, shelter, utilities, and so on.  Just what constitutes basic necessities is never made quite clear but proponents use the government’s poverty threshold as a guide to how much the stipend should be.

According to proponents, a guaranteed basic income would wipe out poverty as every member of society would be given the means to support themselves.  They would be free of worry about meeting their basic life needs, free from the need to work jobs that they didn’t find fulfilling, free from the need to work at all, free to devote their time to pursuits that may not produce income such as artistic endeavors, community service, caregiving, education, and such.

A guaranteed basic income has found support across the political spectrum in the United States, including Libertarians who see it as a more efficient and effective replacement for a complex and expensive welfare system.

The paradox of freedom from responsibility

If freedom from responsibility didn’t undermine personal liberty, it would hold as great a promise for the elimination of material suffering as its supporters claim.  The paradox is that freedom from responsibility isn’t freedom at all but dependency fueled by entitlement.  A person who never takes responsibility for himself never learns the life lessons that come with it.  Without that experience, he is never able to assume responsibility for himself and remains forever dependent and convinced that his basic living expenses are someone else’s responsibility.  This is hardly the description of a free person, but rather that of a perpetual teenager who continues to look to parents for food, shelter, and other basics of living while he goes on his merry way, oblivious to the real world, certain that he knows everything, because he has learned nothing of life.  True freedom requires a maturity that can only come through the experience of being responsible for one’s self.

The need to support one’s self motivates like nothing else:  it focuses the mind and drives the effort needed to overcome obstacles and accomplish tasks; it instills discipline; it clarifies the relationship between productivity and pay; it forces a person to examine her values and prioritize the allocation of time and money.  Through trial and error, a person learns life’s lessons, acquires survival skills, and matures into a responsible adult.

Entitlement mentality precludes growth

It is reasonable to ask:  Wouldn’t a person who receives a guaranteed basic income have to learn these same life lessons if he is to succeed in covering his basic living expenses, in living within his means?  Wouldn’t he go through the same trial and error process, acquire survival skills, and mature into a responsible adult?  He could but he won’t because he doesn’t accept that responsibility.  A feeling of entitlement will hold him back:  he wasn’t responsible for earning that money, so he won’t be responsible in spending it.  If he can’t make it on the guaranteed basic income, he will blame the responsible party: society by way of the government.  He will perceive the problem to be an inadequate stipend: it is simply not enough to live on.  It won’t be his fault; he is not responsible.  It will be society’s fault; they are responsible: the definition of poverty needs to be updated and the stipend increased to fix the problem.  This cycle will repeat itself perpetually, because there will never be enough of a stipend until the person accepts responsibility for himself.  When that happens, no stipend will be necessary.

Entitlement vs Accomplishment

What about the other benefits attributed to a guaranteed basic income:  the freedom from the need to work jobs that aren’t fulfilling, freedom from the need to work at all, freedom to devote time to pursuits that may not produce income, such as artistic endeavors, community service, caregiving, education, and such?  These benefits can be and are enjoyed by people who do not receive a guaranteed basic income:  they obtain new job skills that lead to more fulfilling work while holding down full-time jobs; they make financial independence a priority and accumulate the resources necessary to make work optional; they work full time while pursuing interests in their spare time that do not produce income.  The difference between these folks and those who would enjoy these benefits as a result of a guaranteed basic income is that they earned them, and because they are earned they are valued.  There is a big difference between entitlement and accomplishment:  the former is the assertion of a right, the latter is achieved through an investment of one’s time and energy.

Children are good at asserting their rights, they feel entitled to everything.  They don’t mature into independent, productive adults until they take the responsibility to earn that which they need to survive and prosper.  Taking responsibility for themselves sets them free.

K. C. Knouse is the author of True Prosperity: Your Guide to a Cash-Based LifestyleDouble-Dome Publications, 224 pages

Why We Prepaid Our Funeral Expenses

When Rosa’s father died at age 85, twenty-two years ago, we experienced, firsthand, the benefits of prepaid funeral expenses. He had spent the last three weeks of his life in intensive care, and the ordeal had thoroughly exhausted Rosa, an only child, and her mother. What a blessing to discover that all the funeral arrangements had been made and paid for in advance: the mortuary, the plot, the marker, the casket, the service—everything. Prepayment eliminated a lot of decision-making with regard to funeral arrangements and anxiety over what Rosa’s father would have wanted and how much to spend.

Rosa called the funeral home to have them transport her father’s body from the hospital to the mortuary. The next day she met with a representative from the funeral home to review the arrangements her father had purchased and set a date for the service. The personnel at the funeral home spent their time assisting her rather than selling her. And best of all, Rosa knew that this was exactly what her father had wanted.

Niches of our own

We were impressed with the benefits of prepayment and wanted to spare our surviving relatives the anxiety and guilt associated with making funeral arrangements for us. Within the next year, we took the first step and contacted the same cemetery Rosa’s parents had chosen; we purchased two niches in the cemetery’s mausoleum as a permanent resting place for our cremated remains. The cost of the niches also covered cemetery fees for opening and closing the niches for internment of our remains and for perpetual care. We received a contract of sale, a certificate of ownership, and a document that certified that a fund had been established for the perpetual care of the cemetery and mausoleum.

Our prepaid funeral arrangements

Twelve years later, Rosa’s mother died. She had prepaid her funeral arrangements, as well.  In dealing with her death, we gained valuable knowledge of the cost of a direct cremation (cremation without a service). The laws had changed since Rosa’s father’s death.  Now the state required a mandatory waiting period prior to cremation. This added to the storage and transportation costs for direct cremation.  The additional expenses persuaded us to go ahead and prepay our funeral arrangements.

Our prepayment involved both a funeral home and a life insurance company. We sat down with a member of the funeral home staff and reviewed the prepayment contracts which contained a detailed menu of options, selected the options that pertained to a direct cremation, reviewed the terms, and signed the contracts—one for each of us. The contracts stipulate that the funeral home will provide the services we selected, when required, at no additional cost. In other words, we locked in the price of those services at 2005 levels.

Our prepayment contract is funded by a prepaid life insurance policy through a separate life insurance company that specializes in policies to fund funeral expenses. The funeral home took our applications for the insurance. We chose a five-year, interest-free, monthly installment plan to pay the insurance premiums which totaled exactly the amount of the prepaid funeral expenses. The entire proceeds of the life insurance policy are paid at the death of the policyholder to the funeral home for the services indicated on the prepayment contract.

Not all funeral expenses are covered by prepayment

Prepaid funeral expense contracts do not cover all funeral expenses, only those provided by the funeral home. For example, in our case, crematory fees, death certificates, and newspaper obituaries are not covered. These fees are standardized and relatively small in comparison to the funeral costs that are prepaid and so will not be a burden on our surviving relatives.

Rosa and I created an end of life document that includes the details of our prepaid funeral expenses, the location of the pertinent documents, and our wishes for a memorial service to be held in our home in lieu of a funeral service.

Is prepayment of funeral expenses right for you?

Prepayment of our funeral expenses has proved to be a good choice for us, but is it prudent for you to prepay your funeral expenses? Here are some considerations:

  • Is there a better use for your money?  Prepayment of funeral expenses should be a relatively low priority for you. An emergency fund, paying off debts, adequate insurance coverage for health, property, and life, and adequate funding for retirement all should come before prepayment of your funeral expenses. However, if you are free of debt, have an emergency fund equivalent to at least six months of living expenses, are adequately insured in the critical areas of your life, and are on track to fund your retirement, then prepayment of funeral expenses can be a good use of your money.
  • How committed are you to your marriage? A married couple that prepays funeral expenses that includes cemetery property are making a commitment to their union. If the marriage ends, one or both of them may have to sell the cemetery property or lose the investment.
  • What is the likelihood that you will still be living in the city in which you purchased your cemetery property at the time of your death? Most people plan to be buried in the city in which they have lived, but who knows for sure where that will be? Who knows where life might take you, even in old age? You may end up living with one of your children half a continent away when you die and your remains will have to be transported back to the city in which you prepaid the funeral arrangements or your child will have to try to have the prepaid funeral contract transferred to a mortuary in the city in which your child resides. Either of which will require time and trouble on the part of your child and incur additional expense.
  • What is the likelihood that the mortuary you intend to use for prepayment will still be in business when you die? Rosa and I chose a funeral home that had been in business for decades, had an excellent reputation, and was financially stable. Your prepaid funeral contract is only as good as the mortuary you do business with. Make sure you are dealing with a sound and reputable institution.

Options for prepayment of funeral expenses

There are different ways to finance a prepayment of funeral expenses. Each has its advantages and disadvantages:

  • Prepaid funeral plan through a funeral home. The funeral home establishes an irrevocable funeral trust with a financial institution. The money you pay them goes into the trust. Such trusts are regulated by the state in most states. Contact your state consumer protection agency to determine what consumer protection is available should you purchase such a prepaid plan. This form of prepayment has two primary advantages: 1. You determine where you are buried and what kind of funeral and burial you will have. 2. You lock in the cost of services for which you prepaid. The main disadvantage of this form or prepayment is that either the funeral home or financial institution may go out of business and you could lose your investment.
  • Life insurance. You take out a life insurance policy to cover the costs of your funeral at the time of your death. You can leave an end-of-life document that outlines your wishes for burial, funeral services, location, type of headstone and casket, total costs, etc. The primary advantages of this form of prepayment are that it is not tied to a funeral home and, depending on when you purchase the policy, what type of policy you choose, and how soon after you die, it may cost you less than a prepaid funeral plan. Funding prepayment of funeral expenses with a life insurance policy has three distinct disadvantages: 1. Costs are not locked in, so you will have to account for inflation when determining the face value of your insurance policy. 2. Costs for life insurance vary depending on what type of policy you purchase, when you purchase it, and the state of your health at the time of purchase. 3. Even if you leave detailed instructions regarding your funeral and burial, someone will have still have to implement your wishes and make difficult decisions under time constraints while grieving. Life insurance does not eliminate the anxiety and potential guilt over funeral arrangements in the way a prepaid plan does.
  • Joint bank account. You establish a joint bank account specifically for payment of your funeral expenses and fund it with an amount you estimate will cover the costs. At the time of your death, the joint account holder can pay for your funeral expenses using the money in the account. As with the  life insurance option, you can leave an end-of-life document that outlines your wishes for burial, funeral services, location, type of headstone and casket, total costs, etc. The primary advantages of this form of prepayment are immediate access to the funds in the bank account and the security of the funds if deposited in an institution covered by the Federal Deposit Insurance Corporation (FDIC). The disadvantages are similar to the life insurance option: 1. Costs are not locked in, so you will have to account for inflation when determining the you put on deposit in the account. 2. Even if you leave detailed instructions regarding your funeral and burial, someone will have still have to implement your wishes and make difficult decisions under time constraints while grieving. A joint bank account does not eliminate the anxiety and potential guilt over funeral arrangements in the way a prepaid plan does.
  • Prepaid funeral plan funded with associated life insurance contract. You purchase a prepaid funeral plan from a funeral home of your choice. The plan is funded by a life insurance contract through an insurer associated with the plan and funeral home. At the death of the insured, the entire death benefit of the life insurance contract is paid to the funeral home to cover the contracted funeral services. The primary advantages of this form of prepayment are: 1. You determine where you are buried and what kind of funeral and burial you will have. 2. You lock in the cost of services for which you prepaid.  3. The money you use to prepay funeral expenses is protected from loss because he funeral home and insurance company are separate entities: If the funeral home goes out of business, the proceeds from the insurance policy will still be available to pay for funeral costs. Insurance companies are heavily regulated by the states. The state insurance commissioner will step in to guarantee the rights of policyholders if an insurer gets into financial trouble. The main disadvantage of this form of prepayment is if the funeral home goes out of business, you could lose the locked-in cost benefit of the prepaid funeral plan.

Once you prepay funeral expenses, keep the documents in a safe place. Make sure your spouse and appropriate family members know of the existence and location of the documents; they will need them when you are gone.

Rosa and I didn’t want to burden our loved ones with the arrangement and payment of our funeral expenses. They should be allowed to grieve their loss unencumbered by that terrible responsibility. So we took the responsibility that should only be ours and planned and prepaid our funeral expenses.

K. C. Knouse is the author of True Prosperity: Your Guide to a Cash-Based LifestyleDouble-Dome Publications, 224 pages

Eyewitness to the Death of a Credit Union

Credit unions are dying at the rate of almost 20 per month. Rosa and I witnessed the death of one of our small, local credit unions two weeks ago when we attended a special membership meeting to vote up or down on a voluntary merger with another local credit union that was ten times larger.

Voluntary mergers are common

Mergers of this type are not unusual. In recent years, credit unions have been disappearing through mergers at an average rate of 229 per year nationwide. Ninety percent of these mergers involve small credit unions ($50 million in assets or less) joining with larger credit unions to provide their members with products and services the smaller credit unions could not afford to provide on their own. Additional services and the convenience of additional branches were cited as reasons for the merger in the meeting notification letter Rosa and I received.

We opposed the merger

We were against the merger and intended to vote that way at the meeting. The merger offered no advantage to us: we already had access to the services and additional branches as members of the larger credit union into which the smaller one was to merge, and we stood to lose several advantages the smaller credit union provided such as higher interest rates on certificates of deposit, dividends paid monthly rather than quarterly, and the opportunity to adjust the interest rate once during the term of a certificate of deposit if interest rates increased during that time. In our view, members of the smaller credit union who wanted more services and branches could join the larger credit union; membership in that credit union is open to all who live within the county.

Our minds are changed at the special membership meeting

The chief executive officer (CEO) of the credit union welcomed those who attended the meeting and explained the process by which the board of directors had arrived at the decision to merge with the larger local credit union. He noted that the credit union was in sound financial condition. It was a desire by the chief executive officer and chief operations officer to retire within the next couple of years after serving in their positions for 43 and 37 years respectively that had prompted an investigation into the options open to the credit union. No plans had been made for the succession of top management, and there was not enough time now to bring in new management and adequately train them to take over the operation of the credit union, a process that the CEO estimated would take five years. Other options were considered to keep the credit union independent, but a decreasing and aging membership along with a shrinking loan portfolio made them unfeasible. A merger appeared to be the best solution and the best candidate for merger was the larger local credit union.

According to the National Credit Union Administration, 47% of recent credit union mergers cited declining membership as the primary reason for merging with a larger credit union, while poor management succession planning was the primary reason for 18% of mergers.

The CEO’s presentation changed our minds. We now understood the real reasons for the merger; a vote in favor of the merger appeared to be the only rational choice. The credit union would need to merge eventually; nothing was to be gained by postponing it.

After being assured that the terms of our current certificates of deposit would be honored by the larger credit union, we cast our votes in favor of the merger. The results were announced shortly thereafter. Out of 5,000 members, a little over 500 actually cast votes, most of which were submitted by mail prior to the meeting. Roughly 70% voted in favor of the merger. As of June 1, 2015 the credit union will cease to exist.

Fewer credit unions equal less competition, fewer choices, less freedom

The passing of this credit union means less competition in the local market and the further erosion of personal service in the financial services industry. The management and staff of the deceased credit union were on a first-name basis with a large percentage of their membership and had developed personal relationships with their members over the years. The word “family” was used many times during the special membership meeting. That will not be the case at the larger credit union which is moving relentlessly to automate as many services as possible. We already have credit unions in our local market that utilize centralized teller services for their branches. Much like a call center, tellers are located at a remote office and interact with members at the various branches via a video terminal. Another credit union has gone completely electronic and charges members a five dollar fee for each transaction conducted face-to-face with a teller; all business with the credit union is done remotely via the internet or call center personnel.

With the death of each credit union, the consumer is left with fewer choices and less freedom.

K. C. Knouse is the author of True Prosperity: Your Guide to a Cash-Based LifestyleDouble-Dome Publications, 224 pages