Time to Revisit Areivim

A reader sent me an email that went out from Daily Halacha and I once again feel the need to revisit Arevim and send out the message in hopes that someone will hear it and bring it to those that endorse the program to hear: buy real life insurance and actually take care of your family.

I wish I had the brains to take a photo of the original Areivim pages, a they change from time to time. The last time I visited the subject (Nov 2010) I recall visiting each webpage and that each site made a disclaimer of sorts that the program is not life insurance. The website (Areivim USA) the following email refers to specifically states "Areivim is a 100% non-profit, member-financed, insurance program." I hope I am not mistaken re: this particular website, but I believe that in the past, the different programs had a tad bit of honesty to say somewhere that this was a tzedakah program.

Not to get sidetracked, my message remains the same: don't buy snake oil. Buy old fashioned life insurance (Term 80 is a good standard, relatively inexpensive insurance program. Regular life insurance is NOT controlled by a Rabbinic Board. Regular life insurance is regulated and there are reserve funds. Regular life insurance distributes funds upon death, not upon the marriage of a chatan or kallah. Regular life insurance does not consider your other assets. When you receive a regular life insurance payment, you can use the money as you deem appropriate. Here, Areivim states:

1. A fund of $100,000 will be established by Areivim for each unmarried child and the spouse in the bereaved family.
2. The funds are placed into escrow accounts where they are saved until the child's wedding. Any accrued interest collected until then may be used to provide for the orphans' and/or spouses material and educational needs. All decisions in these matters will be made under the authority of the rabbinical committee.
3. Areivim has been established primarily as charitable (Tzedakah) endeavor. In the event that an orphan has shown the capability of supporting themselves financially and paying for their own marriage expenses, or in the event of a substantial inheritance, no funds will be collected. In certain cases, a partial fund will be established to complete the sum of $100,000 per child.
4. In the event of (G-d forbid) a large number of deaths among members (as a result of war, earthquake, etc.), Areivim reserves the right to consult with its Rabbinical committee in regards to proper procedures.
5. In all cases of dispute between members and Areivim's administrators, Areivim's rabbinical committee will serve as arbitrators and their decisions will be accepted as final.
6. Members relinquish all rights to sue or submit legal claims against the decisions of Areivim or its Rabbinical committee.

The following is the letter that went out. I've deleted the name of the beneficiary family. Rabbi Mansour, please reconsider your endorsement and encourage families to do the right thing and buy regular life insurance. You have an opportunity to encourage people to invest in something real. Please do. This is not a protection, nor is it a nest egg as stated in the audio file which I don't know how to put in this email yet. At best, this is a hachnasat kallah fund for orphans with no guarantees.

Subject: Request from Rabbi Mansour- Join Areivim!


Dear friends;

We appeal to you today, not for money for an organization, but for
financial stability for your own children. Areivim is a non-profit
community based benefit program that does not have a premium, but pays out
to orphans and widows when the wage earner of the home suffers an untimely
passing. This program is very successful in Israel, and all the Rabbis of
our Community including Rabbi Eli Mansour, support, encourage, and REQUEST
your participation. (Please listen to Rabbi Mansour's appeal in the
attached audio file.)

Here is how it works:
. Join your family at no cost, and no monthly or annual premium. Your
family is now covered in the Areivim group.
. Upon an untimely passing, each unmarried orphan and widow receives
$100,000.00, or a lower pro-rated amount if the threshold of 14,286
families are not joined in the group. 
. You pay $7.00 per unmarried orphan and widow when there is an
unfortunate untimely passing in the group. The $7.00 will be reduced once
the membership exceeds 14,286 families. (Currently, enrollment is at
10,800.)

The passing recently of Rabbi [deleted] zt"l was a terrible tragedy. 
We can't ignore the thought that comes to mind of his family's financial
stress had he not assured himself and his family for the unknown with
Areivim. B"H, he had fulfilled his duty towards his family and enrolled in
the program from which his family will now benefit immensely. 

Even if you already have Life Insurance, we encourage you to participate in
this program for the sake of your family, and to help support your
community's wellbeing.

Be responsible. Head the call. Join today. Call Arevim at 877-827-3484 or
visit www.areivimusa.org.

Not So Easy to Contain the Disgust

Cross-Currents' Rabbi Adlerstein reports that rumors have been verified that the Lakewood Mashgiah Rav Mattisyahu Solomon is fed up with the marketing campaign of Kupat Ha'Ir which has reportedly taken many a person looking for a salvation to the cleaners. I share this disgust and believe the advertising crosses the line of honest business practices.

While Rabbi Adlerstein does not contain his disgust for how Kupat Ha'Ir is changing the face of Orthodoxy, he nevertheless warns his readers to be careful and "not throw the baby out with the bathwater." Further in the comments, Rabbi Adlerstein advises, "I would suggest an intermediate position [to not donating at all]. Mail in your usual check. But when the fundraiser comes to town, make a point of going over to him and telling him that you can't support an organization that engages in this kind of advertising. Couch it in such a way that it is not a lie.] Excerpts below, emphasis mine.

It is important to separate the advertising from the point of the organization. I can think of few regular, familiar features of Orthodox life that bring more disgrace to Torah life than the KH brochures and ads. They proclaim to the public that Torah is the province of worshippers of miracle-rabbis. Nonetheless, the information that I get also points to KH as an effective and responsible organization for distributing tzedaka funds. The needy who are serviced by KH should not suffer because of the overzealousness and deception of the advertisers.

It should be easy to contain our disgust to the marketers. Those writing the horrific copy play on the fears and vulnerability of their audience, while coming close to promising miraculous results. They even come close to encouraging making a pledge to KH in place of following medical advice. They are playing with people’s lives, not just their money. They also diminish the real power of personal prayer, which always remains the best strategy for securing what we think we need for ourselves when the forecast looks bleak. Readers should mentally review the stories they undoubtedly know about the great Rebbes of the past who made a point of emphasizing to their Chassidim the potential of their own tefilos, rather than relying upon the intercession of a third-party intercessor, regardless of his stature.

I find it very troubling that after scathing commentary re: Kupat Ha'ir, we are essentially told to ignore the despicable and continue to send in our checks (note: I don't give to this organization). In light of the fact that there are many worthy tzedaka organizations, I see no reason to give to an organization that:

1. Popularizes a version of black-magic/quick fix Judaism, seemingly with the rubber stamp of the Rabbonim that grace its brochures, that is a far cry from a normative mesorah,
2. Preys on the vulnerable through questionable marketing tactics,
3. Has little transparency and a clearly large overhead (I haven't forgot about the Areivim "Life Insurance" program),
4. Promotes an ideology which contributes rampant poverty (thank you to the Cross-Currents posters that make this important point),
5. and ultimately disgraces the mitzvah of tzedakah.

While I have no doubt that the organization does perform valuable work, I choose not to ignore the unseemly.

Guest Post: Predicted Symptoms of Middle-Income Overspending

Dear Orthonomics,

I attended a big actuarial conference this week and one slide at one of the presentations caught my attention.

The topic was marketing insurance to the middle market (defined as household income of $35,000-$125,000).

The speaker commented several times on the differences between the older baby boomers (born in the first 10 years of the boom) compared to the younger boomers and Generation X. The older boomers saved, took financial responsibility, and basically lived within their means. The younger boomers and those who follow them are debt-ridden spenders. It's very hard to sell insurance to this market because they have so many other needs, due to their profligacy.

He said - and this is where I thought of the Orthodox community - that things will not change for this group until they suffer a lot of PAIN. He predicts:

1) multigenerational housing - people moving in with their adult kids.

2) family interdependence [you had a post about this recently].

3) people working longer, putting off retirement - although he does not see jobs being available for this group when it ages.

4) an increase in poverty.

This was a good example of how the problems we see in the Orthodox community are not necessarily unique to our community. Many of the problems in the Orthodox community mirror problems in the rest of society (although frum people like to think that they're insulated and special). Maybe the frum world has the financial pressure of paying tuition - but if it weren't tuition, there's likely be something else to squander money on.

The generation before mine somehow managed to pay tuition and not go broke. Different generation, I guess.

----------------------------------------------------------------------------------------
Thank you to the guest poster for sharing comments in industry re: the spending habits of the young. The Orthodox community shares that same plight, often coupled with our own meshugas and sociology, for lack of a better term. I think the Orthodox community as a whole is already knee deep in all four symptoms mentioned:
1. While I haven't seen too many parents moving in with children, I know of many married, adult children (often with children) who have found they cannot afford to maintain their own living quarters and have moved back in with parents. This must be a challenge in the shalom bayit arena.
2. Family interdependence is extremely high, and often unrecognized. I might be mistaken, but I have referred to many families that claim they receive no financial support, but they receive many, many hours of unpaid babysitting. Even where money is not being exchanged, there is interdependence.
3. I know empty nesters with higher mortgages than I have. 'Nuff said. Retirement is out of the picture for so many families.
4. Signs point to an increase in poverty.

KYA Update: The Moving Ball

As you may recall, a Guest Post by an actuary titled "AREIVIM and Why I Don’t Like It" seemed to have set off an internet storm, which I attempted to follow. The last thing I knew, before the storm settled was that in addition to a few endorsements being pulled from the websites, the KYA director, whom I was very interested in hearing from directly, was a no show on Zev Brenner's Talkline. Since then, I hadn't seen anything on the program until I started getting my Rosh Hashana mail.

Seems the program has changed. Originally, the plan advertised a $100,000 fund to be set up for each orphan that meets certain qualifications. The $100K principal was advertised to remain in tact, and the interest can be used to defray day-to-day expenses. Those who join the plan were to be charged $6/7 (Vaad HaRabbonim, Kupat Hair) per qualifying orphan up to a maximum. The math is clearly problematic. While there are claims of professional review, none have been produced.

Currently, the Vaad HaRabbonim Rosh Hashana brochure advertised:

"Each member family contributes $2.30 through a one-time credit card charge or standing bank order, in the event that the child of a member family is orphaned. The immediately produces a $50,000 fun for the child. The interest helps to defray day-to-day expenses, while the principal serves for wedding expenses."

So, the fund is now being advertised in the brochure as half the size with a payment (per orphan?) of nearly on-third for a half-sized fund, while the website continues to advertise a $100,000 with a $6 per orphan charge.

Clearly, the ball is in constant motion. My readers know how I feel: buy term life insurance from a reputable company. You will know what you are getting. Clearly the directors of Vaad Rabbanim aren't quite clear on what they are even selling.

Signing off.

For Two Weeks a No Show

Two weeks ago I got work that management of Kol Yisrael Areivim was going to appear on the Zev Brenner Talkline program to "clear up the misinformation and rumors spread on the Internet." Being that I hosted the second blog post regarding Areivim that I know of I tuned in last motzei Shabbat. The planned program was postponed because of "new" and "exciting" breaking developments. Tonight (motzei Shabbat, June 13, 2010) I once again tuned in and again the program was postponed, this time because the organization was putting together their documentation, instead I'm listening to an extended and heated Q and A with a frum lawyer about why ponzi schemes seems to hit the frum community hard. How timely!

There are a lot of defenders of the KYA program and the second postponement by KYA should raise some really huge red flags for those who still believe this program could work. This organization didn't develop yesterday. KYA was formed in 2005 (5 years ago). In February of 2007 (3 + years ago), Jonathan Rosenbloom posted an editorial "Look Before You Leap" at Cross-Currents. In his editorial, he pointed out a number of concerns with the program calling it too good to be true. But he nevertheless endorsed the tzedakah aspect of the program calling it an "improvement" over the current situation. For the most part, commentators including seasoned actuaries, chimed in decrying this program.

Now we are in 2010 and following the guest post I hosted, the second such post that I know, Rabbi Horowitz took up a conversation with KYA management, the 3rd post dealing with this organization that claimed in their response to Rabbi Horowitz that the organization has been checked out and endorsed by actuaries, CPAs, and lawyers, to say nothing of Rabbis and community officials. Following this post, KYA pulled the endorsements of the Agudah, NCYI, and an official from the OU were pulled from the website.

Rabbi Horowitz's first post of a handful went up on May 17, 2010. Nearly one month later after that post and 5 years after the founding and marketing of the organization through numerous print and Internet advertisements, the organization is unprepared to go on Talkline defend their program and "clear up the misinformation". Either the research has been done or it hasn't been done! I've written audit reports. In fact, I have an entire stack of such reports sitting in my home office. With a quick review of any of my reports I would be half prepared to talk about work I did a decade ago. My papers have been used by auditors who came after me and they have been examined by outside lawyers and auditors. Such is how a professional office is run. It is truly astounding that for for 5 years KYA and others (Areivim and Areivim USA) have been able to advertise and collect funds without making nary a blip on the radar. Now that they have been put on the radar, they have been unable to go on the air and talk and take questions for no more than 2 measly hours, much of which is interrupted by commercials and buffered by the back and forth with Mr. Brenner. This is just downright terrifying!

Think of how much money has been poured into this program that could have been used to start up a tzedakah to help families fill in the gap to buy REAL life insurance, i.e. the type that pays upon death with no strings attached and allows a family freedom to use the proceeds as they see fit (rather than throwing some interest income their way until the time when a child might qualify to use the lump sum to get married!). Think of all of the people who have bought into this program, passing up opportunities to buy REAL Life Insurance at more affordable prices. Think about the families that could have bought REAL Life Insurance 5 years ago but are now no longer able to do so because they have been hit by the unthinkable.

So will KYA make a showing on Talkline next motzei Shabbat? I really hope so and I hope that readers will take an interest and pepper management with questions and educated commentary. It really shouldn't take this much time to get your docs together KYA. You've been around since 2005. Your docs should have been in hand then!

Surprised to Find Orthonomics in the Yated

I was very pleasantly surprised to see that my Guest Poster's featured post AREIVIM and Why I Don't Like It was quoted in full in the Reader's Write section of this week's Yated. There was no mention that the content of the letter came from my blog, and I'm certain that is for the better. Since I was pleasantly surprised to see the Guest Post in the Yated, I'm curious as to how it landed in the Reader's Write section. The letter begins like this and is followed by the text of the Guest Post:


In response to Rabbi Binyomin Ginsburg’s column on the importance of buying life insurance
and the coincidental inclusion of a brochure for Areivim in the same issue of the Yated, I would like to share some thoughts written by an actuary, whose job is to analyze risk in insurance, among other things. His remarks are titled, “Areivim and Why I Don’t Like It.” He writes as follows:

I had no idea that in the same edition that Rabbi Ginsburg stressed the importance of life insurance that Areivim included a brochure in the paper copy of the newspaper. Simply wow. Now that the KYA/Areivim/Areivim USA issues have come to the forefront of print and virtual media, I am hopeful that we can finally discuss efficient use of resources, personal finance, and transparency head on.

Meanwhile Rabbi Horowitz has published his recommendation that contributors and members of KYA/Areivim/Areivim USA dissolve their relationship with the organization and he is taking some heat on his webpage and at VIN.

Speaking of transparency, in perhaps the most idiotic comment of the year, a VIN reader correlated Rabbi Horowitz's questioning of Areivim to questioning Moshe Rabbeinu writing: "Doson Veavirom also doubted the credibility of Moshe Rabeinu!" Need little ol' me have to review some basic pashat Torah for the benefit of VIN readers?! Moshe Rabbeinu is an example of the great transparency that one should demonstrate when dealing with communal funds. There was no need to place blind trust in Moshe Rabbainu because he avoided suspicion by keeping a transparent accounting and open pockets. In fact, when collecting funds for the Mishkan Moshe Rabbeinu even told the people when enough was collected. Can you imagine a shul, school, or organization today shutting down their collections mid-year because they have what they need?

Just because a tzedakah manages to put out glossy brochure after glossy brochure does not make it "Moshe Rabbeinu." I don't nitpick every action of the organizations that we donate too. In fact, if I was in charge I might spend money differently. But so long as the organization is reasonably forthcoming and demonstrates basic competency and integrity, I am pleased to be a donor. KYA has not been at all forthcoming and has even lied about endorsements and Board Members. Am Yisrael can and will take care of widows and orphans and I believe we will be able to do so in a more dignified fashion without a middle man such as this.

Areivim Continued

The issue of Areivim has really taken center stage on Rabbi Horowitz's blog (here too, but I think this will be my last word on the subject) and I think that those of us who care about yashrut, integrity, fiscal accountability and transparency, and about the mitzvah of tzedakah which not wanting to see it degraded owe a debt of gratitude for putting some leg work to investigate the Kol Yisrael Areivim organization.

In continued semi-literate response from Mr. Bochner, an elusive name behind KYA, names of "bored members" are finally named. Rabbi Horowitz has taken the time to contact some of the named Board Members and reports (see the comments) that at least one member claims not to be involved with this organization. In the meantime, the endorsements from the Agudah, NCYI, and the OU have been pulled from the website, although Mr. Bocher continues to name these organizations in his "answers" regarding the organization, its funding, and its structure.

I hope that those who have been falsely named as supporters or Board Members do not allow this issue to die quietly. Such would be an injustice to the Orthodox community as a whole, and the Yeshiva and Chassidish communities in particular, who are being sold a bill of goods as this program is promoted. It is also insulting when people, including leadership, say that the constituency wouldn't buy life insurance anyways. If you have a platform, you have an opportunity to educate. Don't waste it!

The system of endorsements by slapping a picture of a gadol is highly disconcerting to me. Correct me if I am wrong, but I believe the segulah based, gadol picture advertising is relatively new, as is the 8 page glitz and flash advertisements. I much prefer old and unimproved. Also of concern is that people who simply lack rudimentary education trying to start organizations up for which they haven't the foggiest idea what they are doing. It is amazing that people will let them run wild with millions of dollars in the name of tzedakah. We should remember that the mitzvah of tzedakah is an instruction to invest in the community, not throw your hard earned money in the wind and see which direction it floats in! One would think this an obvious point, but I'm afraid it isn't.

It wasn't too long ago that I reported on the news story of Rav Shteiman's home being robbed of a massive $50,000 of cash alone. The theft was an inside job and should have been prevented through some simple internal control measures. If this could happen, what would make anyone think that the same circle of people has the ability to run an unregulated "life insurance" company?

Areivim: Friends Don't Let Friends Purchase Snake Oil

Since the start of my blog, I have commented on the uses of tzedakah money and the advertising techniques. I have always stayed away from naming names as I operate my blog on the premise that it is a forum for intelligent people to discuss ideas, trends, and culture, not specific people, shuls, and schools. Until last week, I had never come out and named an organization by name (I once linked to the website of said organization with a small warning again co-mingling cash in gemachs and buying into programs that aren't fiscally sound).

Last week, I broke with my usual protocol when a very kind and, most importantly, qualified reader volunteered a Guest Post: AREIVIM and Why I Don’t Like It. I feel so strongly about the issue of not only having life insurance, but educating co-religionists regarding its importance and helping needy families purchase life insurance (rather than multi-thousand dollars apparel, wigs, furniture sets, and pricy sheva berachot for chatanim and kallot that have never paid an electric bill of their own), that I'm willing to go out on a limb here and name names. . . . .or shall I say, lack of names!

Rabbi Horowitz composed a letter to the one and only public name behind Areivim, Yoel Bochner. He asked a series of basic questions about the plan, and he received an answer the essentially reads like this: Trust Us. We are endorsed by Askanim and Rabbonim.

I felt perfectly comfortable publishing the guest post without contacting the organization because I am of the believe that anyone selling a financial product should have officers, audited financial statements, and a prospectus. The Areivim website doesn't list contacts and has the chutzpah to ask you to provide your contact information to them in order that they be able to contact you!

After Rabbi Horowitz received answers to direct questions posed to Avreivim, I believe that I have all the evidence I need to say: Friends Don't Let Friends Purchase Snake Oil. Whoever is behind this program (and we still haven't the foggiest idea, although the other Areivim website lists this as a project of Kupat HaIr) doesn't have the common courtesy to release their names (not in the letter to Rabbi Horowitz and not through their website) or post the names of those who are qualified to endorse such a plan (namely a team of actuaries, which Mr. Bochner claims are out there. . . . .now who are they?!?!?!?). Meanwhile, they are running a very slick advertising campaign through the internet, mailings, and local publications and I think that anyone who has turned their credit card number over should think twice and encourage

The lack of transparent finances and legalities is, of prime importance, but I want to point to three other areas of significant concern (I will underline in the reproduced letter below):

1. Mr. Bochner takes the time in his letter to essentially educate against life insurance, rather than use a valuable platform to educate about the importance of life insurance (although he does ask people buy life insurance). The main premise behind the study of economics is the concept of scarcity of resources. Rather than encouraging families to prioritize resources and mobilizing the community to prioritize our resources in helping needy families purchase real life insurance, he promotes his own program's affordability and essentially discourages the purchase of commercial insurance.

2. The organization reserves the right to decide you don't actually need the insurance and responsible people who purchase life insurance will not be eligible for payout from Areivim despite membership. This achieves the exact opposite of creating a situation of dignity, and will also practically ensure that only the most uninsurable folks buy into this plan.

3. The organization encourages widows to spend the money the "big expenses" of tuition and weddings, but allows a Rav to be the arbiter. The idea that a widow(er) should need to answer to a Rav regarding the money they rightfully receive from a "life insurance" plan (no matter how flawed) strikes me as CRUEL.

I am shaking as I write this and I will go so far as to say that the organization that I believe is behind this plan already deals with millions of dollars of tzedakah funds yearly and I think it high time that transparency be demanded. Additionally, it is time to start asking our community leaders to stop re-inventing the wheel and encourage a philosophy of sechel where precious communal money is at stake. This plan makes about as much sense as investing our life savings in becoming Amway salesperson. What news will we wake up to next, that we need a frummer version of penicillin? It is time to check the ego at the door and admit that we might be a brainy people, but Met Life and Northwestern Mutual have know-how.

In the meantime (I have to go to work), can my more connected readers who might get the time of day please contact endorsers and ask them to take a second look. Breaking news: The endorsements from a Rabbi at the OU, the Agudah, and the National Council of Young Israel are no longer appearing on the website. Can someone find out if they pulled their endorsement. And if so, encourage publication of such. OK, I have to run to work. Here is the letter:

MR. YOEL BOCHNER’S RESPONSE
Dear Rabbi Horowitz,

We are grateful for your interest and the insightful points you raise, and appreciate the opportunity to respond and dispel some of the misconceptions and confusion surrounding our work.

Your reputation as someone who works tirelessly for progress and change in our community, refusing to accept 'because that's the way it always done' as a reason for stagnation, makes us confident that, if you take the time to study our plan, you will share our vision.

In addition, your touching personal note about your own childhood underscores the importance of what we're doing: sparing other humiliation and inconvenience

It would be cynical and unfair to assume that KYA is 'just another' activist organization when, in a sense, we have entirely rewritten the way things are done.

Not content with mere figurehead rabbinic figures, the rabbanim affiliated with us are involved, investing time, energy and heart in this project, one which has become a priority to them.

The rabbanim in question are representative of all the various streams within yahadus hacharedis, chassidim, litvishe, Sephardim and Ashkenazim.

Please note that the rabbanim to not 'endorse' us, or promise to daven for people who help us- they are us! Every single rov is already a part of- or will be a part of- our work and they are the prime catalysts for our success.

In America, the names of Rav Mechel Steinmetz and Rav Benzion Strasser on signed on to the account, and we have hundreds of other rabbanim in communities across America.

You see, Rabbi Horowitz, the rabbanim are our greatest allies because they know better than anyone else just how broken the old system was, and how workable this one is.

They are the ones that were faced with the bitter daily task of hearing the tales of pain from new almanos, the accounts of orphans in a home bereft of a breadwinner.

There was a time before people grew numb, when it was still possible to appeal to the masses and hope to touch their hearts; unfortunately, as tragedy followed tragedy, people- even in a nation of rachmanim- grew a little less sensitive to the relentless onslaught of tzaros.

The 'keren' system, in which the rabbanim formed special accounts for each needy family, was no longer an effective way to galvanize the people and raise the necessary amounts of money.
Rabbi Horowitz, you- correctly- mention the humiliation of the young orphans that are fully aware of their new status as 'wards of state'.

Imagine the shame of young children who are forced to 'pose' for the pictures that will be emblazoned on the walls and shuls of their hometown? Is there anywhere to run from such pain?

We came into being due to original and creative thinking by the rabbanim and askanim involved in these wrenching situations. You, Rabbi Horowitz, raise valid points about how it ought to have been done, in an ideal world, but these dedicated individuals are working within the parameters of reality, well aware of the limitations of people.

You know the numbers- each head of family commits themselves to three dollars per orphan, in the sad scenario of a parent's death.

Three dollars per member – based on a group of 16,500 people in the group- per yassom equals fifty thousand dollars per child.

A lot of rules and regulations were put in place to assure that the system can work out.

The idea gathered steam, and in America- where, unfortunately, tragedy is no stranger- askanim wanted a similar program. The 'keren' system stopped working here as well, and the embarrassing newspaper campaigns, even those that attempt to maintain the anonymity of the recipient, often cause great collateral damage.

The lay leaders that created the American model felt that fifty thousand dollars per child was insufficient for this country, and changed the numbers- six dollars per child would equal one hundred thousand dollars per child. We were welcomed by the heads of virtually every single communal organization- Agudas Yisroel, Young Israel, Orthodox Union, Chabad and various other communities.

The terms and condition were drafted by a team of accountants and actuaries, working pro bono for a cause that was placed at the forefront of the communal agenda by rabbanim.

Rabbi Horowitz, before we delineate the details, allow us to respond to your overriding concern; why not get people to purchase conventional life insurance?

The question is a good one. Kol Yisroel Areivim is not an insurance policy and we encourage every person who can purchase a standard policy to do so. The more they invest, the more their families stand to receive in the event of tragedy, c'v.

Now, for the numbers. In order for a life insurance policy to really make a difference, it would need to provide a minimum $250,000.00 per child. This is based upon the need for $15,000.00 per year per child.

The maximum return on money, with no risk, is 2.5 per year, which means that the profit on $250,000.00 is $6,250.00 per year. The remainder of the money per child would need to come off the 'keren' for each of the ten years, and thus the 2.5 percent yield will decrease proportionately as well.

This option is an expensive one, and a great many frum families cannot afford the monthly payments in a budget weighed down by mortgage, food, tuition and car payments. Bear in mind that this type of policy is only for ten years and one would need to purchase it at a young age in order to get such a favorable rate.

As the age of a breadwinner increases, and health concerns arise, the price rises as well, and often those who need it most cannot afford it. In addition, so often the payout of several hundred thousand dollars is not nearly enough and then the families must resort to the benevolence of the community regardless.

As mentioned, Kol Yisroel Areivim fills a void not in theory- where everyone should have life insurance- but in practice, where many people do not. In fact, even if the deceased did have life insurance, but with a plan that gives less than one hundred thousand dollars per child, Kol Yisroel Areivim fills the gap.

The rabbanim and lay leaders at our head have drafted regulations that ensure that no individual has excessive power and to maintain accountability and fairness.

• The KYA Policy is open to all members of Klal Yisroel.

• All policies will be reviewed by a board of rabbanim and policy acceptance is contingent upon their approval.

• The rov of the shul where the deceased was a member, of a rov closely associated with the family, will oversee the transfer of funds and ensure that the needs of each individual child are met.

• The account is opened in the name of the surviving parents and the family rov, as well as a family guardian to ensure that the money is used or invested wisely.

• Kol Yisroel Areivim reserves the right to have applicants fill out a medical questionnaire that will determine eligibility. In the event that the questionnaire was filled out incorrectly, KYA reserves the right to terminate the agreement. Funds that were paid out must be refunded.

• Any issues that arise will be dealt with by the rabbinical board of KYA or its authorized arbitrator. Their decisions will be final.

• In the event of a member’s passing, the agreed-upon fees will be collected from the group's members. The funds will then be used to establish a trust for the children of the deceased. In the event that the group is complete ,with 16,500 members, the amount will be one hundred thousand dollars per child. If the group is incomplete, there will be a minimum payment of fifty thousand dollars per child

• The amount collected is $6.00 per orphan, with a maximum total of $288.00 per year.

• If the charge does not go through for a period of ninety days, membership will be terminated.


• The money should ideally be allocated for major expenses, such as tuition or marriage, but the rov assigned to the family will be the ultimate arbiter.


• Since this fund is meant as an opportunity give tzedaka, in a respectful fashion, to almanos and yesomim, no fund will be established for people that have life insurance in place, or a sufficient sum in cash/assets to render them ineligible of receiving communal assistance.


• Within the organization there is no single individual that has excessive control over the money.

• The office is run by five askanim that do the office and technical work,and each individual case is assigned one overseer from the central office. These people are efficient and knowledgeable and available to discuss any case or answer questions.

Obviously, there are others that wish to copy the success of our model, and it would serve the best interests of the klal if we could unite and join forces. For various reasons, this is not the case, however.

Our appeals are never based upon the drama of painting heartbreaking scenarios and thus using fear and guilt to convince the people. We much prefer to share the facts in an intelligent, clear fashion and respect the ability of people to make intelligent decisions.

Rabbi Horowitz, we are most grateful for your interest and for taking the time to study our plan and its benefits. Your willingness to ask hard questions is testimony to your concern for Klal Yisroel, and thus, it makes you a most fitting partner for our work. It is gratifying that there are people such as yourself that are realistic enough to recognize the potential problems, yet still hopeful enough to encourage positive change.

Respectfully,
Yoel Bochner

A Few Things

The current Yated has a plea for families to purchase Life Insurance written by Rabbi Binyomin Ginsburg. He mentions purchasing it as a "segula" not because it is a segula, but because it might incline more people to do the prudent thing. Such is the state of Orthodoxy I imagine. At the end of the article he writes about a free $50,000 life insurance program offered by Mass Mutual for education expenses. I'm hoping a reader will be willing to check out this program and report back. I've never heard of a free life insurance program that provides more than say $3000 to a customer of a bank, e.g. Here is the information:

Finally, I would like to share information with our readers about a program that is free of charge.MassMutual, an insurance company that sells life insurance, has a program called LifeBridge. This is a free life insurance policy designed to help people pay for tuition after the death of a parent, r”l. Under the LifeBridge Free Life Insurance Program, Mass-Mutual will issue a $50,000 life insurance policy to a trust for a period of 10 years and at no cost to the insured. MassMutual pays the premiums. If the person dies within that time period, the $50,000 is
used to cover the educational expenses of the children. The children have 10 years after the death or until age 35 (whichever is later) to use this $50,000 educational
benefit.

For more information about this program, contact MassMutual directly or feel free to contact Mr. Kahn at 718.436.0022. He will be glad to help in any way he can to have more people protected with life insurance.

In Israel, Rav Shteiman has said it is time to discontinue the vort, and go with a l'chaim following the engagement at the home of the kallah. Perhaps I'm missing some information being only familiar with things in America, but I can't really tell the difference between what people call vorts and l'chaims. Besides my husband and me, I can't think of too many people who have not had an engagement party (my husband will take issue, however, he claims that because our parents met for a meal in which he announced our engagement that we too had a party. . . . .next time one of my kids wants a birthday party with classmates, I will insist that a meal with family is a party :).

I personally am not at all attached to the practice of a vort or l'chaim. I think engagements are best started off slowly, without a bash. It seems extremely logical to me that when cutting expenses, the vort be the first thing on the cutting block. The Simcha Guidelines from about a decade ago also called for only a small l'chaim. I wonder if a decade later, someone else will call for discontinuation or if the financial realities will finally par down on this expense. Time will only tell.

Also of interest is a story in Haaretz as reported by VIN that Badatz has ruled that Chareidim in Israel cannot invest in stocks of Israeli companies. The concerns reported are that Chareidim should not become *partner* in companies that violate Shabbat and engage in inappropriate advertising. I won't even bother to comment that investing does not make on a partner; I actually have my own moral concerns with certain American companies and don't care to invest directly or patronize certain companies. That said, such an announcement is disturbing in combination with the past policies I've reported on. I guess the post He Can't Work, She Can't Work could now, in light of this new pronouncement be titled He Can't Work, She Can't Work, Nor Can They Invest. It seems that each month, we the big fat pocket book, are privy to another report of what Chareidim can't do because it violates religious principal. Worse yet is when leadership complains that Chareidim can't get ahead because of the man. Seriously, it is no wonder that people think about selling a kidney (which is in fact not permissible).

What surprises me most about the Haaretz reports that of the 50,000 Chareidi households, 42% deposit 825 NIS a month in savings plans. According to this exchange rate calculator that is almost $220 a month. There are so many people in America unable to save such amounts monthly. This just seems unbelievable given the unemployment rate and other stats.

Guest Post: AREIVIM and Why I Don't Like IT

With great thanks to "Old Frum Actuary" who is publishing a response to a heavily advertised plan by the name of Areivim that I believe is a disaster waiting to happen and is nothing more than a poorly conceived tzedakah disguising itself as life insurance. Like my guest poster, I don't care how big names appear as endorsers. The math simply doesn't work and the level of accountability is low, to put it politely. Regular readers know that I don't regularly publish the name of a tzedakah organization when I comment on trends, but I am making an exception because I feel so strongly about the important of life insurance and I believe that anyone who enrolls in this plan is not only buying into something that is simply unsound, but is playing into a trend of form over substance, and ultimately delaying an introduction of substance. Guest post follows:
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AREIVIM and Why I Don’t Like It
By OLD FRUM ACTUARY

This is just my opinion so you are more than free to disagree. Of course some numbers to back up any counter claims should be a requirement.

Here is the Areivim plan:
A group of 14,286 (families) enroll by submitting an application and a credit card number. If someone in the group dies, the remaining members will be charged $7 per surviving unmarried child, for a total of $100,000 per child. No more than $28 will be collected per member per month. For example, if someone dies and has 7 children, the first month’s collection will be $400,000 (14,286*$28) and the second month’s collection will be the remaining $300,000. If there are no deaths, there are no charges.

Now for the problems:
With 14,286 people and a maximum charge of $28 a month, the maximum amount that can be collected in one year is 14,286*$28*12 = $4.8 million. This means the maximum number of children that the group can pay for in any year is $4.8m/$100k = 48 per year. Since this arrangement is marketed to the Chasidic and RW communities, I am going to assume that the average family has 6 children. With an average of 6 kids per family, that means the fund can handle no more than no more than 8 deaths per year.

How many deaths can we expect from a group of 14,286 people? The answer of course depends on the age of the cohort. But from the mortality tables I looked at, there is no way that this will work. Remember, that there is no underwriting. Furthermore, the latest mailing states that not only will they give $100,000 per child, they will also give money to a surviving female spouse with 3 or more children. Last, it also appears that they will pay money to the surviving children whether it is the father or mother who pass way. This means that in the cohort of 14,286, there are actually over 28,000 people at risk for dying. Assuming 8 deaths or less from a group of 28,000 is well below any mortality table at any age.

Another question I had was as follows: As more people die the group gets smaller, so that later deaths do not have 14,286 people each chipping in $7 per child. So unless there is a constant flow of new people signing up and paying, by definition the plan fails. And any plan that requires constant new entrants to be able to pay the older ones is not an insurance plan but rather a Ponzi scheme.

Furthermore, credit cards get cancelled or expire. Who is going to track down the large number of uncollectable funds after each death? Isn’t there a cost for collecting money out of credit cards? Who is paying for that?

Yet another issue I have is regarding their rule on what happens to the $100k after collection. According to their brochure, ‘special accounts’ will be set up with the oversight of rabbonim, run by askonim who will distribute the money over time, to and through the wedding. I am pretty sure that Bernie Madoff himself would have passed the “rabbonim oversight” test. If there is any potential for fraud and abuse, this is it. Having a multi-million dollar fund in the hands of an ‘askan’ is a recipe for disaster. And cynics like me will be the first to point it out to anyone who asks.

Last but not least, are the distortions and outright lies in their most recent mailing. The brochure begins by stating that after two years the program is working, so all the naysayers were wrong. First, I am not sure two years would be enough time to prove any such thing. Second, according to my sources inside the organization, they still do not yet have a cohort of 14,286 people, so how can they say this? Third, this statement is completely un-auditable. We have no idea how many people have signed up, how many deaths there were, and whether or not outside collections were used to pay for them.

Later in the brochure they state that as of now 3 out of every 5 people have not yet signed up for Areivim. Using my brilliant analytical skills I determined that they are therefore saying that 2 out of every 5 people have signed up. Do you believe that 40% of Klal Yisroel has signed up for this plan? Let’s put it this way, do you know anyone who has?

The brochure also says that ALL the Gedolim in EY and America have endorsed it. Well, my son’s Rosh Yeshiva put up a sign in his Yeshiva saying that he doesn’t; though perhaps all that proves is that my son’s RY is not a Godol. J My Rov was also asked to endorse and he too refused.

The brochure makes mention that the number of deaths experienced so far is far lower than ‘Al Pi Derech Hatevah’ (expected). This is in fact quite possible even if I can’t audit them. And perhaps that can be their selling point - join Areivim and Hashem will bless you with a lower-than-expected mortality. But I think we are all better served by buying insurance from a reputable insurance company, with an annual financial statement and appropriate reserves, that pays the beneficiaries upon death.

Back by Popular Demand

Numerous posters have asked me to make a post on life insurance. I can't stress the importance of adequate insurance coverage. Life happens and, while life insurance cannot heal the emotional scars of the death of a loved one, it can provide a safety net that will ease the transition and allow the widow/widower to take a step back and not act rashly. I'm reposting my first post on Life Insurance as well as an overview of the basics from a reader and commentor. See below.

Repost of my first post on Life Insurance:

It is always fascinating to see where the discussions contained in the comments section of each post go. The comments from this post, at one point, turned towards a discussion of just how important life insurance is. On top of the pure tragedy of loosing a beloved spouse and parent, are the financial devastation that follows. Bills continue to pile up, and often the other parent is forced into the workforce prematurely and, even then, it is often unlikely that he (or she) will be capable of making up for the lost income.

I can't stress enough how important life insurance is, and not just for the primary breadwinner, but also for a homemaker, whose contributions must also be replaced. And, even a secondary breadwinner should not assume that he or she does need life insurance because that income may not replace the expenses that the family has assumed over the years. For example, a family with an average salaried teacher and a high salaried executive has probably incurred expenses and obligations that cannot be covered by a teacher's salary alone.

The subject of life insurance certainly isn't pleasant to discuss, but with a little practice, the discomfort wanes and the discussion becomes just another routine topic. But, be warned, chances are that if you haven't taken out life insurance and want to discuss the necessity of doing so, the ice will be a bit tough to break in the beginning.

Unfortunately, I know some people that are sorely mistaken in their views regarding both life insurance and health insurance and believe that taking out these policies demonstrates a lack of bitachon. Fortunately, the proper approach as delineated by our gedolim falls on the side of common sense. For more information on the Torah approach, see articles by Dr. Yitzchak Levine and Jonathan Rosenblum that appeared in the Jewish Observer and Mishpacha, respectively.

Fortunately, life insurance is not nearly as expensive as you may have imagined. We pay around $550 a year for combined policies of over $1,000,000. [Since this post we've increased our coverage to a greater amount]. In the case of the death of my husband (chas v'shalom), the money provided would pay off our mortgage, continue to provide a cash flow stream to cover our expenses, and pay for the college education of our children.

In the case of my own death (chas v'shalom), the money provided would pay for all additional expenses that would need to be incurred should we loose my (most valuable) services. Although I believe that my services are worth much more than they would cost on the free market, the point remains, nevertheless, that the services of a homemaker have value and would need to be replaced at some level. Child care, cooking, cleaning, running errands, shopping, etc. have value. So do the administrative and financial services provided by many "modern" homemakers.

In regards to the cash flow stream, one should know that your agent can and will include expenses well beyond "the basics" and ensure that it covers Yeshiva or Day School tuition also. It is a wonder that the admission applications for Yeshivot and Day Schools do not REQUIRE the parents to prove that they are carrying sufficient life insurance to cover these costs in the case of a tragedy, chas v'shalom.The cost of life insurance is certainly a difficult cost to manage if you are paycheck to paycheck. But, this cost is so important that one should find a way to include it in the budget. Having life insurance gives parents choices that they might not otherwise have in the case of a tragedy, choices that could be necessary not just for the financial health, but for the mental health of the surviving family. Choices that allow parents to ease into a new life without completely upsetting an already upset home and family.

Dr. Levine suggests that buying couples their first year of life insurance as a wedding gift. I definitely think that it should be a priority of the community and of parents to make sure that all married couples (especially their own children) are educated about the basics and the importance of life insurance.While I might not have the courage to offer life insurance as a gift to the next chatan and kallah, I admire those who do. Maybe, at the very least, I can muster up the courage to mention the importance of life insurance to young couples I know that are having their first child (or second, or third. . . ). I certainly would not have minded if someone had broached the subject, because until recently, we were not carrying nearly enough life insurance. [Note: this is an old post. We now have plenty of insurance!]


Guest Post on Life Insurance Basics (thank you once again):

There are two types of life insurance – permanent and term. Permanent, as its name implies, provides coverage until you die, as long as you don’t lapse the policy. Term offers coverage for a specified time period. Permanent insurance generally has a cash value that belongs to you even if you lapse the policy, while term provides pure insurance coverage with (usually) no cash value.

A few quick words about permanent insurance. Types of this insurance are Whole Life, Universal Life, and Variable Universal Life. These are basically complicated investment vehicles in addition to providing life insurance. Investment return accumulates tax free until cash value is withdrawn. Most people are better off keeping their insurance and investment needs separate, since permanent insurance doesn’t offer the most competitive investment returns. Certain very high net worth individuals or couples who have insurance needs may benefit from these policies for estate planning purposes. If this is you, you and your financial advisor know who you are.

This discussion will focus on term, which, thanks to competition within the industry, has become quite economical. I’m not going to show sample rates because they vary by age, sex, whether or not you smoke, and your health, but several hundred dollars a year of outlay can buy several hundred thousand dollars of coverage, or much much more.The type of term you can buy today is generally what’s known as level term. Level term lets you buy a fixed amount of coverage for a period, such as 10, 15, or 20 years, paying the same premium each year. The price is calculated to be level even though the cost of insuring you goes up each year (after all, you’re getting older and you might be getting sicker). The flexibility to buy term insurance for periods as short as 5 years or up to 30 years, depending on your personal needs, is one of the great things about level term.

As I said, there is a great deal of competitiveness in the industry and there is not a lot of price difference among the cheapest 10 companies, so don’t feel you have to shop for the absolute lowest rate. You can buy through an independent agent, which means that he/she is not representing any one company and can search for the policy that’s best for you. I don’t recommend buying life from the same company that sells you homeowners’ or car insurance, though it might be convenient. Many times a property insurer will offer a couple of life products just for this reason, but they are not life specialists and therefore don’t have the most competitive rates.

Your agent should also consider the claims paying ability of the company you are choosing. Ratings from A.M. Best and Standard & Poor’s are available at sites like insure.com. In addition to the big names in the insurance business (MetLife, Northwestern Mutual, AIG, ING), here are some companies which may not be household names that are very competitively priced: Banner Life, West Coast Life, Genworth.How much term life insurance do you need? The rule of thumb is 10 times income. For example, if your income is $100,000, you need $1 million in coverage. Consider your family size and tuition costs. There is such a thing as mortgage insurance, which is not worth buying as a separate coverage. Make sure your main policy is enough to cover paying off your mortgage. Even a stay at home parent should have life insurance, because of childcare and other household help that would be needed in the event of a claim.

Not surprisingly, your health will determine how much you pay. Companies offer super low rates to people who are in very good health. Depending on the amount of insurance you buy, you will be underwritten based on your health. (Very small policies aren’t underwritten to a great degree). There can be blood tests and a medical or paramedical exam, and a health history and usually a family history will be taken. If you think you have health issues, discuss with the agent, since some companies underwrite more or less leniently and a knowledgeable agent can take this into account when recommending a policy.

Here are some health issues that you might not realize are big considerations. Have you been diagnosed with depression? Do you have high cholesterol? Even if these problems are controlled with medication, they will count against you, although you may still be able to buy an affordable policy, especially at younger ages. Obesity will also count. These are in addition to obvious sicknesses such as heart problems, history of cancer, etc.

Therefore, it’s good to buy a policy when you’re still young and healthy.

By the way, it’s not a good idea to every lie on an application, even if you think you can get away with it. Besides the fact that it’s totally wrong, if you do ch”v have a claim, especially in the first 2 years (a legal period known as the “contestable period”), your application will be scrutinized.

There is a difference between fraud (actually trying to defraud an insurer) and misrepresentation (knowingly or accidentally fudging the facts). These are actually complicated legal terms, but either way, if you lie you will either get caught before the policy is issued or if there is a claim, it may face legal challenges.Insurance is one of the few things we buy hoping never to use it, but there are unfortunate events, and claims happen every day. If you have a claim, your insurance company will probably offer to put the proceeds in an interest bearing account for you. This is worth considering, even though common sense says that the company is doing this so that they can continue to make money. People don’t usually think straight after experiencing something traumatic like the loss of a spouse, and you may be tempted to use the money unwisely. Tie the money up in an interest bearing account (if you don’t want to leave it with the insurer, you can shop around for a good rate, but something tells me this is not what someone wants to do when they’ve just had a loss), leaving an amount available for living expenses, and at some point get financial advice on how best to use the proceeds to meet your future obligations.

Let’s say you live to the end of the level term period – now what? If you have timed your policy to expire when your dependents no longer need the death benefit – good for you, that is what you should have done. But what if, for example, you had a baby unexpectedly later in life? When the term period runs out, you will probably still be eligible for coverage, but your rates will skyrocket, and go up each year thereafter. If you are still healthy and young enough you may be able to buy a new policy on the open market. If not – let’s say you have health problems that make you uninsurable – you may find it worthwhile to keep the original term policy even at the super high rates. Some policies allow you to convert to a permanent insurance policy from a term policy without further underwriting. It’s more expensive than term, but this may be the way to go if your health does not allow you to buy a new policy.

There is a fairly new type of insurance out there called Return of Premium Term (ROP Term). This pays you back all your premiums if you live to the end of the level period. It’s more expensive than regular term insurance. It appeals to people who feel that they have to get something for their money no matter what. It’s a psychological need some people have. If this is you, you might consider it.

How Would You Feel About Such a Tuition Fee?

Following is a note to me from ProfK regarding a plan that is being discussed in a certain community to raise money for the schools. I have chose to edit out the name of the community until there is an official announcement so that we can concentrate on ideas rather than play into a rumor mill and discuss particular communities. I make an attempt here to discuss ideas rather than people, communities, or rumors.

Like ProfK, I find the idea of a school requiring parents to pay a fee so that a life insurance policy can be taken out for them by the school and with the school named as a beneficiary to be macabre. I have been an advocate of community education regarding the importance of life insurance. I believe parents of dependent children should be adequately insured and I don't think it is too much to ask families to insure themselves instead of expecting the community to pick up the pieces if the tragic happens, as it does. I would not be in opposition to some sort of requirement for parents of school children to carry life insurance as a condition of scholarship, although I'm not sure how this would work in practical terms. However, the idea of having a school, especially a school that is stressed financially, take out life insurance polic(ies) on their parent body almost feels like a death wish. That is just a gut feeling of mine, perhaps rational, perhaps irrational. I guess I'd rather not be viewed as more valuable dead than alive. May we all live and prosper until 120.



Orthonomics,

My husband came home from shul tonight with an interesting story. A friend of ours has two sons living in [unnamed community] and active in the community. Our friend reported that they are tossing around the idea in [unnamed community] of instituting a life insurance requirement at the local yeshiva. Every parent would be charged an extra $230 of tuition to pay for a one year term life insurance policy on the parents of students in the school. That's the parents, not the grandparents. Apparently from what our friend mentioned there are at least a few deaths each year among the parent body, whether father or mother. The feeling is that the payoff from the insurance policy would at least pay the tuition for those students where a parent had died plus some extra for the school.



To say this is macabre is too mild. Most of the men who heard this at shalosh seudos were astounded at what they saw as an idea in really poor taste. My husband also thought it was in poor taste but went one step further. The proceeds from the insurance policy would go directly to the yeshiva. Who is going to guarantee that they don't mismanage the funds [given the current state of financial management]? Why would parents trust a yeshiva with a closed books policy to manage the insurance payments and the money received?



No end to the out of sight solutions that some people are dreaming up instead of putting their efforts into something practical that might help.

ProfK

The Life Insurance Tuition Plan

Charles Kushner has published an Op-Ed piece title "Op-Ed: Funding Jewish education—a self-sustaining solution." He does not present this plan as a "perfect solution" but rather a conversation starter.

The plan presented has the following two tranches:

Tranche I: Upon enrollment of its first child to enter yeshiva, each family agrees to allow the school to buy a $25,000 life insurance policy on each parent. There is only ONE policy per parent at the school, regardless of how many children attend the school. The premiums are to be paid over a period of 10 years and remain in effect until the insured reaches 100 years of age. Again, the premiums are paid at no cost to the parents.

Tranche II: Ten benefactors to the school will each select an older person to honor by buying a life insurance policy in his or her name. The death benefit will be $5 million, again with premiums to be paid over a period of 10 years and guaranteed until the insured reaches 100 years of age.

I don't want to be a complete pessimist, but this looks like an endowment fund by another name. The winner, of course, being the insurance carrier(s). The commitment is huge. I am not an insurance expert, but my understanding of whole life insurance is that when a payment is missed, the entire policy is cancelled leaving only the cash value. To put out $250,000 annually to pay for an "endowment" is a large commitment. I believe that trying to fund such a plan, if successful, would uproot other fundraising, possibly causing tuition increases until the endowment is fully functioning. Personally, I believe that further tuition increases will threaten enrollments.

Personally, I believe that the problem for many families, especially younger families, is the current price of tuition, i.e. the here and NOW. The presented plan is a long term plan that doesn't address the fact that increasing numbers of families can't afford full tuition for each child, much less try to fund a massive endowment for which there will be no benefit until at least 10 years down the road. From what I understand, the 5% Estate Plan has not yet benefited the schools, and with that plan there is no massive cost. Meanwhile, tuition continue to rise every year.

I'm interested in what my readers think, both positive and negative. I'm not opposed to long term planning by any means, but the underlying assumption seems to be that the schools will just continue to hold on until a big cash infusion kicks in some 10-20 years down the road. And to put it succinctly, I just don't share the same underlying assumption.

Ask Orthonomics: Opting Out of Social Security

I received this question earlier, and my readers have already addressed the question for me (thanks!), but I like to make sure that important subjects have their own posts so interested parties can find them for future reference.

I'm a lurker and comment rarely, I agree with most of your opinions on finance and would love to hear your opinion about my situation. Husband and I are in kiruv, self employed with four children KA"H, our combined income amounts to 46K, we are considering opting out of social security, do you think it is worth it for us? Provided of course, that we invest the equivalent properly.

Dear Reader,

Thank you for bringing up an interesting question. Opting out of Social Security/Medicare is something I don't see younger Rabbis doing, but it isn't unheard of amongst the older Rabbinate. Perhaps the requirements have changed over time, but I'm not quite sure what religious objection we have to a public insurance system as issues regarding the financial sustainability of social security are not valid religious grounds for objections. The Form 4361 is the form needed to opt out and needs to be filed by the second year in the clergy.

The consequence of opting out of social security is that a member of the clergy can no longer receive Social Security, Medicare, or any other welfare program. I'm not quite certain if this means you would be ineligible for all the various welfare credits that already flow through the IRS Form 1040 in the form of "refundable credits" or if this is only exempts you from Food Stamps, WIC (?), Pell Grants, etc. Nonetheless for the $3519 (7.65% of salary) that you would be saving from your half of the employment taxes, you will be losing access to a great deal of programs. (Note: You mentioned being self-employed, but I'm not sure if that is in kiruv or another activity).

The Christian Church has built up numerous "financial ministries" and none seem particularly enthusiastic about members opting out, for both ethical reasons and financial reasons. The United Methodist Church strongly advises its clergy not to exercise this option. Crown Ministries advises clergy that when they opt out of social security they will need to consider income replacement in retirement, purchasing life and disability insurance, and replacing medicare coverage. The truth is that every single one of us who pays into social security needs to do all of the above, especially when you are considering a large family and (yes!) Yeshiva Tuition.

I don't believe that at this income level you will have the means to take the excess and invest all of it. And given the specific concerns in the frum community regarding paying for private schooling, I think you would be nuts to opt out of Social Security, Medicare, all welfare programs, and expect that the "powers that be" will be interested in letting you keep the change to invest in the very things you will need to invest in.

Signed,
Orthonomics

[Updated] To address a comment in the comments section:
I'm surprised no one is bringing up what, at least to me, seems like an obvious problem here: by signing Form 4361, you are certifying that you are conscientiously opposed to, or that because of your religious principles you are opposed to accepting public insurance. The question raised in this post is opting out of Social Security payments because you want to save that money and/or reinvest it yourself. By signing this form, you're basically lying. I don't know of any Jewish religious principle that opposes public insurance; in fact, I would argue quite to the contrary, but that's a different topic for a different day.

I wrote the following: "Opting out of Social Security/Medicare is something I don't see younger Rabbis doing, but it isn't unheard of amongst the older Rabbinate. Perhaps the requirements have changed over time, but I'm not quite sure what religious objection we have to a public insurance system. . . . " In other words, I'm not sure why some Rabbis in the past opted out and I don't have the historical knowledge of the system to determine if clergy could automatically pass on these withholdings without religious objection. Like I noted above, concerns over the viability of the social security system are not "valid reasons for religious objections."

And quite honestly, have am concerned by the discussion in this post as focusing solely on the money savings and pros and cons of opting out of paying this tax. Am I reading this whole thing wrong? I would expect differently from this blog so am a bit surprised.

I'm disucssing the financial issues because I believe that is what promoted the reader to think about leaving the system which is why I concentrated on the pragmatic issues. I did a little research on numerous statements from different church denominations, none of which came out and said signing would be "assur" but all of which said we strongly recommend against this and which asked the clergy member "are you really being honest with youself?" I think if the couple gets past the money issue, they can then ask themself, do I really have a religious objection. Like social security or not (I have plenty of reservations), if the family still wanted to opt out, their next stop should be a posek with a reputation of integrity. I don't know of any religious objection, but then again, I know people in the frum community who don't believe in buying life insurance or saving for retirement for "bitachon" reasons. I think they are sorely mistaken, but if people think that saving for retirement isn't "Jewish" I imagine that they could have the same objection to this safety net.

Don't worry, the blog hasn't changed. Just my approach to the issue was too heavily focused on the pragmatics.

Oops, The Model Is No Longer Working

A very interesting article on VIN that has hardly any comments about the impending Chareidi Housing implosion. An actuary could have pointed out that the "cash gemach" model isn't fiscally sound.

Speaking of other unsound plans, I recently read some comments regarding cash gemachs that people lend to, sometimes in order to shield assets, and others borrow from to pay bills. I have no idea what type of internal controls exist regarding asset protection, to say nothing of yashrut. I don't think my readers would consider such a fund, but I think it is incumbent on the rest of of to point out the obvious: co-mingling money in informal funds carries tremendous risk. "A fool and his money are soon parted." If you want to contribute to a free loan fund, do so. It is a mitzvah. If you want a checking account, head to your local FDIC insured bank and open up an account.

And speaking of other plans that don't work, I've recently seen print and Internet advertisements for a "life insurance" plan of sorts. Groups of frum people are pooled together and if someone passes away, each member's credit card is charged $6 per orphan to alleviate the crisis. The sentiment is lovely and carries plenty of endorsements, but note that the plan is NOT endorsed by actuaries. So much effort is placed into these plans, but they aren't fiscally sound (see CC discussion prior to the launch of this program). I simply just don't understand why tzedakah funds can't be used to help those with less purchase real life insurance plans from a reputable company. Less risk, same intention. Although the organization is honest that this is not a life insurance plan, I can easily see it being construed as a plan of sorts. I understand that many people who would not be inclined to purchase life insurance might be tempted to use their ma'aser dollars and join this plan. But ultimately I think we would be better off to educate people about the importance of life insurance and possibly help those with less purchase a plan.

Book Review: The Total Money Makeover

I have to thank my wonderful readers for introducing me to Dave Ramsey, author of the best selling book The Total Money Makeover. Meeting Dave Ramsey by listening to his radio show and reading his books (I have read a number of them) was sort of like meeting my financial twin. Who would ever imagine that my financial twin would be more fiscally conservative, Protestant, male, and bald? This promises to be a short review because someone has put a hold on this book and I cannot renew it and I'd rather someone who might need this book get their hands on it because I've been practicing "Grandma's Finance" for a long time.

This book is, in Dave Ramsey's own words "NOT sophisticated or complicated." It is not academic, nor is it a finance manual, nor does it present ideas that are earth shattering. Rather it is a presentation of a plan that will help individuals and families tackle their finances head on by getting out of debt and building wealth. Simple as that.

You might ask, what makes this book different from the many other books that outline the same concepts? I would answer that this book is both entertaining and inspiring, plus it has a great, easy to read format where ideas are set off for clarity. Unlike yours truly (that would be me), who has always been unsophisticated and risk adverse, Dave Ramsey has a story, or as he writes, "I have been there, done that. I have a PhD in D-U-M-B. So I know what it is like to be scared and scarred. I know what it is like to have my marriage hanging by a thread because of financial stress. I know what it is like to have my hopes and dreams crushed by my own stupid decisions."

As I mentioned above, Dave Ramsey is a Protestant, and a quite serious one at that. Some of the inspiration in his book does come from the Bible. Some might be afraid of his books because he is a serious Christian. I am not afraid of reading lines from Psalms (Tehillim) or Proverbs (Mishlei) because these passages only reinforce a commonsense Torah approach to personal finance, one of simplicity guided by a consistent philosophy. And if anything was quoted from the Christian Bible, it certainly isn't anything that our great sages have not said. If you listen to his radio show, I think you can appreciate his religious background more. One thing he I have never heard him advise is holding off children as a way to solve a financial problem. He considers building a family of great importance, which is not something I sense from other financial authors. His ministry is named "Financial Peace" the goals go far beyond sensible finance and into building strong marriages and families.

The real inspiration in this book I believes comes from the stories interspersed throughout the book of individuals and families that have "changed their family tree" by turning their lives around. Seeing how other people have succeeded is empowering! Additionally, Dave Ramsey has some great quotes and a good sense of humor. The following are some saying to hang your hat on:

"Winning at money is 80 percent behavior and 20 percent head knowledge."
"Ninety percent of solving a problem is realizing there is one."
"It is human nature to want it and want it now; it is also a sign of immaturity."
"We buy things we don't need with money we don't have in order to impress people we don't like."
"The secrets of the rich don't exist, because the principles aren't a secret."
"We have met the enemy and he is us."
"Don't even consider keeping up with the Joneses. THEY'RE BROKE."
"Radical change. . . is required for a money breakthrough."
"Christmas is not an emergency." (I.e. You know it is coming, so plan ahead.)
"Live like no one else today so you can live like no one else tomorrow."

The first part of the book tackles some debt myths, namely that debt is a tool used to create prosperity. As Dave [Ramsey] writes: "Debt adds considerable risk, most often doesn't bring prosperity, and isn't used by wealthy people nearly as much as we are led to believe." Another book that I recommend, which Dave references is "The Millionaire Next Door." I was raised in by unsophisticated parents who taught me to save for the next big purchase. I remember sitting through finance class dumbfounded by the idea that people would actually take out loans against their homes to invest in the stock market. I managed to run all the calculations asked of me, but in real life I've seen these calculations destroy marriages.

Dave also recommends against loaning to friends and relatives (see more notes on that below), cosigning loans (guess who is on the hook should your relative default?!), and payday loans. He debunks the myth that "ninety days [is the] same as cash" and that a person will always have a car payment (nope, "the average millionaire drives a two-year-old car with no payments") .

He doesn't like car leases (which he refers to as fleeces), new cars, 30-year mortgages, whole life insurance/cash value insurance, credit cards (most people spend more and few pay them off each and every month), debt consolidation (because it only treats the symptom) and debt-management companies (too much fraud and a great way to trash your credit in addition to treating the symptom via a 3rd party no less), buying gold, get rich quick schemes, gambling, mobile homes (OK, I doubt any of my readers have a mobile home, but you never know), prepaying funeral and college expenses (you can do better by investing, additionally see my notes below), home equity lines of credit, student loans, and bankruptcy (it might be necessary in some situations, but it isn't painless procedures where "you merrily trot off into your future to start fresh").

What does he recommend? Using cash, frugal living, getting on a written monthly budget, saving for retirement ("Ed McMahon isn't coming". . . certainly not without Techiyat HaMetim), being adequately insured and drawing up a will (auto, home, life, disability, health, long-term care for those over 60), having an emergency fund, paying off the 15-year mortgage, putting away for your children's college education, and having FUN with your money (not before you have some solid footing however).

Before delving into his plan, Dave Ramsey outlines some hurdles which cause people to resist changing their financial lives, namely:

#1: Ignorance or lack of know-how. Somehow when it comes to money, people get defensive. Dave writes: "Ignorance is not lack of intelligence; it is lack of know-how."
#2: "Keeping up with the Joneses: The Joneses Can't Do Math" and they are likely broke.

There is a story in this section that I think is worth sharing. Although the story involves Christmas, it could be about making a simcha or forgoing social expectations from what you serve or wear on yom tov, to what you do with your kids in the summer, to what you wear on your head:

"Radical change in the quest for approval, which has involved purchasing stuff with money we don't have, is required for a money breakthrough. Sara's breakthrough came with family. Her family was upper-middle-crust and had always given Christmas gifts to every member. With twenty nieces and nephews and six sets of adults to buy for, just on her side, the budget was ridiculous. Sara's announcement at Thanksgiving that this year Christmas giving was going to be done with the drawing of names, because she and Bob couldn't afford it, was earth-shattering. Some of you are grinning as if this is no big deal. It was a huge deal in Sara's family! Gift giving was a tradition! Her mother and two of her sisters-in-law were furious. Very little thanks were given that Thanksgiving, but Sara stood her ground and said, "No more.""

The Plan

Now that I've completed the (rather lengthy) introduction I will quickly outline the plan that Dave Ramsey recommends for getting out of debt and building long-term wealth which he calls Baby Steps. I am presenting the Baby Steps in brief. Plenty of questions are asked and answered in this section. If this plan is of interest, read the book!

1. Save $1,000 Fast: To inspire confidence you need to get started and focus your efforts. He recommends getting your hands on $1000, the baby emergency fund because "it is going to rain." Whatever it takes to get $1,000 of cash in your hands, do it. Have a garage sale, return stuff, work some extra shifts, cut coupons, etc. Once you've got it, hide it and keep it liquid.

[Shocking States: 49% of Americans could cover less than one month's expenses if they lost their income].

2. The Debt Snowball: Debt is the enemy and the goal is to eliminate all debt with the exception of the mortgage. Dave recommends lining up all the debts owed by amount and start paying them off from smallest to largest, while making minimum payments on all larger loans. I do have a quibble with this (see below), but he bases his method on inspiring confidence in one's abilities rather than on interest calculations which he calls "behavior modification over math." He has worked with many people and has observed that small victories lead to larger victories. The way to get the snowball rolling, of course, entails radical action and a lot of beans and rice.

3. Finish the Emergency Fund: Kick Murphy Out. "Murphy" is a play on Murphy's law. Dave writes, "an emergency fund can turn crises into inconveniences." Dave recommends a three to six month emergency fund of money needed to pay expenses if you lose your income. He mentions that women are more security oriented and that this step will improve many a marriage.

4. Maximize Retirement Investing. Here Dave recommends 15% of income be saved for retirement. First you put away in a 401(k) what your employer will match, followed by the remainder in a ROTH IRA if you quality. He has a nice (but simplistic) chart which clearly demonstrates just how much easier it is to put away small amounts when you are younger.

5. College Funding. I'm going to keep this section really brief. Dave hates student loans, as do I, and recommends figuring out how to do without. Note that saving for college follows saving for retirement. And Dave likes ESA's (Coverdells) over 529s because of the flexibility of investing.

6. Pay Off the Home Mortgage. Here he points out that the tax savings from a mortgage don't justify paying the interest and that leveraging your home isn't the way to make money. We all like to reduce our taxes, but it doesn't make sense to pay more interest in order to pay fewer taxes (a point finance and accounting professors will make which, unlike leveraging your home, is financially sound for those who want to follow Grandma's Money Rules).

7. Build wealth and have FUN. Once you have set up a strong foundation and have built some wealth through investing, there is no reason not to have some fun. It could be a new toy, being super-duper charitable, or a combination while making wealth a blessing, not a curse. Dave notes that wealth comes with responsibility and warns against "affluenza."

All in all, I HIGHLY RECOMMEND this book as a motivator for getting out of debt or just developing a philosphy toward personal finance. I would not use it as an investment manual (see note below). Many readers write me with questions and I am so thankful to my readers for introducing me to this book because I think it presents a simple and healthy view on how to approach finances including the spiritual.

I do have more Dave Ramsey posts coming up, so stay tuned.
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Like I said, I love this book, but I do have a few quibbles, which in the scheme of things aren't anything major which is why I am noting them in small print:
1. I don't like carrying cash, so I have a hard time jumping on that train. That said, I do not recommend taking out a credit card until you have established consistent and frugal spending habits. And I would also say that anyone who has reached the end of the month and found themselves unable to pay their card off in full should immediately start using cash and checks. The same goes for anyone seeing their savings falling in a quarterly period.
2. I think the 15 year mortgage is fantastic, but I can't seem to jump on that train either. A 15-year mortgage would be quite a squeeze for most young people buying into my neighborhood, even if they really have it together. I do recommend budgeting extra each month, but I think the emergency fund wins out over the 15 year mortgage.
3. Dave Ramsey rules against loaning money to friends and relatives as it creates a master/servant relationship and ultimately destroys relationships. (He does not opposed gifting under certain circumstances). This is a tough one to reconcile with what we have been taught about the mitzvah of lending. However, now that I've had time to digest his thoughts and think about some real life situations I know of, I think he brings forward a good point. Certainly that halacha takes into account the changed relationships as you must be careful about not even walking by the home of the person you have lent to unecessarily so as to not badger. Personally I think there is a lot to be said for free loan societies that serve as a middle man between the giver and receiver.
4. Dave Ramsey reminds the reader that over time the stock market averages 12%. While I do believe in investing, I don't ever make my calculations based on such a high return. As such, it is hard for me (a lazy investor) to get worked up about pre-paid college plans for example. I think Dave Ramsey has solid advice, but I look to him more for solving the debt issues rather than the investing puzzle.
5. As a math person, I have a hard time buying into a debt snowball that pays off debt according to the amount due, rather than the APR. But I do understand the reason he recommend this method, but I would probably recommend a hybrid method after building some confidence.

CNN Money Should Get My Number on File

Hat Tip: Numerous readers who alerted me to the Money Magazine Article on Faith and the Expense. Please feel free to self-identify.

Money Magazine is featuring three families in a article about religion and money: a Muslim couple, a Christian family with three children, and an (Orthodox) Jewish family with four children and a fifth on the way. Each family pulls in combined income in the low six figures, and each family incurs religious based expenses, particularly tithes. Personally, I have a difficult time thinking of tithes as a religious expense, as we learn in Pirkei Avot that tithes (done right) are a protective fence for wealth.

The Muslim couple's issues don't particularly interest me. Being observant of one's religion comes at a price, and the $1,800 they pay to maintain a mortgage according to Islamic law seems more than manageable. Additionally, the mortgage won't last forever and given their current income and spending habits, I see no reason they couldn't knock off the mortgage early and rid themselves of the expense. Sure, they have racked up some student loans that they wished they hadn't. But they have no credit card debt, and have even managed to put together $17,000 in liquid savings, which will start to grow now that they have been educated about some of their options regarding investing and Muslim law (think heter iska). They are well on their way to creating a small, but reliable passive income.

And, while they have made some errors, such as passing on 401(k) match due to lack of education, they have a lot going for them. They are young (28 years old), have not yet started a family, although they plan to do so, appear to spend modestly and only on a cash flow basis, make a decent combined salary, and are saving. While I can see it is difficult not to have a full smorgasbord of potential investments, they do have options, and most importantly they have decently sound financial behavior. (My own preference would be to knock off the student loans before buying a home, but I don't see their situation as unmanageable).

The Christian family is a bit more interesting. Only recently has their combined income surpassed six figures. Amongst loyal Christians there are those that believe in wealth building and those that believe that wealth building detracts from service to the church. We seem to have a similar divide amongst Orthodox Jews. Already into their 40's and with 3 growing children, they found themselves tired of living on the edge and decided that perhaps taking care of their own needs isn't quite the distraction they had been raised to believe it to be. They discovered that not having funds to fall back upon, worrying about how they would educate their children in the future, and having to take on 2nd and 3rd jobs, was also a bit of a distraction. So, the husband trained for a higher paying position and now they are firmly within the middle class.

Like the Muslim couple, I don't see impending doom and gloom. The Christian couple, while a bit older, certainly has time ahead of them. They are using their increased income to save, and in only two years have put away $18,000 ($8,000 in retirement accounts and $10,000 in liquid savings). Assuming that they continue to save consistently and do not touch their savings, it won't be too much longer until those savings start to provide a second, yet passive income of their own. The family seems committed to debt free living, e.g. the wife is planning to attend divinity school, but they are saving for the expense in cash. And while cutting spending, as recommended by the financial planner, was met with some skepticism, they are putting in effort and surprising themselves by just how much extra savings they can squeeze out of their budgets by changing their habits. One hopes that buying a new, larger home, won't be a mistake. I wish they had went in for something at a lesser cost, but they seem to be on the up and up.

And now we come to the Jewish Family. . . . . . . . . and I think the financial planner procured by Money Magazine should have called Yours Truly before dispensing advice!!!

The good news is this: this family can get out of debt and this family can build a better financial future. But, they won't do so following the financial planner's advice which have little to do with the underlying issues. (I don't really blame the financial planner. He probably believes that the ritual and religious costs are completely non-negotiable).

The bad news is this: The numbers presented don't tell the entire story and I believe that the situation is worse than it appears.

Here is my math. The article notes that they sold a home in Los Angeles and walked away with a $300,000 profit. The article notes that they bought a home in Houston for $270,00 and paid an additional $30,000 to renovate the kitchen (total: $300,000). Yet, the family lists its investments at $95,000 and they have a current mortgage liability of just over $105,000.

Scenario 1: Not having a multi-year balance sheet, I can't presume to know the entire story, but the most positive version of the story would be that the couple hasn't saved a penny since they sold their Los Angeles home for a $300,000 gain and that the missing $100,000 disappeared in the fall of the market making it "on paper."

Scenario 2: Another, unfortunately likely scenario is that the couple took about a mortgage in the low $100,000's, leaving them with a bit less than $200K from their $300K gain. Their moving costs and the $30,000 for the kitchen remodel, left them with a large chunk of change, perhaps around $150,000. The $95K, much or all of which I believe sits in the 401(k) came from annual contributes and employer match, and therefore did not come from the $300K the couple had in cash at one point. Somehow, between their move from Los Angeles to Houston, they have worked through a sizable chunk of change and more, evidenced by their sizable and mounting credit card debt of $25,000. In other words, they are spending more cash than even they (or the financial planner) cares to realize.

Perhaps the truth as what has happened along the way lies somewhere between scenario 1 and 2. No matter what happened in the past, the couple needs to change course via a change of spending habits. The money that has disappeared somewhere along the line isn't coming back, and it appears they have some out of the ordinary needs with their 3rd child.

The financial planner recommended the following:
*Restructuring their debt from their current 15 year mortgage to a 30 year mortgage that the planner predicts will be somewhere between a .5% or 1% lower. He suggests rolling their $25,000 of credit card debt into a new mortgage.

The financial planner notes that the increased cash flow should take care of future tuition increases and allow them to contribute more to retirement. (I don't think the financial planner has a clue about day schools and how "financial aid" works! I also don't know how financial aid works in Houston either, but in other areas, restructuring liabilities to free up cash sticks you with a higher tuition bill. Many people refinance regularly to make more room for tuition).

The wife is perhaps a step ahead of the financial planner noting that she fears they will just end up in the same position, i.e. running up credit card debt, because of *behavior.* She is willing to consider the idea after seeing if they can stick to a strict budget. I think that if they stick with a strict budget, they should be able to knock off a good amount of their credit card debt and won't have to worry so much about refinancing.

*Increase the amount of life insurance they carry to cover day school in the event of early death of the breadwinner.

Talk about one step forward and two steps back. I am in disbelief that the Mrs. believes that if her husband passes that the community will 1) take care of her children and 2) marry her off within 2 years [getting her back on her feet]. Of course, it isn't that a school doesn't want to help the widow and her children (we are rachamim bnei rachamim), but it seems that day schools from North to South and West to East are coming to the realization that it is sink or swim time, or in other words, not all can be helped to the extent needed. Sad, but true. Regarding remarriage, I simply don't think it is always in the best interest of the widow and children to remarry quickly, even if it were so easy.

* Write a will, especially to provide for the needs of their special needs child.

Fine advice, but it simply doesn't address the here and now. But, we all (and I'm talking to myself here) should probably get on task.

Here is my advice:

*Go on a super-duper-financial-diet because credit card debt is an EMERGENCY. Track every single penny that is spent (including the amount spend every month to pay for financing the debt because that is likely to provide some serious motivation):
1. Put the credit cards on ice. They are completely off-limits.
2. Put together a small cash emergency fund as quick as possible, perhaps $1,000. If you have to advertise yourself as a fill in cleaning lady, do it. If you can watch neighborhood kids when you aren't working, do it. If you have stuff you can sale through Ebay, Craigslist, or a consignment store, part with it. You need cash and you need it quickly.
3. Take a full accounting of all credit card debt. Your inventory should list amounts due from the card with the highest APR to the lowest. Make minimum payments on the cards with the lower APRs and throw cash at the card with the highest APR. Once you have paid off a card, start throwing money at the next card.
4. Stop contributing to your 401(k) because you are going to get out of debt asap and will soon resume contributions after that. (Some might say stop contributing beyond match).
5. Make sure you are only withholding the taxes you need to pay. Many Americans over withhold and love to get their refund. Don't give Uncle Sam an interest free loan while your credit cards explode.
6. Cut the grocery bill in half immediately. Over $1,000 a month is simply too much to spend. $14.99 a pound brisket gets replaced by chicken or fish. Chicken and fish get replaced by canned tuna, beans, or legumes. Hard cheese gets replaced by soft cheese. And you start looking for alternatives to the $9 a bottle grape juice. If you can't buy grape juice for under $9 a bottle in Houston (Houston readers, I need your comments), you need to start freezing the 64 ounce bottle in four ounce increments for making kiddush. Even at $9 a bottle, this shouldn't be the thorn in the budget.
7. Medical expenses should be tracked for the past year or two so a reasonable prediction of future needs can be made. Set up a Flexible Spending Account with pre-tax dollars and pay expenses from the FSA.
8. Sponsoring a $500 kiddush is going to have to wait until it can be paid for in cash. According to the article, the family contributes $3,600 a year to their synagogue, of which $600 is dues. It also mentioned sponsoring a kiddush for birthdays. While the question of cutting back of tzedakah in order to get out of debt should be left to qualified Rabbonim, sponsoring kiddushes is something that can be cut back on, especially because it means IRREPARIABLE LONG TERM FINANCIAL DAMAGE.
9. Reprice your auto and home insurance. Shop for new quotes every 6 months to a year. Look into lower cost alternatives for all major expenses, from camp to childcare to auto insurance.
10. Slash all variable expenses. Turn off lights, put the lights you use on Shabbat on timers, hang laundry to dry, take shorter showers, etc.

While I see the Christian family and Muslim family building wealth little by little, I see the Jewish family loosing ground and quickly. $25,000 of revolving credit card debt can easily cost between $3,000 and $7,000 annually to finance. Think about this for a second. . . . . .that is a lot of money! It is easy to see their debt doubling in just a handful of years. But, if they get out of debt, they will be freeing up thousands of dollars a year, and they don't even need to refinance their home. The Jewish family can also get themselves on far better financial footing, even without cutting tuition out of the budget. They need to speak to a Rav about how to give tzedakah in the here and now. They need to cut their spending like their is no tomorrow. What they don't need to do right now is refinance their home. They are already likely a few years into their 15 year 5.5% mortgage. The size of their mortgage is not unreasonable, in fact is is lower than their combined annual incomes. While I will not declare that they should not refinance, I will declare that it won't solve the underlying problem.

I wouldn't leave a stone unturned, mostly because I believe that the family can win this battle.

Your comments.