Today at TILE we talked about financial planning and the need to look into the future. In full disclosure, the arrival of my son Carson Bix on March 25th had me thinking about the future in a slightly different way. All of a sudden there were new financial responsibilities, new expenses, and new adventures to look forward to. Major milestones (having kids, graduating from school, or starting a new job) can be driving forces for anyone to consider or reconsider a financial plan. So, why is financial planning such a dreaded topic? What does it really mean? And why is it better to start when you’re young?

When you hear the words “financial planning,” how do you feel? Does it generate a sense of certainty or chaos? Does it feel like your favorite hobby or your worst chore? It’s often the latter – not because each step in the planning process is so hard, but because it’s hard to know where to start. The truth is, there is no single road map for creating, modifying, or following a financial plan. Each individual’s start time (age 20 or age 40), needs (will you work until age 70 or do you want to retire early?), obligations (how big is your family?), and risk profile (are you a Cautious Mover or a Rabble Rouser?) is different, so the plan has to be different from person to person. Kind of like exercising, there are tons of trainers and systems, but not every fitness regime is “one size fits all.”

What does planning really mean, then? There are different perspectives on this, but personally I like to think of a plan as a “road map” for your financial life. Similar to a road trip in a car, it is more efficient (and for most of us more pleasant) to actually have a sense of where you are going rather than just driving around aimlessly. You can always change your destination (or objectives) but you need to start somewhere! When you are in your 20s, the objective of your plan may be to start saving – growing your money for a nest egg in the future. But when you are older, the objective may be to cover living expenses or find efficient ways to leave money to your heirs. Start with your objective (destination) then get into the details around the best way to get there (for example, types of investments and the risk profile of each).

Starting young makes a big difference in financial planning. Beyond the obvious benefit of setting good habits early, it’s just easier and less risky to reach your objectives (kind of like training for a marathon, most people will do better if they start training months, versus weeks, before the race). Compound interest is a really valuable “lesson” in here, too. For example, if you start with $10,000 today and earn 5% interest for 30 years, the future value of your investment would be more than $143,000. However, if you waited and only invested it for 10 years it would be just over $16,000. Feel free to try it yourself with different combinations (we like calculatorsoup.com and our own Compound Interest “Learn To”). The building blocks are simple: time (when you need it), rate (how much risk you feel comfortable taking), and amount (the ultimate objective). Unfortunately, starting new things isn’t always as easy.

So what does this mean for the TILE Community? Well, young adults are in the best position to gain the most by planning early. Just like an intimidating math or science course, once you start learning the lingo and developing good habits, it will seem simple. That said, having someone to help you set the road map is a huge advantage. Financial advisors and/or your parents can help you do that by asking you the right questions (where do you want to go), suggesting the best possible routes (investment options), and helping you stay on track (are you hitting your goals?). Nonetheless, you’re the driver in this car, and it’s ultimately up to you to decide where you are going.

- Amy

“It was, by most accounts, 1986 when the residents of the United States became aware of the thing called the World Cup. Isolated reports came from foreign correspondents, and we were frightened by these reports, worried about domino effects, and wondered aloud if the trend was something we could stop by placing a certain number of military advisers in Cologne or Marseilles. Then, in 1990, we realized that the World Cup might happen every four years, with or without us.”
- Dave Eggers, “The True Story of American Soccer”

Because some of us at TILE HQ were forced to watch the Champions League Final on Saturday, this week we talked about the economics of the 2010 World Cup. Is the event a moneymaker or loser? How can a poor nation like South Africa afford to host? And who exactly is going to profit?

Most people probably aren’t thinking about money when they watch soccer. (It’s hard to think anything over the roar of the announcer’s “GOOOOOOOOOAL!”) But the world’s most popular sport is really big business. Many soccer clubs are listed and traded on the stock market, and investment giant Goldman Sachs just published its fourth hefty guide to the economics of the event. So where does all this money come from? Well, there’s the staggering cost of staging the month-long event, and then there are the costs of broadcasting and marketing the tournament to something like 25 billion cumulative television viewers. (Some viewers view more than once, which is why that number is 3.7 times more than the entire world population.) And, oh right, the tickets. So far at least 2,500,000 tickets have been sold at $320-$400 a pop.

South Africa is betting that all the money surrounding this year’s World Cup will make a big difference to their developing economy. A report by accounting firm Grant Thornton even estimated that the event could be responsible for 16% of the economy’s growth this year. The South African government has spent billions to construct the stadiums and infrastructure necessary for the games. And it’s true; besides taking in tax revenue from the 3 million tickets that will be sold, the business sector of their economy will definitely get a huge boost – especially in tourist-friendly industries like transportation, hospitality, and construction.

But will any of this actually amount to long-term results? It’s not really clear. On the one hand, hosting such a popular event will probably benefit South Africa by improving their global “brand image” and increasing interest in tourism. But is money injected into the tourism and hospitality industries enough to lift the whole country out of its economic rut? South Africa has a serious poverty problem and the highest number of HIV positive residents in the world. So would spending those billions on infrastructure, education, and public health provide a greater, more lasting economic boost? As for the rest of Africa, well, so far only 11,300 visitors are expected from African countries outside of the host nation. Many Africans either can’t afford to come, or can’t risk the possibility of an extremely long or dangerous journey.

Nobody expects the South African national team to do anything impressive in this tournament – it seems like Brazil is a favorite yet again. But one thing’s for sure: the Fédération Internationale de Football Association (FIFA) and its corporate marketing partners are going to be big winners when it comes to profit. FIFA controls the World Cup, but it also acts like a genius marketing firm, selling exclusive sponsorships and co-branding rights to companies who are able to exploit the emotion of the competition in order to sell everything from ad space to jerseys to sausages. (Yes, sausages. 3.5 million of them were sold at the 2006 FIFA Fan Fest in Germany.) If hosting the World Cup boosts a country’s image, imagine what plastering logos all over a playing field can do for a sponsor’s brand!

So what does this mean for the TILE Community? We’re not exactly sure. But if you plan on catching some or all of the games this year (for instance, the U.S.A. – England match on June 12th), think about all money it took to make it happen. And if you’re interested in international development and poverty or AIDS issues, keep a close eye on South Africa next year. Only time will tell whether this very expensive tournament is an investment or an impulse buy.

- Team TILE

This week we are very lucky to hear from Dr. John W. McArthur, CEO of Millennium Promise. Millennium Promise is entirely devoted to halving extreme poverty by the year 2015 – specifically, they’re *the* organization that’s focused on making the UN’s 2005 Millennium Development Goals a reality. John is a Research Associate at the Earth Institute at Columbia University, and he also teaches at Columbia’s School of International and Public Affairs. So sit up straight, put your cell phone on silent, and listen to a little tale from Tanzania…

Amidst the gripping daily headlines of economic crisis throughout the world’s richest countries, it’s easy to overlook some of the big anti-poverty breakthroughs that are happening in the quieter corners of the world. I just returned from a terrific visit to the Millennium Villages of Mbola in rural western Tanzania, where I was reminded yet again of the power of the human spirit and the amazing difference that can be made to improve lives around the world when poor people gain access to basic but ever-improving technologies.

Probably the fastest-changing and most impactful example of this is the mobile phone linked to the Internet. Just a few years ago, a visitor to the villages of Mbola would have experienced no connectivity, and the links would have been spotty where they existed at all. Has that ever changed! Last week, I could send and receive email on my Blackberry from almost any patch of dirt road around Mbola, and I could post Twitter updates from pretty much any location.

The wireless connectivity was great for my own productivity while traveling in rural Tanzania, but it is a much more significant boost for the people who live there. There are a few key examples of how it helps – quietly but tremendously. One is that most people in Mbola live as farmers on remote patches of land, so mobile connectivity makes it much easier for them to know what is happening in the nearby markets and when to buy and sell goods to obtain the best deals.

Second, connectivity allows health clinics and community health workers to access emergency health services. Most basic health posts in Mbola have only the simplest medicine and are located roughly 10 kilometers apart. Local people have to walk along dirt roads to get to them in the first place. If a mother giving birth in a health post has a medical emergency requiring surgery (like a C-section), 10 kilometers is a very long way to go. The same problem applies to a father who carries in a child with a raging fever that might reflect a lethal infection and is not treatable with simple medicine. When the health post has a mobile phone, they can call an ambulance to get patients to the emergency clinic in a straightforward and life-saving manner. Huge numbers of lives can be saved just by introducing these simple systems throughout the world’s poorest communities.

Schools are a third place where connectivity will soon start to make a major difference. Many of the schools in Mbola were little more than huts only a few years ago. Soon they will introduce computers with live connections to the Internet. Local children will have their first opportunity to access all the crucial links we take for granted – to get online, to surf the web, and to connect with other communities around the world. We may soon be reading live Tweets from the children of Mbola themselves!

We recently launched an initiative called Connect To Learn, which will be promoting secondary education and the use of connectivity in schools. This is a terrific partnership between the Earth Institute at Columbia University, Ericsson, Madonna, and Millennium Promise. Much of the connectivity progress in Mbola has been made possible thanks to the Ericsson’s telecommunications leadership (and that of Zain, its local partner in Tanzania) so we are excited to continue growing our partnership with them to expand the educational benefits of connectivity around the world. We’re looking forward to sharing more of our plans on that front soon.

In the meantime, as the news websites tremble with daily recaps of bailout packages needed for many of the world’s richest countries and banks, we can take encouragement from the daily marvels that are taking place in the farthest reaches of the global economy. Modern technology is giving more and more people a chance to succeed across the integrated nature of life’s challenges. It’s worth our collective effort to make sure it reaches everyone who needs it.

- John

Follow @johnmca on Twitter to keep up with his adventures in millennium development!

With Amy out of the office on maternity leave (busy explaining derivatives to young Carson), Team TILE is occasionally left to fend for itself when it has questions about the economy. Last week was a great example of this, as an oil well continued to spew black stuff into the Gulf of Mexico, and the stock market appeared to crash… for twenty minutes. We didn’t know what to think, so we asked our friend, the Internet.

The unfortunate giant oil spill of 2010. An explosion on a drilling rig April 22nd has caused at least 3.5 million gallons of oil to leak into the gulf as of May 11th, and there’s no good solution in sight. While it’s clear (and tragic) that this spill will damage local ecosystems for decades to come, we wondered how something like this would impact the American economy.

BP has already spent $350 million fighting the spill, and experts estimate that when all is said and done, the whole mess will cost the company more than $10 billion. The price of BP’s stock has dropped more than 18% since the rig exploded, but apparently the company is expected to survive because of enormous profits in 2009. Besides that, the company has announced that it will only pay for damages claims it deems “legitimate,” so it may end up off the hook for damages that are hard to quantify – like long-term environmental damage and loss of potential income for people who depend on gulf waters for their livelihood.

Of course, BP isn’t the only one affected by this spill. If the government responds to the crisis by tightening regulations or severely curtailing off-shore oil drilling, the whole U.S. oil industry could be negatively impacted. (Some argue that that would be a good thing, while others point out that a decline in U.S. oil production will simply lead to heavier reliance on foreign oil.) And what about local economies? Louisiana waters yield 10% of the country’s seafood – the impact on fishermen and other workers who rely on the health of this ecosystem could be shocking to the state’s industry. Plus, what harms animals will undoubtedly be bad for people, too. Is an increase in health care costs coming to the Gulf Coast?

Just as we were getting to the question of why oil prices didn’t shoot up after the spill, the stock market crashed. And then… uncrashed? A satisfying explanation for the bizarre activity between 2 and 3pm on May 6th has yet to be found, but the precipitous drop and recovery of the market has everyone talking about the danger of relying on systems that nobody fully understands. Investigators can tell that there was “unusual trading action” taking place at the time (duh), but because there isn’t a clear history of trades made in error and then canceled, they’re basically fumbling in the dark. There are plenty of rumors flying around about “what really happened,” but we thought the most interesting point was that the major electronic exchanges had no way of syncing their “circuit breakers,” which are systems designed to automatically slow down trading when stock prices go into a free fall.

As employees of a web-based company, we know that without a central organizing structure (and a good puppet master, or CTO), the many parts that make a system work have to play nice together or the whole thing’s going to heck. The major exchanges learned that last week and, to their credit, they’ve already agreed on a basic outline to make each electronic trading system compatible enough that they can respond to chaotic trading activity (or the actions of one rogue trader) in unison. But this one bizarre afternoon shook the confidence of many investors – especially those of us just starting out. Has your perspective on the security of the market changed since last week?

As always, our final question is, “What does all this mean for the TILE community?” In both situations last week, the systems that were in place to manage crises failed… but they didn’t have to. Clean-up plans for a potential oil spill were more than 20 years old when they were called into action, and it’s not unreasonable to think that companies that rely on electronic markets should have done more to protect against an inevitable system error. It’s easy to point a finger and say “they should have anticipated this.” But do you have better emergency plans in place? What would you do if an emergency came up in your own life? Your car gets a flat tire, your apartment floods, your credit card is stolen, your computer crashes, you lose your passport in a foreign country. Do you have insurance? Emergency savings? Even a rough plan to make sure you, your family, your pets, and your stuff are safe if a disaster strikes?

Being prepared is different from being afraid. Even though the world and all its markets are subject to wild twists of fate, they’re normally pretty safe. Don’t be afraid to get out there and get your hands dirty… just make sure you’re prepared to deal with the exciting parts when they inevitably arise.

- Team TILE

Today’s guest post is by Nancy Lublin, the CEO and Chief Old Person of DoSomething.org – the largest organization in America for young people and social change (and one we’re particularly fond of here at TILE). She is also the founder of Dress for Success, an organization that helps women transition from welfare to work. Nancy received her BA from Brown University, an M.Litt. from Oxford University, and a law degree from NYU. She writes a column for Fast Company and is the author of Zilch: The Power of Zero in Business. Nancy is proud to have been selected a Young Global Leader by the World Economic Forum and to be the mother of two young children who love broccoli.

So I’ve just returned to American soil after attending a conference. Who would have thought that a volcano in Iceland would force me to contemplate the financial worthwhile of conferences?! When is a conference even worth the dough, anyway?

Bottom line: conferences are about networking. Being out of your office, out of your state, and even out of your country allows you to shake up your daily routine – meet new people, think about new ideas, and look at other people’s bad PowerPoints.

But how do you know whether a conference is worth the money, the time, the plane ride, the risk of being trapped in Europe for a week by a volcano? Here are some things to keep in mind:

1. Are you speaking at it? If so, its worth it. Especially if you have something remotely interesting to say, it’s worth it. You will meet a ton of people just because you’ve been visible.
2. You’re not speaking, but the panel you’re sitting in on has tough moderators. Moderators can make or break a panel. If someone is really pushing conversation, then you might actually learn something, so go. People leading panels or interviewing subjects serve to limit grandstanding and puffery, getting to the heart of some truth and pulling out juicy bits of knowledge along the way.
3. How was it last year? Watch the video clips online. Check out the # on twitter. Or go old school and actually call somebody and ask what the highlights of last year’s conference were.
4. Who is sponsoring it? One of the reasons that TED gatherings are so great is that they don’t have to pander to anyone, so the content itself is king. Sometimes conferences turn into love fests for the fatcats who sponsor them. Avoid those conferences. You can buy yourself a tote bag at Whole Foods instead.

That said, attending conferences on issues or industries you care about is a great way to immerse yourself when you’re just getting started. If you’re in college and you think you want to get involved in fighting AIDS in Africa, get yourself to a conference to find out what’s going on in the community, plus who you might want to meet/ read/ work for. If you’re a budding inventor or entrepreneur, there are countless conferences for you (and countless online reviews to help you separate out the good ones). So while I don’t recommend throwing your money away on unworthy events, I do encourage you to get out there and… you know, do something.

- Nancy

Daniel Sachs is the CEO of Proventus AB, a Sweden-based company that funds mid-sized companies looking for capital to grow or restructure. They do this primarily by investing in public corporate bonds, leveraged loans and private corporate loans. Proving that bond investing does not involve a life of numbers and legal jargon, Daniel is also a Chairman and/or Member of a number of design, theater, and arts organizations. And as if that weren’t enough, Daniel was nominated to be a Young Global Leader by the World Economic Forum in 2007, and he’s a member of the European Council on Foreign Relations. He holds an MBA from the Stockholm School of Economics and The Wharton School at the University of Pennsylvania (so listen up, kids).

If someone asked you whether you included bonds in your investment portfolio, you might wonder, ”What is a bond and why should I care?”

Well, a bond is an obligation by a company, a state, or a municipality (like a city or township) to repay the bond holder a certain amount – plus a fixed amount of interest. Each bond is repaid on a specific date (called “maturity”), though some bonds pay their interest yearly, quarterly, or sometimes monthly. This paid-out interest is often called a coupon. Other bonds are called “zero-coupon bonds,” which pay all of their accrued interest at maturity. Bonds can have short maturities (1-2 years) or much longer maturities (5-10 years). And some bonds may even be converted to stock shares once they mature. Bonds are issued directly by companies (corporate bonds), municipalities (municipal bonds), and states (government bonds).

Investing in a corporate bond is like a bet on a company or state’s ability to repay the bond amount and interest on maturity. But investing in bonds is lower risk than investing in stocks. Shares of stock can decrease in market value by 10, 50 or even 99%, but if a bond is purchased at its original value (“nominal value” or “par value”) and held to maturity, the investment can only result in a loss if the company (or state) goes bankrupt or renegotiates its liabilities.

One of the advantages of investing in bonds is that you will typically know what return to expect, which is never the case with shares of stock. A bond with a yield of 5% which is bought when it was originally issued and held to maturity will give you a return of exactly 5% (assuming nothing dramatic happens to the bond issuer). Different bonds yield different rates of return depending on the risk involved. For example, a company which is perceived by the market as high-risk can yield a return of 15% (in exchange for the increased risk of bankruptcy and therefore you losing your investment). And government bonds and bonds of very solid, low-risk companies will yield just a few percent in today’s markets.

If you compare stocks and bonds in terms of earning potential, stocks will typically give you a better return – if things go well. But if things don’t go so well, it will result in a bigger loss for you. By combining stocks and bonds, you can build a portfolio that has less risk than an all-stock portfolio, but that may give you a higher overall return than an all-bond portfolio. The disadvantage of investing in bonds is that they are legally much more complex than stock and the legal terms may differ between different bonds. But that’s what your broker or banker is for. They should be able to advise you on how to go about investing in bonds without any trouble.

Good Luck!

- Daniel

Isabelle Steiger is a guest blogger very close to our collective TILE heart, because she was one of our very first TILE interns! She’s just finishing up her junior year at Columbia, where she studies English. This year, Isabelle swung an awesome internship at HBO, so we figure she’s pretty much a pro. Here are a few of her thoughts on the internship-swinging process…

No matter what job you ultimately want, a summer internship is a great way to help you land one. An easy first step is to start thinking about the kinds of jobs you’re interested in, and then try to find companies that employ those people, come into regular contact with them, or provide related services. For example, if you want to be a novelist, you can’t intern at a novel factory. But you could intern at a publishing company, which, while not a novel factory, is about as close to one as you can get. Or you can get an internship at, say, a magazine. You won’t be able to practice writing fiction, but you will be able to practice writing for money.

If you know what kind of internship you’d like but don’t yet have a list of specific opportunities (or even if you have a few possibilities but would like some more), networking is your friend. Do you know anyone – a family friend, a teacher, etc. – who is somehow associated with a company you’d like to work for, or who has experience in your chosen field? The goal here isn’t necessarily to find someone who does exactly what you want to be doing. Even if the person you know can’t help you directly, he or she will probably be able to refer you to people who are closer to where you want to be. And maybe those people won’t be able to help you directly, either, but they’ll be able to give you a few more names. Whenever you find someone who’s receptive but unable to actually give you the internship you want, it’s always worth it to ask, “Do you know of anyone else I should contact?” Probability is on your side here: the more names you can rack up, the greater the chance that one of them will be a hit.

When you deal with potential employers directly, remember that you don’t just want to seem accomplished, you want to seem interested. If there’s a specific reason you want to work there, mention it in your emails or interviews. If you learn something new about the company that genuinely excites you, show it (while maintaining your professional decorum, of course). If you can manage to get across to the interviewer that you are genuinely enthusiastic about this internship, then it’s a point in your favor, because people are (obviously) more likely to excel and provide valuable insights when they’re engaged in what they’re doing. Conversely, if you couldn’t care less about the position you’re applying for, that’s probably what’s going to shine through in your interview.

On the subject of enthusiasm, it’s probably worth mentioning that interns are, by definition, the lowest rung of the ladder. So there is a very real chance that instead of doing what you want to do, you’ll end up running for coffee and picking up dry cleaning for the person who does what you want to do. There are very few ways around this essential truth – everyone has to start somewhere. But there’s still a silver lining in this arrangement: you get to come in to work every day and watch people doing the thing you want to do. You get to observe and learn the tactics those people use to excel in that position, and you get to witness mistakes you’ll know to avoid. Ideally, you’ll also get a chance to get to know at least some of those people, and to give them a chance to watch how capably you handle every task assigned to you.

And remember, even if you don’t land the perfect internship this year, every job is a learning experience. You may learn that you hate what you’re doing, but that’s part of the process!

- Isabelle

While Amy is out on maternity leave (getting to know her own future TILE member), we’ve invited a few fabulous friends to keep up the dialogue. This week we have the pleasure of introducing you to Corinna Lathan, who emerged from the world of biomedical and aerospace engineering (with a helping of neuroscience, naturally) to found a seriously mind-blowing research & development firm called AnthroTronix. Here she is:

Do you believe that this is a crucial moment in time for us to become a generation of committed global citizens who believe we can make a real difference?

Do you believe in the reality of a better world? That developing personal connections with other cultures through social action and direct community engagement is the key to peace and progress in the world?

If so, you are not alone. Since the 1960′s (another pivotal time in history), youth travel and cultural exchange has been recognized by many governments as a useful tool to create greater global understanding in order to prevent future wars. This became know as the ‘Gap Year‘ – usually taken during the year before or after college – when independent travel and volunteerism evolve hand in hand. More recently, the term “service learning“ has been used to reflect the desire to combine our academic interests with service in the form of experiential learning. And there’s something for everyone out there!

Some organizations help you identify your interests and choose a program that is right for you – such as the Center for Interim Programs. Others, such as Global Learning Across Borders, focus directly on cultural engagement. Programs that integrate academic interests may focus on the summer season in order to maximize flexibility and opportunity. I am on the board of one organization, Engineering World Health, which combines an interest in science and engineering, cultural engagement, and an impactful volunteer experience through working in a rural hospital in Africa or Central America.

Unfortunately, this concept of service learning has not taken hold in the U.S. as much as in Europe and other parts of the world. This is due in large part to the debt that families must carry to pay for U.S. college tuition. However, momentum is gaining in the U.S. – Even Harvard is now encouraging students to take a year off to travel.

So this is a great opportunity for the TILE community to have an impact! Think about exploring opportunities to immerse yourself in another culture, explore a specific interest, or volunteer to help others.

And let’s not forget… have fun!

- Corinna Lathan, Ph.D., P.E.
Board Member, Engineering World Health  (ewh.org)
Board Chair and CEO, AnthroTronix, Inc.  (atinc.com)

p.s.  Another great resource is the “The Complete Guide to the Gap Year”, by educational consultant Kristin White.