Financial Prudence Quotes

[The wives of powerful noblemen] must be highly knowledgeable about government, and wise – in fact, far wiser than most other such women in power. The knowledge of a baroness must be so comprehensive that she can understand everything. Of her a philosopher might have said: "No one is wise who does not know some part of everything." Moreover, she must have the courage of a man. This means that she should not be brought up overmuch among women nor should she be indulged in extensive and feminine pampering. Why do I say that? If barons wish to be honoured as they deserve, they spend very little time in their manors and on their own lands. Going to war, attending their prince's court, and traveling are the three primary duties of such a lord. So the lady, his companion, must represent him at home during his absences. Although her husband is served by bailiffs, provosts, rent collectors, and land governors, she must govern them all. To do this according to her right she must conduct herself with such wisdom that she will be both feared and loved. As we have said before, the best possible fear comes from love. When wronged, her men must be able to turn to her for refuge. She must be so skilled and flexible that in each case she can respond suitably. Therefore, she must be knowledgeable in the mores of her locality and instructed in its usages, rights, and customs. She must be a good speaker, proud when pride is needed; circumspect with the scornful, surly, or rebellious; and charitably gentle and humble toward her good, obedient subjects. With the counsellors of her lord and with the advice of elder wise men, she ought to work directly with her people. No one should ever be able to say of her that she acts merely to have her own way. Again, she should have a man's heart. She must know the laws of arms and all things pertaining to warfare, ever prepared to command her men if there is need of it. She has to know both assault and defence tactics to insure that her fortresses are well defended, if she has any expectation of attack or believes she must initiate military action. Testing her men, she will discover their qualities of courage and determination before overly trusting them. She must know the number and strength of her men to gauge accurately her resources, so that she never will have to trust vain or feeble promises. Calculating what force she is capable of providing before her lord arrives with reinforcements, she also must know the financial resources she could call upon to sustain military action. She should avoid oppressing her men, since this is the surest way to incur their hatred. She can best cultivate their loyalty by speaking boldly and consistently to them, according to her council, not giving one reason today and another tomorrow. Speaking words of good courage to her men-at-arms as well as to her other retainers, she will urge them to loyalty and their best efforts.

When financial wizardry and short-term returns trump prudence and long-term value creation, customers and employees suffer.

The Seventh Central Pay Commission was appointed in February 2014 by the Government of India (Ministry of Finance) under the Chairmanship of Justice Ashok Kumar Mathur. The Commission has been given 18 months to make its recommendations. The terms of reference of the Commission are as follows:  1. To examine, review, evolve and recommend changes that are desirable and feasible regarding the principles that should govern the emoluments structure including pay, allowances and other facilities/benefits, in cash or kind, having regard to rationalisation and simplification therein as well as the specialised needs of various departments, agencies and services, in respect of the following categories of employees:-  (i) Central Government employees—industrial and non-industrial; (ii) Personnel belonging to the All India Services; (iii) Personnel of the Union Territories; (iv) Officers and employees of the Indian Audit and Accounts Department; (v) Members of the regulatory bodies (excluding the RBI) set up under the Acts of Parliament; and (vi) Officers and employees of the Supreme Court.   2. To examine, review, evolve and recommend changes that are desirable and feasible regarding the principles that should govern the emoluments structure, concessions and facilities/benefits, in cash or kind, as well as the retirement benefits of the personnel belonging to the Defence Forces, having regard to the historical and traditional parties, with due emphasis on the aspects unique to these personnel.   3. To work out the framework for an emoluments structure linked with the need to attract the most suitable talent to government service, promote efficiency, accountability and responsibility in the work culture, and foster excellence in the public governance system to respond to the complex challenges of modern administration and the rapid political, social, economic and technological changes, with due regard to expectations of stakeholders, and to recommend appropriate training and capacity building through a competency based framework.   4. To examine the existing schemes of payment of bonus, keeping in view, inter-alia, its bearing upon performance and productivity and make recommendations on the general principles, financial parameters and conditions for an appropriate incentive scheme to reward excellence in productivity, performance and integrity.   5. To review the variety of existing allowances presently available to employees in addition to pay and suggest their rationalisation and simplification with a view to ensuring that the pay structure is so designed as to take these into account.   6. To examine the principles which should govern the structure of pension and other retirement benefits, including revision of pension in the case of employees who have retired prior to the date of effect of these recommendations, keeping in view that retirement benefits of all Central Government employees appointed on and after 01.01.2004 are covered by the New Pension Scheme (NPS).   7. To make recommendations on the above, keeping in view:  (i) the economic conditions in the country and the need for fiscal prudence; (ii) the need to ensure that adequate resources are available for developmental expenditures and welfare measures; (iii) the likely impact of the recommendations on the finances of the state governments, which usually adopt the recommendations with some modifications; (iv) the prevailing emolument structure and retirement benefits available to employees of Central Public Sector Undertakings; and (v) the best global practices and their adaptability and relevance in Indian conditions.   8. To recommend the date of effect of its recommendations on all the above.

The second is Warren Buffett’s bedrock reminder of the need to adjust our financial actions based on the investor behavior playing out around us. Fewer words, but probably even more useful: The less prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own affairs.

Nothing so undermines your financial judgment as the sight of your neighbor getting rich.

The attempt to manage conflicts through regulation has failed because it has spawned complex rules without achieving its underlying objective. Those who handle other people’s money, or advise on the management of other people’s money, are agents of those whose money it is. Financial intermediaries can act as custodians of other people’s money, or they can trade with their own money, but they must not do both at the same time. The effective application of principles of loyalty and prudence towards clients, and insistence that conflicts of interest be avoided, puts an end to the current business model of the investment bank, which relies on its multiplicity of activities to provide ‘the Edge’.

FINANCIAL FREEDOM For the Lord your God will bless you as he has promised, and you will lend to many nations but will borrow from none. You will rule over many nations but none will rule over you. Deuteronomy 15:6 God promised Israel that if they were obedient to Him, they’d lack nothing. He’d bless Israel so abundantly that they’d have plenty to lend to others. Interesting how the verse goes from not being a borrower to not being ruled. The link between indebtedness and control is reiterated in Proverbs 22:7: “The rich rule over the poor, and the borrower is slave to the lender.” America is so many trillions of dollars in debt it’s almost impossible to account. Yet we have leaders refusing to acknowledge it, refusing to cut spending, and refusing to exercise fiscal prudence. What’s worse is the very real danger of being owned by lenders. When we are dependent on China, a nation that does not particularly like us, we’re in big trouble. Washington spends our money in unbelievably wasteful ways. The government’s backing of the green-energy company Solyndra cost us half a billion dollars alone! The Obama “stimulus” package, enacted in 2009, is expected to cost well over $800 billion by 2019, and the only real stimulus it has provided has been to government spending. The stories of government waste are legion. How about the $16 billion of ammunition the government purchased, only to decide it didn’t need it, so it spent $1 billion to destroy it! How’s that for prudently handling the nation’s money and resources? SWEET FREEDOM IN Action Today, vow to pay closer attention to how politicians spend your money. Those who do not exercise fiscal restraint do not deserve your vote. Find candidates who do. Remember that bigger government is the problem, not the cure.

There is a dignity in the very effort to save with a worthy purpose. … It produces a well-regulated mind; it gives prudence a triumph over extravagance; it gives virtue the mastery over vice; it puts the passions under control; it drives away care; it secures comfort. Saved money, however little, will serve to dry up many a tear—will ward off many sorrows and heartburnings, which otherwise might prey upon

There is a dignity in the very effort to save with a worthy purpose. … It produces a well-regulated mind; it gives prudence a triumph over extravagance; it gives virtue the mastery over vice; it puts the passions under control; it drives away care; it secures comfort. Saved money, however little, will serve to dry up many a tear—will ward off many sorrows and heartburnings, which otherwise might prey upon us. —Samuel Smiles, 1875

The British tended to base their refusal to intervene in famines with adequate governmental measures on a combination of three sets of considerations: free trade principles (do not interfere with market forces), Malthusian doctrine (growth in population beyond the ability of the land to sustain it would inevitably lead to deaths, thereby restoring the ‘correct’ level of population) and financial prudence (don’t spend money we haven’t budgeted for).

With the first banks opened on Monday, the afternoon brought another request from Roosevelt. Stating that he needed the tax revenue, he asked Congress that beer with alcohol content of up to 3.2 percent be made legal; the Eighteenth Amendment did not specify the percentage that constituted an intoxicating beverage. Congress complied. The House passed the bill the very next day with a vote count of 316–97, pushing it to the Senate. Wednesday brought good cheer: The stock market opened for the first time in Roosevelt’s presidency. In a single-day record, the Dow Jones Industrial Average gained over 15 percent—a gain in total market value of $3 billion. By Thursday, for increased fiscal prudence, the Senate had added an exemption for wine to go with beer, but negotiated the alcohol content down to 3.05 percent. Throughout the week, banks were receiving net deposits rather than facing panicked withdrawals. Over the following weeks, the administration developed a sweeping farm package designed to “increase purchasing power of our farmers” and “relieve the pressure of farm mortgages.” To guarantee the safety of bank deposits, the Federal Deposit Insurance Corporation was created. To regulate the entire American stock and bond markets, the Exchange Act of 1933 required companies to report their financial condition accurately to the buying public, establishing the Securities and Exchange Commission. Safety nets such as Social Security for retirement and home loan guarantees for individuals would be added to the government’s portfolio of responsibilities within a couple of years. It was the largest peacetime escalation of government in American history.

As you can see from the above, virtually all the conditions on which the GFC was built were endogenous to the financial system and the credit cycle. The developments that constituted the foundation for the Crisis weren’t caused by a general economic boom or a widespread surge in corporate profits. The key events didn’t take place in the general business environment or the greater world beyond that. Rather, the GFC was a largely financial phenomenon that resulted entirely from the behavior of financial players. The main forces that created this cycle were the easy availability of capital; a lack of experience and prudence sufficient to temper the unbridled enthusiasm that pervaded the process; imaginative financial engineering; the separation of lending decisions from loan retention; and irresponsibility and downright greed.

Although the federal government had been trying to persuade middle-class families to buy single-family homes for more than fourteen years, the campaign had achieved little by the time Franklin D. Roosevelt took office in 1933. Homeownership remained prohibitively expensive for working- and middle-class families: bank mortgages typically required 50 percent down, interest-only payments, and repayment in full after five to seven years, at which point the borrower would have to refinance or find another bank to issue a new mortgage with similar terms. Few urban working- and middle-class families had the financial capacity to do what was being asked. The Depression made the housing crisis even worse. Many property-owning families with mortgages couldn't make their payments and were subject to foreclosure. With most others unable to afford homes at all, the construction industry was stalled. The New Deal designed one program to support existing homeowners who couldn't make payments, and another to make first-time homeownership possible for the middle class. In 1933, to rescue households that were about to default, the administration created the Home Owners' Loan Corporation (HOLC). It purchased existing mortgages that were subject to imminent foreclosure and then issued new mortgages with repayment schedules of up to fifteen years (later extended to twenty-five years). In addition, HOLC mortgages were amortized, meaning that each month's payment included some principal as well as interest, so when the loan was paid off, the borrower would own the home. Thus, for the first time, working- and middle-class homeowners could gradually gain equity while their properties were still mortgaged. If a family with an amortized mortgage sold its home, the equity (including any appreciation) would be the family's to keep. HOLC mortgages had low interest rates, but the borrowers still were obligated to make regular payments. The HOLC, therefore, had to exercise prudence about. its borrowers' abilities to avoid default. to assess risk, the HOLC wanted to know something about the condition of the house and of surrounding houses in the neighborhood to see whether the property would likely maintain its value. The HOLC hired local real estate agents to make the appraisals on which refinancing decisions could be based. With these agents required by their national ethics code to maintain segregation, it's not surprising that in gauging risk HOLK considered the racial composition of neighborhoods. The HOLC created color-coded maps of every metropolitan area in the nation, with the safest neighborhoods colored green and the riskiest colored red. A neighborhood earned a red color if African Americans lived in it, even if it was a solid middle-class neighborhood of single-family homes. For example, in St. Louis, the white middle-class suburb of Ladue was colored green because, according to an HOLC appraiser in 1940, it had 'not a single foreigner or negro.' The similarly middle-class suburban area of Lincoln Terrace was colored red because it had 'little or no value today . . . due to the colored element now controlling the district.' Although HOLC did not always decline to rescue homeowners in neighborhoods colored red on its maps (i.e., redlined neighborhoods), the maps had a huge impact and put the federal government on record as judging that African Americans, simply because of their race, were poor risks.

Experience tends to confirm a long-held notion that being prepared, on a few occasions in a lifetime, to act promptly in scale, in doing some simple and logical thing, will often dramatically improve the financial results of that lifetime. A few major opportunities, clearly recognizable as such, will usually come to one who continuously searches and waits, with a curious mind that loves diagnosis involving multiple variables. And then all that is required is a willingness to bet heavily when the odds are extremely favorable, using resources available as a result of prudence and patience in the past. —CHARLIE MUNGER, WESCO ANNUAL MEETING, 1996

Fiscal responsibility is key to financial strength, enabling efficient financial navigation during market uncertainty with purpose and prudence.

PLACE IS AN undervalued determinant in creative output: a place to be and a place apart and a place always changing and thus encouraging change. To think of an artistic group in terms of place is to write a different history of art, one that can be more inclusive, more open to serendipitous interaction, and can also explain more of the cultural, emotional, and financial context behind any art object. To focus on place allows us to bring in the small details around the conditions and materials of working, too often lost to the archive, that help uncover why anything even gets made at all.