My Biggest Money Mistake

Money slipups can be enough to make or break any shlichus. Below are stories of two shluchim who, teetering on (and off) the edge of fiscal failure, changed their mindset and adopted a new approach to their finances. Not only did each leave his debt behind, but they even expandedand gained a new level of respect from baalei batim, too.

Budgeting: A Brocha Rabbi Yisroel Shmotkin

Mir Darf Ton
During 44 years as Head Shliach of Wisconsin, Rabbi Yisroel Shmotkin has been fortunate to communicate with the Rebbe on a wide variety of issues. He recalls a time when the Rebbe advised him to take a financial path that was, at the time, out of the ordinary. From the beginning, we never had it easy. I wanted to go out on my own, to a new place, rather than being comfortable and getting a salary. I wanted to give the Rebbe nachas. In those days, the head shluchim were provided with salaries from Merkos, but the money was running out. I was given half a years salary, and then the Rebbe extended it another six months, and then there was no salary. From then on, if I sold books, I made money. If I didnt sell, there was nothing. We were able to put food on the table, but only by borrowing more and more money. We went on shlichus in 1968. The mentality was different then. All the shluchim lived with the adage that mir darf ton: first, we must do. First the money would be borrowed, and only later would anyone think about trying to pay it back. I wish I knew then what I know now about making budgets and recording income and expenses. I always had financial trouble. To me, it was part of shlichus. We borrowed and survived, borrowed and survived, but I never really comprehended how serious my situation was. I needed a wakeup call to see that I was in a financial crisis. It came from the Rebbe.

My Rebbe, My Financial Advisor

In 1972, I wanted to buy a building for a Chabad house. It was Shnas HaShivim, and, once again, I wanted to give the Rebbe nachas. The Rebbe and Rabbi Chodakov both told me to be cautious. At that point, the Rebbe was contributing 10 percent of the cost of a building, but on the condition that the

other 90 percent was fundraised or that the mortgage would be guaranteed by baalei batim. Rabbi Chodakovs question to me put it in simpler terms: Do you have money? At other points, the Rebbe repeated the same guidance. When I wanted to bring down a new shliach, the Rebbe told me that since I didnt have the money at that point, I wasnt ready to expand. The Rebbe never encouraged me to go ahead and everything will be OK. I was supposed to look at the books before I bought buildings or hired new shluchim. A few shluchim were instructed lchatchila ariber, but in general, the Rebbe stressed caution and budgeting. Really, the Rebbe was giving day-to-day advice: keep a cheshbon; make sure you have money before spending it. It seems obvious looking back, but it wasnt at the time. I kept borrowing as long as the banks kept lending. Even at that point it was a struggle. I spent so much time juggling money between accounts. Eventually, none of the major banks in Milwaukee would lend to us. I dont regret the stress, the pain, or the white hairs that came from our debt. I dont regret not being successful, because we were! We had baalei batim, baalei teshuva, camps, concerts. The real problem is that we began to lose credibility with our baalei batim. Instead of asking for contributions, we were asking for loans that we couldnt repay. This weakness created conflict and lowered our influence in the community. Had we treated every expense like a Chabad House and kept cheshbonos, I doubt any of those problems would have occurred.

Contribution Ex Nihilo
It was my children who ended up helping me the most. In 2000, a foundation donated money towards hiring a financial consultant. We filed for bankruptcy, found ways to lower costs on our programs, and reorganized our finances. Another consultant helped us with a plan to pay back the $3.5 million debt that had accumulated in 18 months. During this effort, I found that appealing to the baalei batim increased their respect for Chabad: We had finally shown that we understood that we needed to be financially solvent in order to be more successful. Many doubted that we would ever pay back the debtbut still donated five times their usual amount. We began this process in July of 2000. Eighteen months later, we had raised $3 million, leaving us $500,000 short. My sons, who were also involved in the effort, told me not to worrythe Rebbes brochos would continue, and wed get the remainder from an unexpected place. Turned out, that unexpected place was closer to home than Id expected. There was a Jewish man who lived a block away. Id known about him for 25 years, and in that time hed never said so much as a word to me. That December, he came to the Chabad house and said, Rabbi, Id like to meet with you. My son Mendel had become close to him, and three days before New Years, he went to this mans house and told him our situation. The mans response: we had until 4 p.m. on December 31 to come up with $250,000. If we were successful, hed match the money. The day before the deadline, two donors contributed $125,000 each. We were saved.

Living with Miracles

The Rebbes brochos continued: In 2002, I wanted to make a grand dinner to honor the Rebbes 100th birthday. A dinner of this scale had never been accomplished by any Jewish organization in Milwaukee, and at first, I was so worried that wed end up back in debt. But again, miracles happened. We managed to book Senator Joseph Lieberman to speak, charged $1,000 per couple, and had 200 attendees. In the past, I would always end up bringing myself to the brink of financial ruin in my quest to bring kavod to the Rebbe. This time, I was able to bring even more nachas to the Rebbe by being financially sound. I could devote more energy to programs, events, and expanding Chabad in Wisconsin. Obviously, the Rebbe was right all along, but it took a while to change my mindset and modus operandi. Needless to say, it paid off. Last year, at the height of the financial crisis, we hired four new shluchim and took over a failing day school. All are financially stable, as is the rest of Chabad of Wisconsin. In 1991, the Rebbe told me that I was already living with miracles, and the miracles should continue. I never expected them to increase in the way that they did. Today, we are the third largest Jewish employer in Milwaukee. There are 20 shluchim, 130 children enrolled in our nursery school, and 200 in our summer camp. We have a Friendship Circle, with three centers in Milwaukee alone and close to 150 total staff. I thought that budgeting would hold us back, but instead, it catapulted us forward. Before 2000, we were spending $1.2 million a year and falling into debt. Now, our budget for the state is $8.1 million, with $5.5 million in Milwaukee, and without the agmas nefesh that I lived with for 32 years. I dont think theres a better way to bring nachas to the Rebbe.

Listening to the Rebbe Rabbi Sholom Moshe Paltiel

Pedagogy in Peril
Twenty-one years ago, Rabbi Sholom Moshe Paltiel set out on shlichus to bring Yiddishkeit to Port Washington, a quiet town on the north coast of Long Island, NY. Over the years, hes raised enough money to build a shul and fund countless events and programs, but it wasnt always easy. Seven years after Rabbi Paltiel started his shlichus, he had a thriving preschool and wanted to add more grades. He planned to build a day school, and build one he did. For a few years, everything seemed to be working smoothly, but after the economy soured, many parents couldnt afford the tuition needed to keep the school running and enrolled their children in public school. Unfortunately, Rabbi Paltiel didnt notice that he had a serious problem until it was too late. We didnt realize that expenses were growing and enrollment was dropping because of the high cost of tuition. There wasnt the commitment that we expected.

He was in a bind: If he lowered tuition, more students could attend, but hed need more resources and have less tuition to spend. If he raised tuition to cover his bills, even fewer parents would enroll their children. With no exit strategy beyond dreaming of a grant to keep the lights on, he ended up borrowing money to meet payroll expenses. I used to cry out my problems to other shluchim, and they would tell me that I was doing amazing, but I really wasnt, Rabbi Paltiel admits. He knew something had to be done before the schools problems bankrupted him.

One Step Back, Two Steps Forward

Finally, Rabbi Paltiel found the help he needed so critically. A friend referred him to another shliach who helped him ascertain two key points: first, that all of his financial problems were coming from the school. The rest of the moisod was financially stable. Second: the day school needed to go. He would cut his losses and refer the remaining students to a day school that was opening up in nearby Great Neck. The only obstacle left was to raise the funds to pay off the remaining creditors. Knowing that it would be financial suicide to borrow any more money, Rabbi Paltiel steeled himself to do the only thing he could: tell his inner circle about his problems. I was embarrassed, he confessed. To me, it looked like a chilul Hashem. I was expecting to lose supporters. But what he experienced was to the contrary. Every week at the board meeting, Id show a video of the Rebbe. That weeks video included part of a sicha where the Rebbe encouraged shluchim to involve their closest baalei batim with Chabad House finances. One of the baalei batim who was watching the video with us told me, Rabbi, you have to listen to the Rebbe! I saw now that the Rebbe had given me no easy way out. I prepared myself for the worst and told them all my financial woes. Instead of being upset, Rabbi Paltiels supporters were impressed with his honesty and pledged to help him get out of debt. Looking at their new relationship with their rabbi as more of a partnership, they now see Rabbi Paltiel as an honest, hardworking rabbi who listens to their financial advice. As one baal habos told him, Youre a terrible businessman, but letting us help you out makes you an even better Rabbi. Chabad of Port Washington recently celebrated its 21st anniversary with the dedication of an 1,800square-foot Israel-themed indoor playground.

SIDEBAR

Rabbi Paltiels Pro Tips To be followed before crisis hits

You can be optimistic, but you have to work in this world, too. For every project you start, do a costbenefit analysis. Figure out how much it will cost, and ensure youll be able to cover it. Make cheshbonos. Keep track of your expenses and budget so you know where your money is going. Dont borrow money whenever you have a bad month. Its addictive, and it will have a terrible impact in the future. Instead, ask a baal habos who has pledged money for later in the year to give you the money now.