I must apologize as I have been "MIA" for the past several months. Many of you know that Jacky has joined me in Tampa and we are extremely happy to be living together after living apart for the past two years. With her arrival in Florida we had to move into a bigger place, get our place in New York renovated and rented out, purchase a car, and I still have not taken a day off from work. With all that I am very excited for the planned mini vacation we have next week.
Now, back to business.
In the current economic crisis people are turning to alternative sources of cash. If you are wondering where people are going, take a look in the mirror, because it is you!
Whether you are asking for a loan or being asked to make a loan the situation is just awkward. For this reason I would suggest always asking in private. It allows everyone involved an opportunity to assess the situation as well as ask and answer difficult questions.
Making a loan to a friend or family member can be very stressful. I have been on both sides of the table and the easiest way of severing any relationship is by being financially irresponsible. Most times the pressure of acting financially responsible is the burden of the person receiving the money. I feel the borrower and the lender has a level of responsibility so that the relationship can remain intact.
As I stated above, I have been on both sides of the table. In my personal life I have made loans as small as a few dollars and some in the thousands. In my profession I have made loans as small as $100K and as large $250 Million. I have seen the good, the bad, and ugly with respect to lending money. Below I have outlined some "Do's" and "Dont's" for those asking and those being asked.
For the person asking for a loan:
Always ask your friend or relative in private. Asking in private will allow tough questions to be asked and answered.
Drop your Pants!!!! If you are asking for money be prepared to give full disclosure. Tell the person why the money is needed. No one likes making a loan under false pretenses. Not being honest can lead to the beginning of the end of a relationship.
The biggest concern for most loans between friends and family is when will repayment occur. Always be very specific and realistic. Don't just say "I'm gonna hit you back soon!" When people have told me that it usually was the first sign that I will never see my hard earned money again. If your expectation is that you will be able to repay the loan in full on June 17th, say June 17th. Having an agreed upon date will ease the pressure of when repayment will occur. If circumstances change and you are not able to meet the deadline be proactive and let the person you owe know what has happened and when you feel you will be able to make good on your obligation.
Always give the lender adequate time to make a decision. If you rush or pester the person the chances of a "No" go up dramatically.
If you are Making the Loan:
In making a loan the Lender has an obligation to act responsible. In my profession as a Commercial Lender all of my loans are properly documented, the borrower has strict financial covenants that they have to abide by, and typically I have the right to assets that have been posted as collateral. It is my responsibility to do the proper due diligence and assess the Bank's ability to take on additional risk. Personal loans are very different. Usually the borrower has no assets worth taking as collateral, there typically are no financial covenants that can be enforced to ensure repayment, and the mere fact that they are asking for a loan from a friend or family member suggests that the loan is risky. Because we are a litigious society we do have documents that can be used for personal loans. The thing to remember is if the loan goes bad is it worth the time and emotional drain to take the person to court and even doing so will not ensure full repayment.
Part of being a responsible lender is assessing your risks. Assessing your risks includes knowing your borrower. If Cousin Craig comes asking for a loan and you know he does not have steady job or he is simply borrowing from you to pay someone else it is not a good idea to make a loan to Cousin Craig.
Sometimes being responsible has nothing to do with the borrower. The person may have a good job, is responsible, and an overall good credit risk. However, if you as the Lender do not have the capacity to absorb a potential loss (all loans have a potential loss) you should not make the loan. As a lender your conduct can sever the relationship. I've seen people hound those they have made loans to, physically and verbally threaten, and even sudden changes in attitude can impair a good friendship. In my own profession I am seeing good borrowers having their lines of credit cut, interest rates and fees raised, and loans not renewed primarily because the bank does not have the capital base to take on certain levels of risk.
At the end of the day relationships are important. If simply by making a loan you feel the relationship will fall apart, don't make the loan. If someone is asking for a loan of $700.00 it may be better to offer to give $100.00 with no "strings" then to loan the $700.00 and lose a friend or family member over it.
In today's society we are seeing why both parties have to be responsible when engaging in any financial arrangement. The global implications have been and continue to be damaging. When a personal loan goes bad the relationship between the two individuals is not the only one that suffers, the friends and family of those involved are also affected.
At the core, making loans professionally or personally is a good thing. However, responsibility is key. If you cannot pay a loan, do not borrow. If you do not have the capital base to make the loan, do not lend. Being responsible upfront can save a lot of grief down the road.
As Always, Stack your Chips!!!!!
Sunday, March 8, 2009
Saturday, February 21, 2009
Spare Change
What do you do with your spare change? Do you realize your spare change can be used as a source of savings?
As kids, most of us grew up with some form of a "Piggy Bank". As we get older saving money seems to get more sophisticated. In today's tech savvy society we have swapped cash for debit and credit cards. Most transactions are electronic and deposits into our savings, frequent or infrequent, are the same. Using a "Card" provides benefits such as cash back, points, miles, rewards, etc. Lord knows, my cards get a workout!!!!!
Every so often you do need some cash. For Jacky and I, cash is usually used for the neighborhood corner store, haircuts, cab fares, etc. Dollars usually get used until they're gone, but what about the coins? For years Jacky and I would have coins scattered around the apartment, at work, or in the car. One day we decided to better organize our life and chose to start with organizing our spare change.
We both went to College in Atlanta, the home of Coca Cola. While there, Jacky purchased a three foot tall replica Coke bottle from the World of Coca Cola Museum. It was designed to be used as a "Piggy Bank" and we decided to take advantage of it. In May of 2003 we made a promise to each other that at the end of the day, whatever coin currency we had in our pockets we would deposit it into the Coke bottle. The plan was to see how long it would take to fill the bottle and then see who would be the closest in determining how much money was inside. Whoever came the closest, would decide what to do with the money.
Living in NY and not having a washer and dryer in our apartment, quarters are a premium. At times we were tempted, but we did our best not to dip into the "stash" we were accumulating.
As the coins in the bottle grew, so did we. The bottle moved with us from Brooklyn to Mount Vernon when we purchased our coop and although we are blessed to have great jobs with base salaries and bonuses we still practiced depositing our coins in the Coke Bottle.
Well, on February 15th, 2009 the bottle was 75% filled. At this point we had duct taped the bottle several times as the coins were beginning to bust out of the sides. We decided to" cash in". We were worried the bottle would not last long enough for the coins to reach the top.
Although I am very conscience of how I spend my money I felt that spending my time trying to roll all those coins was not worth it and we decided take the coins to a Coinstar Machine understanding there would be a 8.9% fee.
You can find Coinstar machines in most grocey stores, so we headed to Stop and Shop. On the way there we made our guesses. Jacky's guess was $350.00. I was less optomistic and went with $225.00. Well a third of the way into depositing the coins into the machine we had to readjust our estimates as we already surpassed $200.00 and it was very clear we would go beyond $350.00. Jacky's second guess was $550.00, mine was $600.00.
The great thing about Coinstar is the screen will display exactly how much of each coin has been deposited. Our grand total was: 19 silver dollars, 4,526 pennies, 1,269 dimes, 707 nickles, and 1,557 quarters, or more easily put $615.76.
I don't care who you are or what you make, 615.76 is real money and you can do something with it. It took six years, so on average every year we saved over $100.00 in pennies, nickles, dimes, quarters and silver dollars.
The lesson learned is no amount of money is too small to save. Pennies turn into dollars. The next time you just throw the change in your pocket on your dresser, desk at work, or in the car ash tray remember that down the road that same change can be the spark needed for the vacation, new purse, watch, or shoes you've been saving for. Don't forget, you can also put the money in the bank.
So you are probably wondering what I decided to do with the money since I had the closest estimate. You already know, we put it in the bank.
Stack your Chips.
King of Cash
As kids, most of us grew up with some form of a "Piggy Bank". As we get older saving money seems to get more sophisticated. In today's tech savvy society we have swapped cash for debit and credit cards. Most transactions are electronic and deposits into our savings, frequent or infrequent, are the same. Using a "Card" provides benefits such as cash back, points, miles, rewards, etc. Lord knows, my cards get a workout!!!!!
Every so often you do need some cash. For Jacky and I, cash is usually used for the neighborhood corner store, haircuts, cab fares, etc. Dollars usually get used until they're gone, but what about the coins? For years Jacky and I would have coins scattered around the apartment, at work, or in the car. One day we decided to better organize our life and chose to start with organizing our spare change.
We both went to College in Atlanta, the home of Coca Cola. While there, Jacky purchased a three foot tall replica Coke bottle from the World of Coca Cola Museum. It was designed to be used as a "Piggy Bank" and we decided to take advantage of it. In May of 2003 we made a promise to each other that at the end of the day, whatever coin currency we had in our pockets we would deposit it into the Coke bottle. The plan was to see how long it would take to fill the bottle and then see who would be the closest in determining how much money was inside. Whoever came the closest, would decide what to do with the money.
Living in NY and not having a washer and dryer in our apartment, quarters are a premium. At times we were tempted, but we did our best not to dip into the "stash" we were accumulating.
As the coins in the bottle grew, so did we. The bottle moved with us from Brooklyn to Mount Vernon when we purchased our coop and although we are blessed to have great jobs with base salaries and bonuses we still practiced depositing our coins in the Coke Bottle.
Well, on February 15th, 2009 the bottle was 75% filled. At this point we had duct taped the bottle several times as the coins were beginning to bust out of the sides. We decided to" cash in". We were worried the bottle would not last long enough for the coins to reach the top.
Although I am very conscience of how I spend my money I felt that spending my time trying to roll all those coins was not worth it and we decided take the coins to a Coinstar Machine understanding there would be a 8.9% fee.
You can find Coinstar machines in most grocey stores, so we headed to Stop and Shop. On the way there we made our guesses. Jacky's guess was $350.00. I was less optomistic and went with $225.00. Well a third of the way into depositing the coins into the machine we had to readjust our estimates as we already surpassed $200.00 and it was very clear we would go beyond $350.00. Jacky's second guess was $550.00, mine was $600.00.
The great thing about Coinstar is the screen will display exactly how much of each coin has been deposited. Our grand total was: 19 silver dollars, 4,526 pennies, 1,269 dimes, 707 nickles, and 1,557 quarters, or more easily put $615.76.
I don't care who you are or what you make, 615.76 is real money and you can do something with it. It took six years, so on average every year we saved over $100.00 in pennies, nickles, dimes, quarters and silver dollars.
The lesson learned is no amount of money is too small to save. Pennies turn into dollars. The next time you just throw the change in your pocket on your dresser, desk at work, or in the car ash tray remember that down the road that same change can be the spark needed for the vacation, new purse, watch, or shoes you've been saving for. Don't forget, you can also put the money in the bank.
So you are probably wondering what I decided to do with the money since I had the closest estimate. You already know, we put it in the bank.
Stack your Chips.
King of Cash
Monday, January 19, 2009
Trimming
Now that we all have come down from our "High" from the holidays it is back to the "Grind". As we all know 2009 is marked as a year that will be tougher than any since the Great Depression. The beginning of this year brings many questions to mind when it comes to saving funds and preserving cashflow.
Recently my Wife and I re-visited our personal budget and realized we should do some "trimming". Although each of us is still employed we decided to make changes as we are unsure as to what the rest of 2009 will be like for our household. Being able to make decisions with a clear head allowed for a less stressful conversation and we made choices about our personal budget that are realistic and more importantly sustainable.
Everyone leads a different lifestyle and making general recommendations as to what to "trim" would be irresponsible. What I can say is that most of us can cut between 10-20% of our budget. The areas my Wife and I decided to cut back on was our entertainment and telecommunications/video categories. Entertainment for us consists of Dining Out, Movies, and Sporting Events. Telecommunications/Video consists of our cell phones, internet, and cable. Within our Entertainment budget we were able to reduce our spend on dining out. Instead of always meeting friends out for dinner we decided to start having informal dinner parties. Etiquette usually calls for those attending a persons home to bring something. Whether it is wine, dessert, or a dish complementing the main course it takes the stress off of the host and no one feels like they are overwhelmed financially. In the Telecommunication/Video we eliminated one of our data plans on our cell phones. Most of the usage was useless emails and surfing the internet when dull moments arose. Keeping one data plan made sense for the occasional directions from mapquest and looking up a phone number while we are out and about.
When trimming your budget start by reducing and not cutting all together. Like most things, quitting cold turkey is very hard and most likely will not last for an extended period of time. Start with things you know you can be disciplined about. If you enjoy going out and having drinks with your friends, but realize it can be expensive don't totally eliminate it. If you go out twice a week, maybe cut back to once a week.
When going through the exercise of going through your budget treat it like a beautiful Thanksgiving Day turkey. If you thinly carve the turkey the pieces will be palatable and people will enjoy. However, if you "Hack" at the turkey and take off huge chunks there may be bones in the pieces and people may choke. The same is with your budget! If you try to take off too much, you will choke.
Stay the course and realize a budget is a working document. You will always have to tweak it as life presents changes good or bad. Good Luck!
Stack your Chips-
King of Cash
Recently my Wife and I re-visited our personal budget and realized we should do some "trimming". Although each of us is still employed we decided to make changes as we are unsure as to what the rest of 2009 will be like for our household. Being able to make decisions with a clear head allowed for a less stressful conversation and we made choices about our personal budget that are realistic and more importantly sustainable.
Everyone leads a different lifestyle and making general recommendations as to what to "trim" would be irresponsible. What I can say is that most of us can cut between 10-20% of our budget. The areas my Wife and I decided to cut back on was our entertainment and telecommunications/video categories. Entertainment for us consists of Dining Out, Movies, and Sporting Events. Telecommunications/Video consists of our cell phones, internet, and cable. Within our Entertainment budget we were able to reduce our spend on dining out. Instead of always meeting friends out for dinner we decided to start having informal dinner parties. Etiquette usually calls for those attending a persons home to bring something. Whether it is wine, dessert, or a dish complementing the main course it takes the stress off of the host and no one feels like they are overwhelmed financially. In the Telecommunication/Video we eliminated one of our data plans on our cell phones. Most of the usage was useless emails and surfing the internet when dull moments arose. Keeping one data plan made sense for the occasional directions from mapquest and looking up a phone number while we are out and about.
When trimming your budget start by reducing and not cutting all together. Like most things, quitting cold turkey is very hard and most likely will not last for an extended period of time. Start with things you know you can be disciplined about. If you enjoy going out and having drinks with your friends, but realize it can be expensive don't totally eliminate it. If you go out twice a week, maybe cut back to once a week.
When going through the exercise of going through your budget treat it like a beautiful Thanksgiving Day turkey. If you thinly carve the turkey the pieces will be palatable and people will enjoy. However, if you "Hack" at the turkey and take off huge chunks there may be bones in the pieces and people may choke. The same is with your budget! If you try to take off too much, you will choke.
Stay the course and realize a budget is a working document. You will always have to tweak it as life presents changes good or bad. Good Luck!
Stack your Chips-
King of Cash
Sunday, December 21, 2008
Give
All of my previous posts speak about retaining cash and making wise decisions when purchasing retail items. Although it is important to do so, we must also remember to give to others. During this holiday season we are seeing a disproportionate number of people going without. Whether it is from job loss or those born into poverty we must reach out and lend a helping hand.
Helping can come in the form of providing money, clothing, food, toys, or your personal time. I challenge everyone to take the opportunity this holiday season to choose one form of help. I guarantee it will be gratifying and you may find that you will receive as much as you give.
Also, share with others some of the charitable experiences you engage in. Sharing these experiences will make others aware of how much help is needed and how getting involved can make a big difference.
The holidays is usually the catalyst for most charitable giving. Please remember that help is needed year round and it means as much to give in March and April as it does in November and December.
Give with a genuine heart. If it is easy for you to write a check, do that but also dedicate some of your personal time. If you have extra clothes donate them but don't just bag them and dump them off at a central location and never think more about them. Hand them over directly to someone that works for a charitable organization. Give with Love!!!
It is hard to define "Life", but someone told me that the majority of "Life" is Love and Service. Keep Love and Service in mind with all activities. I wish you all and your families the best during the Holidays!!!!
Stack your Chips-
King of Cash
National Charitable Organizations that Need Your Help:
http://www.salvationarmy.org/ihq/www_sa.nsf
http://toysfortots.org/
www.stjude.org
www.worldvision.org
http://www.lifelinkfound.org/
Helping can come in the form of providing money, clothing, food, toys, or your personal time. I challenge everyone to take the opportunity this holiday season to choose one form of help. I guarantee it will be gratifying and you may find that you will receive as much as you give.
Also, share with others some of the charitable experiences you engage in. Sharing these experiences will make others aware of how much help is needed and how getting involved can make a big difference.
The holidays is usually the catalyst for most charitable giving. Please remember that help is needed year round and it means as much to give in March and April as it does in November and December.
Give with a genuine heart. If it is easy for you to write a check, do that but also dedicate some of your personal time. If you have extra clothes donate them but don't just bag them and dump them off at a central location and never think more about them. Hand them over directly to someone that works for a charitable organization. Give with Love!!!
It is hard to define "Life", but someone told me that the majority of "Life" is Love and Service. Keep Love and Service in mind with all activities. I wish you all and your families the best during the Holidays!!!!
Stack your Chips-
King of Cash
National Charitable Organizations that Need Your Help:
http://www.salvationarmy.org/ihq/www_sa.nsf
http://toysfortots.org/
www.stjude.org
www.worldvision.org
http://www.lifelinkfound.org/
Wednesday, December 3, 2008
Know your Industry
Many of us go to our place of employment everyday, perform the tasks required of us , and generally understand how the functions we perform relate to the mission of the institution we work for. For most, this is the extent as to which we feel responsible for knowing what our job means to us. If you think this is as much as you should know, you are missing the boat. Knowing your job is one thing and knowing your industry is another!
In my earlier post (Who is the King of Cash) I mentioned how Jacky (my lovely Wife:) and I came to saving two years worth of living expenses. For many, two years seems above and beyond what is generally required. However, understanding that our household income solely came from the financial industry, we began to aggressively save. We understand that recessions typically hit the financial industry hard and one or both of us could be without work for an extended period of time.
There was a time when certain industries had the perception of being "safe". Many would flock to education, insurance, municipalities, not-for-profits etc for the practical purpose of security. How many of us have heard from elders "You get a job wit the State, you gotta job fo Life". Twenty of our Fifty states are suffering budget deficits and the very jobs that people ran to for safety are being eliminated or suffering pay cuts. The one thing this current economic cycle has taught us, is that no industry is safe from job and salary cuts.
This "Storm" came through and wiped out everyone. Although there are many we can blame for the the current mess we are in, we won't. It is a waste of time. No one is going to jail and spending energy on "Who did what" will not fix anything. For all of us between the ages of 18-35 we have to realize that the industry we have chosen to work in has risks. We must better understand the vulnerabilities and prepare for the unexpected. Our personal cash flow depends on it! You owe it to yourself.
Questions to ask yourself about your Industry:
Is my industry depended on dollars that are considered discretionary? (Examples would be Fashion, Travel, Entertainment, Sports, Electronics, Auto, Beauty, Dining etc.)
Although my industry is not considered "discretionary", can dollars be easily be reallocated to core needs? (Example of this would be marketing/advertising. Although businesses will always have some need for marketing/advertising, in times like today they will drastically reduce what they normally spend to focus on core operations.)
My industry is considered a "Need", however my company caters to a specific niche. Can dollars be tiered down from the niche level to general? (An example of this would be the food industry. People always need to eat, however food is tiered. Organics have gotten to be very popular over the last 5-10 years, but in times when people are trying to conserve cash flow people will opt for a few extra hormones in their food if it will save them money. Think Whole Foods vs Stop & Shop!)
The questions above can be applied to all industries and by understanding the nature of your industry will allow you to pick up on changing trends and be able to protect yourself potential changes in cash flow.
News Flash, News Flash.......
For those of you that doubt "Cash is King"LISTEN UP!!!!!! JP Morgan Chase, Bank of America, and Citi Bank (all three represent the majority of the credit card market) announced they will be reducing their credit exposure to consumers by Two Trillion (yes Trillion) Dollars. Plain and Simple, all you people that use credit cards to bridge the gap to make ends meet, will soon fall in the water if you don't have cash. If you think you are safe because "I always pay my bills" or "I'z got good credit" YOU ARE WRONG!!!!! This will be a reduction across the board. Good Credit, Bad Credit we all risk seeing our credit availability reduced in the next 18 months. I can vouch for this occurring as I have seen the reduction of credit availability happening in the Commercial Banking market for the last several months.
Credit cards are the second most used source of liquidity for consumers behind our wages (sad thought). With this source of liquidity drying up, it is time to get back to basics. SAVE YOUR MONEY!!!!!
As Always, Stack your Chips...........Cash is King!
Link to article about the reduction in Credit Exposure to Consumers:
http://www.consumeraffairs.com/news04/2008/12/credit_card_cutbacks.html
In my earlier post (Who is the King of Cash) I mentioned how Jacky (my lovely Wife:) and I came to saving two years worth of living expenses. For many, two years seems above and beyond what is generally required. However, understanding that our household income solely came from the financial industry, we began to aggressively save. We understand that recessions typically hit the financial industry hard and one or both of us could be without work for an extended period of time.
There was a time when certain industries had the perception of being "safe". Many would flock to education, insurance, municipalities, not-for-profits etc for the practical purpose of security. How many of us have heard from elders "You get a job wit the State, you gotta job fo Life". Twenty of our Fifty states are suffering budget deficits and the very jobs that people ran to for safety are being eliminated or suffering pay cuts. The one thing this current economic cycle has taught us, is that no industry is safe from job and salary cuts.
This "Storm" came through and wiped out everyone. Although there are many we can blame for the the current mess we are in, we won't. It is a waste of time. No one is going to jail and spending energy on "Who did what" will not fix anything. For all of us between the ages of 18-35 we have to realize that the industry we have chosen to work in has risks. We must better understand the vulnerabilities and prepare for the unexpected. Our personal cash flow depends on it! You owe it to yourself.
Questions to ask yourself about your Industry:
Is my industry depended on dollars that are considered discretionary? (Examples would be Fashion, Travel, Entertainment, Sports, Electronics, Auto, Beauty, Dining etc.)
Although my industry is not considered "discretionary", can dollars be easily be reallocated to core needs? (Example of this would be marketing/advertising. Although businesses will always have some need for marketing/advertising, in times like today they will drastically reduce what they normally spend to focus on core operations.)
My industry is considered a "Need", however my company caters to a specific niche. Can dollars be tiered down from the niche level to general? (An example of this would be the food industry. People always need to eat, however food is tiered. Organics have gotten to be very popular over the last 5-10 years, but in times when people are trying to conserve cash flow people will opt for a few extra hormones in their food if it will save them money. Think Whole Foods vs Stop & Shop!)
The questions above can be applied to all industries and by understanding the nature of your industry will allow you to pick up on changing trends and be able to protect yourself potential changes in cash flow.
News Flash, News Flash.......
For those of you that doubt "Cash is King"LISTEN UP!!!!!! JP Morgan Chase, Bank of America, and Citi Bank (all three represent the majority of the credit card market) announced they will be reducing their credit exposure to consumers by Two Trillion (yes Trillion) Dollars. Plain and Simple, all you people that use credit cards to bridge the gap to make ends meet, will soon fall in the water if you don't have cash. If you think you are safe because "I always pay my bills" or "I'z got good credit" YOU ARE WRONG!!!!! This will be a reduction across the board. Good Credit, Bad Credit we all risk seeing our credit availability reduced in the next 18 months. I can vouch for this occurring as I have seen the reduction of credit availability happening in the Commercial Banking market for the last several months.
Credit cards are the second most used source of liquidity for consumers behind our wages (sad thought). With this source of liquidity drying up, it is time to get back to basics. SAVE YOUR MONEY!!!!!
As Always, Stack your Chips...........Cash is King!
Link to article about the reduction in Credit Exposure to Consumers:
http://www.consumeraffairs.com/news04/2008/12/credit_card_cutbacks.html
Sunday, November 23, 2008
Discipline
The Holidays are here and I wish everyone and their families a happy and safe holiday season!
In my last blog entry the word discipline was mentioned several times. This was not by accident. The word Discipline is defined by Merriam Webster several ways but the most common way is : Self Control.
I have found that when most people ask for financial advice they essentially want to learn how to make more money in the market. This is the wrong approach especially as most of us do not know how to save a dime and worst of all control ourselves when we are in the Mall. "Discipline" or "Self Control" is the foundation for financial success.
Understanding the difference between "Wants" and "Needs" is the first step. Although most people inherently know the difference, most do not exercise the practice. How many times have we all seen someone on Oprah or the Suze Orman Show crying because they are $30K in the hole over credit card expenses related to impulsive shoping and they can no long make their rent or mortgage payments. This is all too common especially among those between the ages of 18-35.
Now, I could sit here and be the plain vanilla person offering financial advice and list what are considered "Wants" and "Needs", but I won't because you already know what they are. What we are lacking is the Discipline to practice what we know is right.
Let's be responsible for ourselves and stop all the excuses of "They keep offering a higher limit on my credit card". "It was on sale". Or here is my favorite one, "I didn't know the interest rate was going to be so high". Stop pointing the finger and realize the problem is you! The retailers are supposed to entice you. It's your responsibility to say "No" if you are not in the position to make a purchase. The retailers are like "Drug Dealers" and the "Consumers" are the junkies. The Retailers will give you credit, layaway, or any form of payment to keep you buying. I bet if you think back to the last several times you purchased something from a department store they asked you "Would you like to open a credit card with us? You'll save 10% on your purchase." Sound familier? The dealer talking to a potential new client. People, just say No!!!!!!!
So, now that I have vented I will offer some simple advice. With the holidays here we all are going to be in the mall. There is nothing wrong with being there and I am not going to tell you to not go. What I am going to suggest is to go with a purpose. Have a list of what you need to get and have an idea of what you are willing to pay for it. Most importantly, do not deviate from your plan. When you see something you "Want" that is considered impulsive, the first thing you should do is walk away. This will allow you time to think about what the purchase will mean to you from an emotional and a financial stand point. My wife and I always do this. If we are not together we will call one another and bounce the idea of the the purchase off of the other person. Usually within a 1 minute conversation the initial excitement of the item has diminished and we have saved ourselves from a impulsive purchase.
While shopping don't fall into the salespersons/dealer's trap. They will tell you anything. You may hear "It may not be here later", "There is only left in your size" or "the sale won't last forever". Bullshit!!!!!!! Most retail items are not only sold in one specific store or even chain. The item will always be somewhere else. It may not be on sale next week, but who cares! If you don't "Need" the item than you lost nothing.
Having self control is a sign of strategic planning and keeping an ultimate goal in mind. Succumbing to "wants" will get you in trouble.
For those of you who have fallen into the traps listed above, it is not too late. Like any addiction, quitting cold turkey is not the best approach. Begin to slowly implement some of the suggestions mentioned above. Trying to cut yourself off all together will only cause regressions and you may end up worse further down the road. Take baby steps! Slow and steady will win the race. The goal is to build a "house" with a solid foundation not a "house of cards".
News updates:
This past week was marked with the Big 3 asking for government assistance, Citi Bank announcing they will lay off 53,000 people, JP Morgan laying off 3,000 Investment Bankers and the Dow dropping dramatically to levels not seen since the early 2000's. The only bright spots were President elect Obama announcing Tim Geithner as his pick for Treasury Secretary and gas prices have nationally dropped below 2.00 a gallon. The Treasury Secretary announcement saw the market rebound although we are still at very low levels especially compared to a high of over 14,000 + on the Dow a little over a year ago.
Many have labeled me and my close friends as pessimists because we have been preaching "Doom and Gloom" for the past year with respect to the national and global economy. Well people, if you didn't think we could have another Depression you are wrong. In fact there are some scary comparisons to the Great Depression happening right now. One of these comparisons is the two week period ending November 20, 2008 with the Dow dropping 16%. The same two week period in 1931 saw the Dow drop the same amount. If you think that is scary, the final five weeks in 1931 the Dow dropped another 20%. We all feel that at some point we need to reach a bottom but the market has no obligation to stop falling because is has already fallen so much.
With no positive economic data foreseeable I would hold on to your britches and expect more fall out. Don't be disillusioned with the fact that some stocks are so cheap that they can't fall anymore. Understand that you still can lose money. This is only the beginning. We have a long way to go. Act like each pay check may be the last.
Stack your Chips-
King of Cash
Next Blog: Understand your Industry
In my last blog entry the word discipline was mentioned several times. This was not by accident. The word Discipline is defined by Merriam Webster several ways but the most common way is : Self Control.
I have found that when most people ask for financial advice they essentially want to learn how to make more money in the market. This is the wrong approach especially as most of us do not know how to save a dime and worst of all control ourselves when we are in the Mall. "Discipline" or "Self Control" is the foundation for financial success.
Understanding the difference between "Wants" and "Needs" is the first step. Although most people inherently know the difference, most do not exercise the practice. How many times have we all seen someone on Oprah or the Suze Orman Show crying because they are $30K in the hole over credit card expenses related to impulsive shoping and they can no long make their rent or mortgage payments. This is all too common especially among those between the ages of 18-35.
Now, I could sit here and be the plain vanilla person offering financial advice and list what are considered "Wants" and "Needs", but I won't because you already know what they are. What we are lacking is the Discipline to practice what we know is right.
Let's be responsible for ourselves and stop all the excuses of "They keep offering a higher limit on my credit card". "It was on sale". Or here is my favorite one, "I didn't know the interest rate was going to be so high". Stop pointing the finger and realize the problem is you! The retailers are supposed to entice you. It's your responsibility to say "No" if you are not in the position to make a purchase. The retailers are like "Drug Dealers" and the "Consumers" are the junkies. The Retailers will give you credit, layaway, or any form of payment to keep you buying. I bet if you think back to the last several times you purchased something from a department store they asked you "Would you like to open a credit card with us? You'll save 10% on your purchase." Sound familier? The dealer talking to a potential new client. People, just say No!!!!!!!
So, now that I have vented I will offer some simple advice. With the holidays here we all are going to be in the mall. There is nothing wrong with being there and I am not going to tell you to not go. What I am going to suggest is to go with a purpose. Have a list of what you need to get and have an idea of what you are willing to pay for it. Most importantly, do not deviate from your plan. When you see something you "Want" that is considered impulsive, the first thing you should do is walk away. This will allow you time to think about what the purchase will mean to you from an emotional and a financial stand point. My wife and I always do this. If we are not together we will call one another and bounce the idea of the the purchase off of the other person. Usually within a 1 minute conversation the initial excitement of the item has diminished and we have saved ourselves from a impulsive purchase.
While shopping don't fall into the salespersons/dealer's trap. They will tell you anything. You may hear "It may not be here later", "There is only left in your size" or "the sale won't last forever". Bullshit!!!!!!! Most retail items are not only sold in one specific store or even chain. The item will always be somewhere else. It may not be on sale next week, but who cares! If you don't "Need" the item than you lost nothing.
Having self control is a sign of strategic planning and keeping an ultimate goal in mind. Succumbing to "wants" will get you in trouble.
For those of you who have fallen into the traps listed above, it is not too late. Like any addiction, quitting cold turkey is not the best approach. Begin to slowly implement some of the suggestions mentioned above. Trying to cut yourself off all together will only cause regressions and you may end up worse further down the road. Take baby steps! Slow and steady will win the race. The goal is to build a "house" with a solid foundation not a "house of cards".
News updates:
This past week was marked with the Big 3 asking for government assistance, Citi Bank announcing they will lay off 53,000 people, JP Morgan laying off 3,000 Investment Bankers and the Dow dropping dramatically to levels not seen since the early 2000's. The only bright spots were President elect Obama announcing Tim Geithner as his pick for Treasury Secretary and gas prices have nationally dropped below 2.00 a gallon. The Treasury Secretary announcement saw the market rebound although we are still at very low levels especially compared to a high of over 14,000 + on the Dow a little over a year ago.
Many have labeled me and my close friends as pessimists because we have been preaching "Doom and Gloom" for the past year with respect to the national and global economy. Well people, if you didn't think we could have another Depression you are wrong. In fact there are some scary comparisons to the Great Depression happening right now. One of these comparisons is the two week period ending November 20, 2008 with the Dow dropping 16%. The same two week period in 1931 saw the Dow drop the same amount. If you think that is scary, the final five weeks in 1931 the Dow dropped another 20%. We all feel that at some point we need to reach a bottom but the market has no obligation to stop falling because is has already fallen so much.
With no positive economic data foreseeable I would hold on to your britches and expect more fall out. Don't be disillusioned with the fact that some stocks are so cheap that they can't fall anymore. Understand that you still can lose money. This is only the beginning. We have a long way to go. Act like each pay check may be the last.
Stack your Chips-
King of Cash
Next Blog: Understand your Industry
Wednesday, November 12, 2008
Who is the King of Cash?
King of Cash....ok maybe it is a self proclaimed title, but not untrue. With this title I do not profess to be financial wizard that makes money trading stock. I am person who understands trends and applies discipline to my life approach.
Never being a big user of credit cards and for most of my childhood being fascinated with stacks of cash, I always made sure I kept money readily available. Sometimes I wonder if I was born this way or if I learned the habit of saving. Like most talents, I probably have natural tendancies but over the years I have refined my discipline.
It was my junior year in college (2000) when I discovered how different I was from most people. I can remember having a debate with a classmate about what is the true definition of being able to maintain your lifestyle? My friend felt having a job that allowed you to pay your mortgage, stay current with your bills and establish modest savings (3 months) was sufficient. I quickly challenged his theory with my own. My thoughts of being able to maintain one's lifestyle is having enough cash reserves to sustain a life altering event, personal or global, where a person is able to satisfy all of their obligations without altering one's day to day habits.
After debating for an hour we agreed to disgree. My friend's mindset was based on the fact that as long as a person is employed or has some cash flow, modest savings were sufficient. In retrospect I dont' fault him! His rational was correct for the economy we were currently in. In 2000 most people who were laid off or lost a job could find employment within 90 days. With this mind set.....yeah things are ok and how bad can things really get that I would need savings beyond 3 months. Having studied the history of different economic cycles (Great Depression, The Crash of 1987, etc) I felt if a bad economic cycle hits a prolonged period of unemployment can occur. Knowing this, I always felt it is neccesary to prepare beyond what is considered standard.
Lets fast forward 8 years to our current economic cycle. Most corporations and some State Governments are down sizing 10%-12%, the housing and stock market are in the toilet, banks are unwilling to lend, and there is no turnaround forseeable. The only real access to capital is what is in our bank accounts (Thank you FDIC!!!!!!).
As a Commercial Banker I speak to all of my clients about what changes they are making to get through this current economic cycle. The first thing most business owners are saying is"I am cutting my staff by 10%-12%". You can see that the possibility of unemployment reaching 10% is very real. This global epidemic will not be fixed anytime soon and those who have lost their jobs should expect to be out of work for more than a year.
As a young man my father always taught me "Son, never put all of your eggs in one basket." As a banker I was taught the same in terms of analyzing companies. This lesson came in the form of "Stay away from businesses that have too much customer concentration". Taking both mentalities to heart, I began to analyze my own life. My household income is concentrated in the financial industry (My Wife is a very talented human being and Wall Street Trader. I do my best to keep up with her success.) I began to research how the financial industry fairs during economic downturns. I quickly realized the industry didn't fair well with massive layoffs as the trend. I understand it is not easy to just go out and switch employment to another industry for the sake of diversification, so I asked myself "what is the mitigant?" Understanding the industry ("Understanding your industry"future blog) we work in is what made me realize what we needed to do. If one or both of us could be unemployed during an economic downturn, the easiest thing to do is to accelerate our savings to offset any prolonged period of unemployment.
I must say it takes alot of discipline to aggresively save when there is no real evidence of an economic downturn. Many feel my agressive approach to saving (or conservitive approach to spending) is extreme. However, in this environment, you can quickly see that a strong financial foundation is never a bad decision. We are all learning that we cannot rely on others to ensure our financial stability. Investing in homes, the stock market, 401k, or simply having a job is not enough. "Cash is King"! Stack your Chips!!!!!
For some of you reading this, it may be too late, but for those of you who are blessed to still have employment I encourage you to start "tightening the belt". This is only the beginning and while you still can, please take control or your finances and prepare like each pay period may be your last.
Next Blog Title: Discipline
I will discuss the "checks and balances" my Wife and I put in place to began our financial foundation I will also share economic news that is impacting us all.
Never being a big user of credit cards and for most of my childhood being fascinated with stacks of cash, I always made sure I kept money readily available. Sometimes I wonder if I was born this way or if I learned the habit of saving. Like most talents, I probably have natural tendancies but over the years I have refined my discipline.
It was my junior year in college (2000) when I discovered how different I was from most people. I can remember having a debate with a classmate about what is the true definition of being able to maintain your lifestyle? My friend felt having a job that allowed you to pay your mortgage, stay current with your bills and establish modest savings (3 months) was sufficient. I quickly challenged his theory with my own. My thoughts of being able to maintain one's lifestyle is having enough cash reserves to sustain a life altering event, personal or global, where a person is able to satisfy all of their obligations without altering one's day to day habits.
After debating for an hour we agreed to disgree. My friend's mindset was based on the fact that as long as a person is employed or has some cash flow, modest savings were sufficient. In retrospect I dont' fault him! His rational was correct for the economy we were currently in. In 2000 most people who were laid off or lost a job could find employment within 90 days. With this mind set.....yeah things are ok and how bad can things really get that I would need savings beyond 3 months. Having studied the history of different economic cycles (Great Depression, The Crash of 1987, etc) I felt if a bad economic cycle hits a prolonged period of unemployment can occur. Knowing this, I always felt it is neccesary to prepare beyond what is considered standard.
Lets fast forward 8 years to our current economic cycle. Most corporations and some State Governments are down sizing 10%-12%, the housing and stock market are in the toilet, banks are unwilling to lend, and there is no turnaround forseeable. The only real access to capital is what is in our bank accounts (Thank you FDIC!!!!!!).
As a Commercial Banker I speak to all of my clients about what changes they are making to get through this current economic cycle. The first thing most business owners are saying is"I am cutting my staff by 10%-12%". You can see that the possibility of unemployment reaching 10% is very real. This global epidemic will not be fixed anytime soon and those who have lost their jobs should expect to be out of work for more than a year.
As a young man my father always taught me "Son, never put all of your eggs in one basket." As a banker I was taught the same in terms of analyzing companies. This lesson came in the form of "Stay away from businesses that have too much customer concentration". Taking both mentalities to heart, I began to analyze my own life. My household income is concentrated in the financial industry (My Wife is a very talented human being and Wall Street Trader. I do my best to keep up with her success.) I began to research how the financial industry fairs during economic downturns. I quickly realized the industry didn't fair well with massive layoffs as the trend. I understand it is not easy to just go out and switch employment to another industry for the sake of diversification, so I asked myself "what is the mitigant?" Understanding the industry ("Understanding your industry"future blog) we work in is what made me realize what we needed to do. If one or both of us could be unemployed during an economic downturn, the easiest thing to do is to accelerate our savings to offset any prolonged period of unemployment.
I must say it takes alot of discipline to aggresively save when there is no real evidence of an economic downturn. Many feel my agressive approach to saving (or conservitive approach to spending) is extreme. However, in this environment, you can quickly see that a strong financial foundation is never a bad decision. We are all learning that we cannot rely on others to ensure our financial stability. Investing in homes, the stock market, 401k, or simply having a job is not enough. "Cash is King"! Stack your Chips!!!!!
For some of you reading this, it may be too late, but for those of you who are blessed to still have employment I encourage you to start "tightening the belt". This is only the beginning and while you still can, please take control or your finances and prepare like each pay period may be your last.
Next Blog Title: Discipline
I will discuss the "checks and balances" my Wife and I put in place to began our financial foundation I will also share economic news that is impacting us all.
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