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
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