ECorp Login

Larrys _dollars _and _sense

Dollars and Sense

February 25, 2015

Q:

Is there one characteristic that distinguishes middle aged people today and the previous generation from a financial perspective?

A:

In my opinion, middle aged adults in the previous generation were less materialistic than  today's middle aged adults. Bigger and newer homes, multiple cars in the garage, expensive vacations and bigger wardrobes just to name a few. The generation of our parents did not have as much as we do today even if they could have afforded it but, it's not all our fault.  There are a lot more options available to us today. Technology has created many more opportunities to spend money that our parents and grandparents did not have. The currentgeneration has not been able to resist the temptations this has presented. I read a book a few years ago written by Tom Brokaw the newscaster. It was titled The Greatest Generation. He wrote about the people of the World War II and Korean War era. After reading it, I believe that it was truly the greatest generation. These people, through a truly difficult time, learned how to save and how to spend money. Many of today's middle aged adults have sadly notlearned the importance of this. A lot of our countries financial difficulties can be traced back to this issue.

Q:

Several months ago, you mentioned how difficult it is for friends to go into business together.Is it any easier with other family members?

A:

 I have seen many family owned businesses that have been highly successful. I've known a few friends who have been successful in business together. They have all had one thing in common. One person was in charge. No business can survive without someone in charge. If that isn't clear from the start, the business will fail. It doesn't matter if it's family or friends. If you have a business with several employees and a lot of decisions to be made, someone has be a leader. That doesn't mean only one person can make decisions. It just means when there are differences of opinion, someone has to be in charge. These kinds of things need to be addressed before you go into the venture. Not after you have started. How do I know? It's from dealing with 1,000's of businesses over a period of 40 plus years and witnessing what   goes on. There are always exceptions but, they are rare. Human nature and egos come into play and that affects how well things work.

Q:

A friend of mine told me he tried to open a bank account at a local bank and they refused to allow him to do so. Why would this happen?

A:

  I don't know if this applies to your friend but, it could be that he or she had some problems  with an account at another bank. In recent years, the banking industry have begun to shareinformation on losses they have incurred as a result of a relationship with someone. Banks can and do share bad experiences with each other and it's perfectly legal. Being a part of  this system has saved the banking industry millions, if not billions of dollars by being able toavoid doing business with people who evidently have no problem in defrauding banks. Chances are pretty good that if a person is refused service in the form of a bank deposit account, there is another bank out there that has already taken a loss from overdrafts and insufficient funds to cover checks they have written. In some cases it may not have been anattempt to defraud. It could have simply been their inability to handle a bank account and tokeep it balanced. In either case, the information is shared.

February 11, 2015

Q:

If the government is so interested in saving energy, why don't they put more restrictions on  the fuel economy of cars being produced?

A:

Our government has imposed fuel economy on the auto industry for years and it has gotten better. However, I don't believe they will ever pressure the auto industry to do as much as they could. First, there is the political commitment to oil producing countries that ship oil to us for consumption. They will not do anything that would damage those relationships. In addition, the auto industry has one of the largest lobbying groups in our country. If buyerswant a car with power that uses a lot of gas, so be it. They want to build it. Because of the  restrictions on fuel economy to produce better mileage, we have many vehicles that get 35 or more miles to the gallon. However, I don't think we will ever see all cars and trucks get  that kind of mileage.

Q:

What will my mortgage lender do if I have a dispute on my real estate taxes and don't pay it?

A:

 A mortgage lender is not going to get in the middle of a dispute over your tax bill and they  will expect you to pay it when due. It is not all that unusual for someone to dispute realestate taxes but, I imagine the county will expect you to pay it while it is being disputed andso will your lender. As I have mentioned in the past, real estate taxes is the only thing that  can come between your lender's mortgage from the standpoint of a lien. If your taxes go unpaid, it increases the amount needed to clear  your mortgage. I would not advise you to just stop paying the tax bill while you dispute it even if your dispute is legitimate. If youdecide to not take this advice, rest assured, you will hear from your lender and they maybegin foreclosure on your property if you let the taxes go without being paid for very long.

Q:

Is it unfair for me to expect my kids to help out with their college education?

A:

  I will make the assumption that you cannot afford to pay it all yourself. If that is the case, it's not unusual for parents to ask that their son or daughter help out by working part time whilein school and during the summer. Even some people with plenty of money require their kids to participate. I have seen situations where parents could have easily written a check for theentire four years of college yet they still required their kids to work a part time job. In most ofthese instances, the parents felt that requiring them to participate financially would promotegood work ethic and I think that is a legitimate reason. It will probably make them appreciate their education more. I fully understand that most people want to provide their children witha trouble free education. However, it is your decision as a parent as to whether you require them to participate in the finances. If you can help, you should. Whether you choose to pay a part of it or all of it, that's a personal decision.  

February 4, 2015

Q:

Have you heard numbers on how much giving amnesty to illegal aliens will cost tax payers?

A:

The plan to give amnesty to illegal aliens is a very controversial subject and I know there are  two sides to the issue. However, I think it would be foolish for anyone to think that it won't  be expensive. Where will these people turn for help if they are unemployed? Where will  they get the money for health care? They will turn to our government and add to the millions  who are already on government subsidies. I think the fact that our country has a history of  allowing people to come here and enjoy our life is great. However, they should not be allowed to do it illegally. They should be made to do it the proper way. If your personal  finances are in trouble, you don't go out and buy some expensive item. Our government is in  serious financial trouble. Adding the expense of millions of illegal aliens is not making sense. Our President tells us they will add benefit to our economy by spending money. Someone  needs to tell him what we already know. They will get this money to spend from us, the  taxpayer. That doesn't add to our economy.

Q:

Do you know how much of our tax dollars are used to protect former Presidents of the U.S.?

A:

 I've read this information some time ago but I'm not sure of the number. At present, we are  caring for 4 former Presidents. Aside from providing Secret Service protection, I believe there  is a pension, an allowance for office space, an office assistant or secretary and several other  benefits. I think a conservative guess for all 4 would be $5 million per year. However, plenty  of other expenditures that our government makes concern me a lot more than taking care of  former Presidents. Whether we approve of the job they did or not, I think they deserve the  benefits they receive after leaving office not to mention giving them protection against those  who might still want to harm them. We need to concentrate on other wasteful spending. Dowe give them too much? If you compare it to what CEO's of large national companies receive,  it is not too much. 

Q:

Years ago, banks used to give out little passbooks when you opened a savings account. Noneof them do it anymore. Why?

A:

I remember in my earlier days of being a banker when we gave those little books out to a  new savings account holder. What customers did not know is that it was for the customer's  benefit and not the bank's because it was not an official record. Anyone could post a depositin those books whether they actually made the deposit or not. It was not proof of a deposit.The passbooks stopped being used when we began using computers that generated areceipt for your deposit which is real proof of your deposit. They may have been kind of niceto open up and look at but they're not official. Some banks, including ours, offer customersa ledger made of thicker paper material to keep track of their deposits, withdrawals andbalance. However, just as with the little passbook from years ago, it is not an official receiptof payment. Some banks don't even offer that. Your official proof of deposit is the receipt  generated by the teller.  I would not expect your bank to accept your entries in the ledger asproof that you made a deposit. You need the receipt.

 

January 28, 2015

Q:

My employer matches half of my 401K contributions up to 6% of my salary. So, why would I contribute more than they will match?

A:

Many employers graciously offer a 401K match like yours does and they usually put a cap onhow much they will match. While there are rules on how much you can contribute, there are other factors, such as a "catch up" provision, that could allow you to do more. If you are interested, speak with your accountant to see if you qualify. If you do qualify, it doesn't matter whether your employer will match it or not. It's still money that can avoid taxes until you retire and begin to take withdrawals from your retirement program. For those who have an employer who matches any part of your contributions, you are very fortunate. This can add up to a significant amount someday depending on how aggressive you are in your contributions. If you can, take advantage of this opportunity to the fullest extent.

Q:

Are time-share vacation homes still a popular thing today?

A:

They might be but, you don't hear as much about them as you did 20 years ago. Time-shares, for those not familiar, are a way you can share ownership with several other people and you get the use of the home a certain amount of time each year. If you don't see yourself spending 3 to 5 months a year in a warmer climate, it's another option for 2 to 6 weeks a year. I know there are a lot of people who own time-shares. Personally, I don't care for the concept. Most of these arrangements do not allow you to pick and choose when you want the use of the property. Instead, you are given a window of opportunity when you can use it and you are co-owners of a property with people you don't know. I've also heard that they are difficult to sell if you ever want to get out of the deal. If you can't afford to own a vacation home, you might consider renting. There are reports out that, due to the downturn in the housing market, rental housing in warmer climates are plentiful. If time-sharing works for you, that's fine. I just don't care for it.

Q:

Aside from the basic salary or hourly wage, what are the additional costs of an employee totheir employer?

A:

The total cost of an employee goes beyond the base salary or hourly wage. Some  of the expense is mandatory like the Social Security match your employer makes on your behalf.However, most of the additional expense is voluntary. If you contribute to a 401K or other retirement plan, most employers match your contribution up to a certain percentage. Your employer likely contributes to the cost of your health, dental and vision insurance. Some even contribute to your education when it relates to your job. Even vacation and sick days are a cost to your employer. Depending on how many benefits your employer offers, the additional expense could be from 25% to 40% of your salary or hourly wage. If you apply either of these percentages to your income, you will see that it is substantial. For those who sometimes say negative things about their compensation, try to remember all the additional cost your employer pays for you or gives to you. Some employers share this type of  information with employees at the end of each year.

January 21, 2015

Q:

Are there any guidelines on how much to spend on a wedding compared to your income?

A:

I don't know of anything in writing but, there is an unwritten guideline and all it takes is common sense to figure it out. Don't spend more than you can afford. Daughters are very special to us. However, I would think a reasonable approach is don't spend more than you have in cash or, don't borrow more than you can pay back within 12 months. I've seen it,even in my own family, where it took years and second jobs to pay back what was spent on a wedding. That doesn't make a lot of sense to me. No child should expect their parents to destroy their finances for a wedding especially with the rate of failure in marriages today. How much you care about your kids is not based on how much you spend on them and the amount you spend is not going to determine how tight the marital knot is tied. Weddings are no different than anything else you spend money on. You need to use your head. In case you are wondering, I've paid for two.

Q:

Why won't banks make long term fixed rate loans unless they can be sold in the secondary  market?

A:

Your reference is to mortgage loans and the reason is very simple. The funds used to make  loans comes from customer deposits. Depositors have always been unwilling to accept long term fixed rates. Therefore, we have to match terms on loans as closely as possible to terms on deposits. If a banker does not do this, it could cause a very bad effect on earnings. Therefore, unless the banker has a significant amount of deposits with rates fixed for a longtime, he can't afford to take a rate risk by fixing a rate on a loan for a long term. Therefore,if someone desires a fixed rate for 20 to 30 years, it will be sold in the secondary market and it becomes a part of thousands of loans that are packaged and sold in the bond market. Back in the early 1980's, the Savings and Loan industry was nearly wiped out because of this very situation. They made billions of dollars in 30 year fixed rate mortgages with money that came from CD's invested for less than 4 years on average. When rates got very high on deposits, it  created a situation that made them unprofitable.

Q:

I heard a news report that said small banks will become non-existent. Do you agree?

A:

I don't agree with that at all. However, I do think it is becoming harder for community banks to maintain profitability unless the government eases up on some of the requirements that were meant for large regional and national banks. A significant amount of the newer laws imposed on banks have very little if anything to do with how a community bank operates. Yet we are expected to abide by them just the same. It is very costly. In the future, I think you will see more partnering of small banks to pool their resources to combat the heavy cost of  regulatory issues. However, the most important reason why I think smaller banks will always exist is that we provide a level of service that big banks cannot offer.  Large banks have become so impersonal with customers that they truly are no more than a number to them.  Our customers know their bankers and we know them. I think that is important to people and it will help us survive. If you have ever dealt with a large bank, you know this is true.

January 14, 2015

Q:

Bank stocks in general haven't done well in recent years. What's causing it?

A:

In general, you are correct. Bank stock prices have been down over the past few years. However, not proportionately more than any other types of stock. Unfortunately, stock  markets do not differentiate much when it comes to the size of banks. Therefore, small banks were adversely affected because of the problems in large banks during the housing crisis and Wall Street issues. The other thing that has hurt banks, especially smaller ones, is the flood of new regulations the government has placed on our industry many of which do not apply to small community banks yet we have to comply with them anyway. The stock market sees this as an additional cost to banks in order to keep up with the new laws and regulations passed in recent years. With all this being said, I think bank stocks have done fairly well and they continue to pay dividends. This is my opinion and not an encouragement from me to buy bank stock. That decision is all yours.

Q:

I've heard you mention bank regulations. Do you have to abide by all of them?

A:

Banking regulations are created by politicians most of which have never managed a business of any kind. Many have never held a job outside of politics yet they write laws and regulations for industries with no expertise or understanding of that industry. Bank depositsare insured by a government agency (The FDIC). Therefore, we have no choice but to comply with all laws and regulations pertaining to banking. It can be a criminal offense if we don't comply with them. It is very frustrating and time consuming for us to keep up with all of these regulations because there is reporting that goes along with it. More often than not, people are told that these laws and regulations are made to protect them. However, in many cases, they are senseless and they don't accomplish anything. All they do is frustrate people and we are left to try to explain why we have to do it.

Q:

When a city has a special event, like a convention, they talk about economic impact. How is  this calculated?

A:

We often hear these kinds of numbers in the news reports. It's not rocket science and it's  not completely reliable. It's an estimate. Basically, they try to determine what each person will spend on things like a hotel, meals, tips, cab fare and other normal expenditures. If that number is $900 for a 3 day convention and there are 1,500 people attending, they figure aneconomic impact of $1,350,000. This may not include the money earned by workers who redistribute it through purchases in the community. For the municipality in which it is held,  it's a windfall of income if they have a city sales tax. Depending on the tax structure in that state, it might help them as well. This is why you see a lot of big cities and the states lobbying to get events scheduled. It can mean a great deal of money to them. Regardless of how small of an event it is, there is always an economic benefit to the community. Although it's small, there is even an economic impact on something like the Chamber of Commerce Summer Fest.

January 7, 2015

Q:

Can people make money collecting things to recycle?

A:

I suppose recycling is a good thing whether it's for money or for the environment. Most  people who collect scrap metal, pop cans, plastic bottles and other things do not do it for the environment. They do it for the money. They are cleaning up the environment without realizing it. Contrary to what you might believe, recycling is not something that just started in recent years. I remember my first cheap car in high school. It leaked oil badly. Service stations used to take the oil from cars when they changed it, poured it through a strainer and resold it in Mason jars for 10 cents a jar. Since it seemed like I was losing a quart of oil every   25 miles, I would buy the recycled oil 5 jars at a time. Did those station owners believe that it was helping the environment? Probably not but, it was helping anyway. Recycling for the sake of the environment is a very good thing. However, when you consider the time people invest in collecting recycled goods to turn into cash, it's probably not very cost effective. I've never heard of anyone getting rich from doing it.

Q:

My kids think it is crazy for me, as a senior citizen, to buy a different home this late in life? Is  it?

A:

Not at all. It happens often for different reasons. It might be a downsizing issue or selling one home and buying a new or newer one for less maintenance. Often this is done even if there is a mortgage involved. Regardless of the reasons, I don't see any problem with it as long as you can afford it. The only circumstance in which it is your kid's business is if they are helping you financially. Then, I would think they are entitled to some input. If not, do what you want. You earned the money and you can spend it as you choose. Unless you have become mentally incapacitated, you can make decisions for yourself without an OK from your children. Maintaining an older or larger home becomes more of an issue as we get older and even if it  is difficult to give up a home you have lived in for a long time, it is the practical thing to do.

 

Q:

We are beginning a new year. Do you have any tips for making financial adjustments?

A:

Probably the same ones I would give someone every year. If you are in debt for credit cards,you should commit to reducing or eliminating it. If you have an automobile loan, check to see if the current value is greater than what you owe on it. If not, increase the amount you pay each month to create some equity in your car. This will help you when you go to trade it or sell it. The same goes for your mortgage loan. If you owe more than 80% of the value of your home, pay extra until you get it back in line. I know some will find these tips hard to do but, if possible, this should be your focus. If you are not in debt for anything, you are one of the more fortunate people but, you can still have goals. Do some tax or estate planning to make sure you have sufficient income in retirement. Or, look at the investments in your retirement fund to make sure you are comfortable with your decisions. Some individuals fail to do this and regret it later. The first of the year is always a good time to check your finances.

December 24, 2014

Q:

How much of a part do finances play in getting people elected to public office?

A:

Unfortunately, it plays a huge part especially in national politics. Many Americans don't make an effort to decide who is the better candidate or the most qualified and that's a shame. Instead, they make a choice based on who is the most visible through TV and newspaper ads.The dollars being spent to get elected just seems to grow. There are laws that have been passed limiting the size of the contributions. However, at least on the national level, they have figured out a way to get around it. It would be great if candidates could be elected based on real qualifications. In the business world, people are hired based on experience and qualifications. In politics, we elect people based on how much money they spend. Most of them have no financial experience and yet they spend trillions of dollars every year. Then, we wonder why our country is in such a financial mess. How could it possibly end up differently?

Q:

Will we ever see CD rates above 10% again like in the 1970's?

A:

For all of our sakes, I hope not because it will also mean high loan rates. Rates topped out on Certificates of Deposit at around 15% in the early 1980's. It was a very difficult time.  Lenders had to price loans on mortgages at close to 18% and commercial loans at Prime rate plus 2% which totaled about 21% in order to pay these competitive rates. This was not a  good thing back then and it would be even worse today. I know people are frustrated over low interest rates on deposits. I never thought we would see the day when they would be this low for this long of a period but, when it comes to the economy, nothing is for sure.  However, I feel safe in saying that we won't see 15% CD rates again because a lot has changed since then to keep that from happening. 

Q:

I have quite a few collector coins. Could you tell if they are valuable by looking at them?

A:

I'm afraid I won't be any help to you on this topic. A lot of people probably think a banker would keep up to speed on rare coin values but, we don't. People also assume that banks take in all kinds of valuable coins which is not the case. Back when I was a young banker, we  did see a fair amount of old coins come through the bank. Although I did not do this, it was not uncommon for bankers back years ago to go through coins looking for rare ones. As with other types of collectibles, most older coins have been taken out of the market and they now lay in someone's collection. I could go through every coin that comes through the bank for a week and not find one collectible coin. Maybe I should have shown more interest when they were plentiful but, I didn't and now it's too late. From the little bit of knowledge I have, the condition of the coin has a lot to do with the value it will bring. If you start collecting coins, do it for fun. You won't be able to accumulate enough to get rich from it because most of them have been taken out of the system.

December 17, 2014

Q:

I signed on a loan for a friend. I was notified he isn't paying as agreed. What is my liability?

A:

It's unfortunate but, this is a question you should have asked before you signed the loan  document. I can't speak for all banks but, I can tell you that we make a point of making sure  the guarantor understands what his or her liability is before signing the papers. Claiming you  didn't understand what you were signing is not going to solve your problem. You agreed to  make the payments if the primary borrower failed to do so. The lender will hold you just as responsible as the person you signed documents for. When the lender asked for a guarantor,they felt there was more than a normal amount of risk that the borrower may not pay as agreed. It always amazes me when guarantors often become angry with the lender when  called upon to pay. Be angry with the borrower, not the lender. You might have just lost a friend if you had refused to sign on the loan. Now you have lost a friend AND your money.

Q:

What does it mean when an individual sells a loan at a discount to a lender?

A:

It doesn't happen very often but, I have been involved in a few of these over my career. Here is an example. Let's say you sold real estate and financed it for the buyer at a rate of interestway below the market rate. They have been paying for 5 years on schedule but, you have a need for some cash. Your banker, who you have a good relationship with, has offered to buy the loan from you at 90% of the face value. The banker takes over the loan and gives you 90% of the amount owed. You get your cash and the buyer of your property now owes the bank. The reason for the discount is that it will make up the difference on buying a loan with a low interest rate. This is rarely done these days but, it was a common practice years ago. If the seller didn't really want to sell the note, he could pledge it as collateral on a loan. The key to this is that the person selling the note must have a properly prepared documents and mortgage or the banker would not buy it.

Q:

I heard an economist say that you need 50% of your working income to retire. Is that true?

A:

I don't think much of that advice from the economist. To start with, no one can give a flat percentage needed for retirement. This is a good example of why I caution people about  taking advice from someone on TV. Your lifestyle and the amount of debt you have will  dictate how much you will need. That figure could be 30% or 100% of your working income needed in retirement. Depending on your situation, it could very well end up being 50%. However, that would just be a coincidence. So, it's irresponsible for someone to state that you need that figure in order to retire comfortably. That question is like asking how much gasoline you will need to drive from New York to Los Angeles. No one can answer that unless they know if you are driving a compact car or a 16 wheel truck. I used to have these conversations with my mother when she closely followed a well-known TV economist. Don'taccept everything you hear or read. 

                   

 

December 10, 2014

Q:

This Black Friday sales event after Thanksgiving, do retailers really make money from it?

A:

You have heard the old saying, "There's a sucker born every minute." Retail marketing experts came up with one of their best schemes ever when they created Black Friday. They lure you into the store with a few things priced very low knowing full well that many of the people who show up will buy other things. If they were not making money from Black Friday they wouldn't do it. All you can do is just shake your head when you read about fist fights, people being knocked down and injured or in a couple of instances, it resulted in death. I would think I had lost my mind if I ever agreed to participate in Black Friday. I think it has become a game for a lot of people who just want to brag that they were able to get that one item priced well below normal pricing. Is it worth it to go through this mess of people and traffic? Not for me.

Q:

With the stock market the way it is, I'm thinking about just putting money away in a savings instead of my 401K. What's your opinion?

A:

I understand your concern but, there is a bit more to it than that. Contributions to an IRA or 401K is taken from your pay check before taxes are calculated. In other words, employers calculate tax liability on the lower figure after the contribution to your retirement. It doesn't matter if your return on the investment ends up being zero, you are still going to avoid paying tax on those contributions until you begin drawing from your IRA in retirement. If you choose to have a portion of your pay check going to a savings account, taxes will be calculated before the savings deposit and not after as in an IRA. In my opinion, your idea will not benefit you even though the stock market is down. Maybe you should consider talking to your IRA administrator for advice on how to avoid the ups and downs of the stock market by going into more stable investments. As I have said many times before, the 401K and IRA are such great tools for retirement and reduction in taxes that I'm surprised the government has not taken it away from us. Let's hope that never happens.

Q:

In the type of job I have, I receive a sizeable year-end bonus from my employer. Should I have a contribution to my 401K withheld just like normal pays?

A:

Why not? Unless you have some significant thing that you need the money to accomplish, I would make the contribution. It will save taxes on your bonus and, if your employer matches a portion of your contribution, this is an added incentive to do it. I cannot express strongly enough the importance of taking advantage of every opportunity you have to make these contributions. Ask anyone who is within 10 years of retirement and they will all tell you they wish they had done more when they were younger. The 401K was passed into law by our government in the mid 1970's. I remember it very well. We trained our staff on how it worked and how significant this was to their future. The tendency for people under the age of 35 is to think there is plenty of time for them to save for retirement. I can assure you there is never enough time. The years will pass quickly.

 

December 3, 2014

Q:

Is there a general rule of thumb when making a large purchase to either borrow the money or, if you have it, pay cash for the purchase?

A:

There is no rule of thumb. This is mostly a decision that gives you the most comfort. There are some who get comfort from having cash in reserve for an emergency. There are others who really don't handle being in debt very well. Each individual's situation is different. The other consideration is how much cash you have. If this purchase just makes a small dent in your savings, paying for it makes sense. If it will virtually wipe out your cash, maybe borrowing makes better sense. From a financial perspective, these are the things I would consider if it were me making the decision. What makes sense for one person may not make sense for another person. There is no right or wrong. Do what keeps you from losing sleep.

Q:

Do all your financial questions come from people writing you and what was the most interesting question?

A:

Some come from people writing or stopping me on the street. Others come from listening to people talk in groups. They mention something about financial matters that bother them and it occurs to me that this may be something that concerns a lot of people. You would be surprised what you hear if you listen. Between these sources, it seems like there are a never ending number of questions people have about financial matters. If I can help someone by answering a question, I have accomplished what this is supposed to do. I've had people tell me they don't understand how someone could not know the answer to some questions because they are so easy. My response to that is very simple. There are varying levels of financial knowledge. What might seem simple to you may not feel that way to someone else. All questions are welcome.

Q:

Is there one reason, more than any other, why people develop financial problems?

A:

The reason most individuals and families get into financial trouble is they don't understand their financial limitations. They don't make plans for the unexpected things in life. They spend every dime they make and give very little thought to what they will do in the event of an emergency or an unexpected expense. Living this way will catch up with you sooner or later. Part of becoming mature as an adult is taking responsibility for your own finances. A lot of the blame for young people's financial difficulties can be traced back to their parents who never allowed their son or daughter to grow up financially. They know if they mess up, Mom and Dad will cover them. People don't just suddenly become bad managers of money. They start this trend at a young age and it builds from there. I might not have felt this way at the time but, I am thankful my parents taught me at an early age that they would take care of my needs but, I would have to work for what I wanted. If you care about their future, you will teach your kids the difference between the two.

 

November 26, 2014

Q:

What is the #1 reason a business or company chooses a community for their location?

A:

I think the #1 reason for a manufacturing company would be the availability of a work force. Most manufacturers do not depend on the local community for sales so they are not that concerned about it. They just need to know that there are enough people looking for employment to have a staff of workers. For retailers, it's different. They do depend on the local people for sales. So, people and traffic flow are the most important things to retailers. From a community standpoint, we need to make sure both manufacturers and retailers are getting what they need. We need to do everything we can to keep people in business whether they are making a product to sell or stocking their shelves with things for customers to walk in and buy. A successful community will have a mixture of both. There are small towns across the country that have turned into ghost towns because they were unable to meet the needs of manufacturers and retailers. We don't have that problem.

Q:

What is the failure rate for small businesses?

A:

It depends on the type of business. Some have a higher failure rate than others. Statistics are not kept on small town business failures. However, they are tracked in larger market areas. The last numbers I recall seeing put bars/night clubs and restaurants a close #1 and #2 in failure rates. Historically, these businesses have a short life. While we all know of successes in these categories, the overall closure rate is higher than any other retail or service business. While Fort Wayne is not a large city in comparison to many others, you have probably seen a lot of these establishments come and go over the years. Many of these closures were from national chains. These two categories are far and away the two most likely to fail in large market areas. The next in line for failure is a little broader and that is retail stores that deal in specialty items. In other words, stores selling a limited number of different items. Owning a business can be difficult even in the best of times.

Q:

Has the house and apartment rental business gotten any better than it was 2 or 3 years ago?

A:

From what I hear, the rental business is better. However, it's better for some than others. Owning rentals can be a tough business especially if you do not know what you are doing. Those who are the most successful have been at it for years and they are able to do most of the repair work themselves. This, plus keeping the rentals in good repair and being selective on tenants are the keys to success. It may look easy to those who do not own rentals but, it isn't. Multiply the difficulty 10 times if you have too much debt against the properties. I would suggest to anyone thinking about getting into the business to think it through carefully and talk to someone who has owned rental property for a long time before making a decision. We have seen individuals get out of the rental business in short periods of time after purchases because they didn't realize what they were getting in to. Use caution.

 

November 19, 2014

Q:

What does the most harm to the economy, inflation or recession?

A:

There is an old saying that goes, "It depends on whose ox is getting gored." In other words, who is getting hurt the most? Poor and middle income families are getting hurt the worst during inflation or recession because they don't have much excess money to throw around. Higher income families may grumble over inflation but, they will still eat and spend on the things they need or want. All the others will limit their spending based on necessities. I don't think inflation or recession are good for extended periods of time like the one we are in now. However, some of these periods are for corrective purposes. The housing market is a good example. Things got out of hand for a few years when home values were going up by double digits every year. That had to stop. So, the recession served as a corrective period where homes lost values. It's a bitter pill to swallow but, I firmly believe it was needed. We will continue to have ups and downs in the economy. There's nothing we can do to change that.

Q:

I heard on the news that frivolous lawsuits impact the economy. How is that possible?

A:

Frivolous lawsuits are very costly. Unfortunately, they are filed by the thousands every day. An example of a frivolous lawsuit would be someone suing their neighbor because their roofline blocked sunlight to their flowers. I made that up but, you get the point. How does this affect the economy? Well, the lawsuits usually end up in the hands of insurance companies who sometimes cover the one being sued which drives up insurance rates for everyone. We have all read stories in the newspaper where one individual sued another for some ridiculous reason. Remember the lady that sued the fast food restaurant for serving coffee too hot and she spilled it on herself? I believe Great Britain has a system that works. If someone files a frivolous lawsuit and loses in court, they must pay the legal fees for the person they sued. I wish we had that system here in the U.S. The insurance issue is the only thing I can think of in terms of lawsuits hurting the economy and I don't think it's that big of an impact.

Q:

News reports indicate auto loan delinquencies are up. If the economy is improving, why would this happen?

A:

I don't think it has anything to do with the economy. Loan demand for banks and other lenders has been down as a result of the recession. Some banks, not ours, have loosened credit requirements to make loans. This has occurred mostly with large banks and other non-bank lenders. They are now starting to pay the price for making these marginal loans. There have been reports for several months that this situation might develop. Not only did they lower credit requirements, they also offered very low rates. You may have seen TV ads from auto dealers in larger markets stating that they can get you financed even if you have had credit problems. It may be considered conservative but, I have always felt that if someone did not pay another financial institution as they agreed, why should I think they will do any better for me if I made the loan? Having answered your question, I don't think the problem has become an epidemic yet but, it could develop into one.

 

Name 
Phone 

Thank you, your request has been submitted.

X

Close on a Home Mortgage or Home Equity Line of Credit at THB during February or March and receive a $25 dinner certificate & 2 movie tickets.