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Dollars and Sense

June 9, 2016

Q:

Last week you were critical of forgiving student loan debt. Why is that? It helps the kids.

A:

Going to college is expensive. I understand that. However, when someone accepts tax payermoney to get their education and doesn't pay it back, it's not right. I realize that good jobs arescarce for graduating students. However, if graduates can't find a job immediately in their field of studies, take a job that doesn't utilize your education until one comes along. It's called being  responsible. You won't be the first college grad who was forced to take a job they didn't like so  that they could pay their bills. If you are one of those individuals who paid for their educationthrough a loan, pay it back when you go to work. Don't start your adult life by taking handouts from the government and parents, don't encourage this kind of behavior and attitude. The only individuals who should get a free education from the government are veterans who served in the military and risked their lives. We have a program for them and that's fine by me.

Q:

Can you explain what an IPO is and if they are a good investment?

A:

IPO stands for Initial Public Offering. It's usually a company that needs to raise capital to support rapid growth or, it could be someone who wants to maximize their personal  investment in the company by selling stock and giving up a part of their ownership. Some of the more famous IPO's were Amazon, Yahoo and Facebook. Most of the high tech companies were started with an IPO and a lot of people got very wealthy by investing in them. However, don't assume that every IPO will be a success. When you purchase stock in a company, you arerelying on someone or some group of people that you don't know anything about who have no obligation to you as an investor to be successful. They plan on being successful but, there areno guarantees. I would say that there has been much more money lost on IPO's than money  made on them. It's risky and I would not invest any more than you can afford to lose. If you arenot a gambler or risk taker, I would be very careful on an IPO.

Q:

I get the impression that Presidential candidates are more interested in protecting consumersthan they are businesses. Why?

A:

I don't necessarily believe that the candidates are against businesses. However, what you might be seeing is "pandering" to voters. It's a word that we hear a lot during elections and  what it means is the candidates are saying what they think people want to hear. Businessesdon't vote. People vote and speaking from a financial point of view, the candidates want to   leave the impression with voters that they are going to protect them against the business world taking advantage of them. The voters don't need protection but that's the impression they want to leave. Our free enterprise system allows people to do business with whomever  they wish based on service and pricing. The average voter wants to believe, based on what    they hear, that the candidate will look after their best interests. I wouldn't place any  importance on these kinds of comments from the candidates. Bashing some segment of society to win votes is an old tradition with political candidates whether it's deserved or not.

June 1, 2016

Q:

How bad is the student loan debt crisis they keep talking about in the news?

A:

There is approximately $1.3 trillion dollars in student loans in this country and virtually all of it is backed by the U.S. Government. The most recent reports tell us that 40% of this amount is individuals being either behind on their payments or not paying at all. This SLA loan program started out as a good idea. However, as happens with most government sponsored programs,  it has become a nightmare. President Obama wants to forgive all this debt and let them walkaway without paying a dime. If you have student loan debt or your children have it, you are probably excited about this. If you do not have student loan debt or your children don't have student loan debt, you are probably very angry about this plan of forgiveness. Especially if you paid your own way through school or paid for your child's education. This idiotic forgiveness of debt is another example of what has gotten our country into this financial mess. It's our tax  dollars they are giving away and it has to stop for our nation to get better financially.

Q:

What is this new law that raises the level for qualifying to be an exempt employee?

A:

For years, this government imposed rule stated that a worker had to exceed a base salary of $23,660 per year to be eligible for exempt status. Most exempt employees are not paid overtime and usually have official titles or they're a part of management. As of December 1, 2016 it will be increased to $47,476. In other words, anyone on a salary under that figure  must be paid over-time pay if they exceed 40 hours per week. The department of labor estimates that this will affect 4.2 million workers and additional income to workers of $12  billion collectively over the next 10 years. Furthermore, it may be necessary for employees to use time card who currently do not do so in order to give employers appropriate records. Thismajor change affects everyone regardless of their status or title in a company. Once again, politicians with no business experience, making rules that unfairly affect workers and it will notmake a substantial difference in wages for those 4.2 million individuals. All it will do is create more paperwork for employers.

Q:

Why do banks change the pricing of their fees so often?

A:

I don't believe it's fair to say they do it often but, from time to time, all banks take a look at their pricing on products and services. Why? Because your bank's cost to provide the products and services change. Employee compensation is the biggest factor. Not only the expense in  what we pay employees but also health insurance which has been rising by double digits  annually for some time now. Most banks set a level of relationship at which you can avoid fees.  We are no different than any other industry. Our cost of operating our business is constantlyrising. This isn't just about making the bank a profit. It also allows us to continue contributing   to important projects and programs in our communities. A strong and profitable communitybank is essential to a strong and progressive community. Charging appropriately for services isessential in accomplishing this.

May 24, 2016

Q:

If some people live pay check to pay check and they are happy, what does it matter?

A:

Money won't bring you happiness. I can agree with that. However, don't confuse being happy with being secure financially. I doubt that anyone would be satisfied with living paycheck toto paycheck but, it doesn't have to keep them from being happy. Also, there is a difference between barely making ends meet on the essentials and intentionally spending your last dime on frivolous things that you could have done without and risking your families wellbeing. The welfare system our country has created is responsible for a lot of these attitudes. Many of those collecting from the system have decided that it will be their retirement plan. I don't have to work another day in my life because Uncle Sam will send me money when I run out. I think all hard working Americans would love to see our government revamp a system that creates these attitudes. If you are broke but working and you arehappy, that's great. If you are choosing not to work and collecting from the system and happy, most working people will have a problem with that.

Q:

Will you get an audit by the IRS if you don't check the box for a political contribution?

A:

Every taxpayer must file an annual tax return. For many years, there has been a box that youcan check to donate $3.00 to political campaigns. You can ignore it without fear of being audited. This is purely voluntary on the part of the taxpayer. In my opinion, I don't think it should even be on the form. Political contributions should be a private matter and if you want to make a donation, you can do it on your own without being reminded of it by the IRS.  I have never heard of a single person who got audited and claimed it was a result of his or her refusal to contribute. Maybe it is only $3.00 and it wouldn't make a difference in your wallet.  However, I don't criticize those who are contributors or those who are not. That's your business and should not be open to criticism by anyone. The campaign system needs some change and it should start with funding.

Q:

Why are charitable contributions tax deductible and some other things are not?

A:

It would be a pretty sad country we live in if it were not for charitable organizations. I think getting a tax deduction for charitable contributions is great. I have seen estimates of 75%fewer donations if it were not for the tax break. I can't imagine all the people in need that  would not be taken care of without tax free donations. Thankfully, this has not been taken away and I hope it never is. However, over the past few years, there have been news stories about the high percentage of some charities income that goes to administrative expenseslike salaries. While it is not practical to think these organizations can operate without   employees, you would do well to do some research to see which ones have the highest and the lowest percentage of their income going toward salaries and other administrative cost before making a commitment. We all want most of the money to go for the intended  purpose.

May 18, 2016

Q:

Is there one type of business that works best in a small town like Hicksville?

A:

I'm sure some types of businesses are more suited for a small town than others. However, there are things much more important than the type of business. Someone wanting to open anew business must do research to determine if there is a need for their product or service. They need to have knowledge of what they are selling not to mention practical experience.  All too often, people go into business just because they have always wanted to start a business or maybe they have an emotional attachment to what they are wanting to do. These are not good reasons for doing it. It doesn't matter how passionate you are about your product or service. If there is not enough of a market for it, you are wasting your time and money. Having  passion for something is great. However, you cannot let it stand in the way of making a goodbusiness decision like this. Make the decision with your head and research and not your emotions. Your margin for error is much smaller in a small community.

Q:

I've heard that banks sometimes go in partnership with businesses. Is this true?

A:

By virtue of lending money to a business owner, we are partnering with them. However, not in the sense that you are thinking. We don't own stock in their company, we don't make business decisions in the company and we don't help manage. If it gets to the point that we are makingdecisions, it means the business is in trouble and we are trying to avoid losing money. We neverplan on that happening and we don't want it to happen. Bankers are not interested in running your business if there is any way possible to avoid it. Obviously, we are glad to offer advice if itis requested. Otherwise, we don't interfere. Sometimes, when a business owner gets in trouble, they become too emotionally involved to make the tough decisions needed like   closing the doors. If our loan is in jeopardy, we help them with that decision just to avoidthings getting worse. We will do everything we possibly can to stay out of your business affairs but, we will get involved as a last resort.

Q:

What's the single most important thing in making a decision in lending to a business?

A:

Well, you may have heard the phrase, "numbers don't lie." When it comes to making a credit decision, the ability of the borrower to repay the loan is critical and we determine that by analyzing financial numbers. The borrower may have the best intentions in the world of repaying the loan but, if there is insufficient income to pay it, they won't pay. Hard work, character and experience are all important things to a credit decision but, the numbers are themost important thing. A lender could know the individual his or her whole life but, if they are attempting to borrow beyond their capabilities to repay, we won't loan the money. I've made the following statement many times over my career. I would much rather have you upset with  me because I rejected your loan request than to make the loan and have you upset with mefor taking your home or automobile because you didn't pay as agreed. I think most bankers  feel the same way. If they don't, they should.

May 11, 2016

Q:

The government is always giving economic percentages on the economy. Are they reliable?

A:

We read numbers like the CPI (Consumer Price Index), Unemployment Rate and the number  of new homes under construction. All of these ratios and numbers are for the entire country. People that are giving us this information (our government) are the same people who cannotstop the wasteful spending, stop welfare fraud and offer political favors for votes to keep  them in office. The economic numbers may possibly be fairly accurate. However, when they come from people like this, how can you believe anything they say. If you want a good feel for the economy, read what the big retailers are telling us about sales. If they are seeing anincrease in sales, you can feel better. If they are not experiencing and increase, it's a prettygood indication that the economy is still struggling.

Q:

Is the banking industry worried about something like a cyber-attack on their computers?

A:

It's not just the banking industry that's concerned about it. All businesses plus our federal government is concerned too. It's the number one threat to our country. Billions of dollarshave been spent over the past few years to protect computers against attacks from enemies abroad and criminals in our own country. However, to address your question, we are very concerned and have been for many years. It's one of our industry's largest areas of expense.  Is a cyber-attack possible? Anything is possible but, we have taken steps to minimize the riskof such an event and we will continue to upgrade our safety measures to stay on top of thisissue. We have to be diligent and the cost of system upgrades is a permanent item in ourbudget every year. I believe it is the same in all financial institutions.

Q:

Have many people have stopped having home phones to help their financial budget?

A:

According to some reports, about 40% of homes do not have a land line (home phone) and their cell phone is the only thing they have for calling and receiving calls. To be honest, I thought the percentage might be higher. I'm guessing it will go higher. Aside from wanting to save money, the other reason landlines are disappearing is due to the ever increasing amount of telemarketing calls they receive. I know there is a number you can call to get on a  "do not call" list. However, speaking from my own experiences, that is a waste of time. It doesn't work. I think most people feel the way I do. The people I want to receive calls from have my cell number. So, I don't need a land line on which 80% of the calls received weretelemarketers that I didn't want to hear from. With today's economy being what it is, the average person needs to save on expense anyway they can. Some people want or need a  land line and some don't. There is no right or wrong decision. It's just a preference.

May 4, 2016

Q:

Are the reports true that car sales remained good during the recession?

A:

 I have read numerous reports that auto sales have remained good while most other sectors of our economy have not been so good. Most retail businesses have struggled to keep their doors open over the past 10 years or so. Residential real estate sales have been soft for a  very long time. The answer to why auto sales have not been affected as much as other sectors is hard to pinpoint. Some say it is because the recession did not affect the higher income buyers as much and they went right on buying autos as if there were no recession.  Others say low interest rates kept sales going. I believe both reasons played a part in this.   However, I have another one to consider. The American public loves their cars. While it is short sighted during a recession, we just can't resist the urge to trade our vehicles from time to time. Very few people buy a car with the intend of driving it until it just quits running or  falls apart. I'm sure there are probably other theories as well.

Q:

Why is our government still giving money to other countries while we have a deficit?

A:

I don't pretend to understand our government's foreign policy. However, it is something that frustrates all of us. We hear about the trillions of dollars that our country is in debt but, we still continue to give away billions of dollars to other countries and, in many cases, these countries do not appear to have anything to offer us in return. Generally, our government does not offer any explanation for it other than humanitarian aid. I realize that some of this is necessary due to their strategic and geographic location. However, I think we can all agree that charity begins at home and we have some pretty bad situations right here in the USA. We should be asking more questions of our elected officials about foreign aid decisions.

Q:

I found quite a few silver coins in my parent's home after they passed away. Are they  valuable?

A:

This is not something that bankers keep up with unless they happen to be coin collectors and I'm not a collector. However, I do know that it depends on the age of the coin and the condition. Fifty cent and dollar coins used to be made of silver. But, silver became too  valuable to be used in making coins. We rarely see them come across a teller window. Start first by looking it up on the internet. There is very little that can't be researched on the  internet.  Also, you could try a coin dealer. They will know the value of your coins. Keep in mind, the dealer will not give you top dollar for your coins because they need to purchase   them at a price where they can make money or they won't stay in business very long. If you  want top dollar, you need to go to a collector who wants them for his or her own collection and not to resell.

April 27, 2016

Q:

Is it true that you can get a government guaranteed mortgage with no down payment?

A:

There are government backed programs out there that would allow someone virtually 100% financing and this is one banker that thinks it's a bad idea. It appears our governmentdid not learn any lessons from the housing and mortgage crisis of the past 10 years. This  type of financing is what brought about the hundreds of thousands of foreclosures on which lenders and our government lost billions of dollars. It is absolutely amazing to me thatthis is happening again. Many years ago, someone came up with the phrase "The Great American Dream." It was referring to the dream of owning your own home. To thousands offamilies, it became their nightmare and not their dream. The fact is, not everyone should own a home and renting is a good alternative. I would never encourage anyone to buy a home with no money invested and the fact that our government is encouraging this type ofthing is bound to end in disaster. If you can't afford the down payment, you can't afford thepurchase. There are too many unknowns that come with home ownership.

Q:

What do you think about some lenders offering a 72 month auto loan?

A:

I don't think they are doing the borrower any favors by going that long on an auto loan.   So, I don't think it's a particularly good idea. My guess is that most borrowers choosing to go for a 72 month auto loan couldn't afford the payment for a lesser period of time. The problem is, most people don't keep a vehicle that long and when they go to trade it in, they will probably owe more than it is worth. Six years is a long time to pay on a car. If you can afford to pay a larger payment on a shorter number of months, I would definitely do so.  If you need to go 72 months, just be sure you understand the risk involved. It would notsurprise me if a lender comes up with an 84 month auto loan which would make matters  worse.  

Q:

Since the Federal Reserve started raising rates, why haven't CD rates gone up as much?

A:

Most of the general public does not understand what the Fed interest rate is or how it impacts them. The Federal Reserve Bank can make loans to banks that are Fed members.  The rate you see in the news is the interest rate they will charge banks. What the generalpublic does not know is that a very small percentage of banks borrow from the Federal  Reserve and practically no community banks borrow from the Fed. The banks that borroware normally the very largest banks in the country. While the Fed rate is a key interest rate to describe what condition the economy is in, it really doesn't have an immediate impact on deposit rates like most people believe. Because of the insignificant impact it has on smaller banks, deposit rates usually lag behind a change in the Fed rate. Why? Because it doesn't  have an impact on our cost of funds or the interest rates we charge our customers on loans. Over time, if the Fed continues increasing their rate, you will see a delayed impact.

April 20, 2016

Q:

What is the biggest mistake people make in their personal finances?

A:

 There are several. But, there is one mistake that is universal with an average family. The biggest mistake people make is not budgeting for their expenses and needs. They just wing it.  Money is spent without a clue as to whether they can afford it or not. If your finances are notfilled with a lot of excess funds, which in most cases they aren't, spending money without a   budget is like sailing the ocean without a compass. In both cases you don't know where you are going. I strongly suggest that you develop a budget outlining your known expenses which tells you if there is excess for other things. A budget will force you to prioritize your needs and help you identify things that are not needs but simply your wishes. There is a big difference  between the two. This is a good practice for anyone. However, it's a necessity for those whostruggle making ends meet.

Q:

I heard that some states are making people work to get food stamps. Do you think this is right?

A:

A few weeks ago, there was a news report that disclosed a handful of states that are requiring people to do charitable work or some minimal kind of work in order to get food stamps. It's about time someone did it. I think every state in the U.S. should do it. I have to pay for my food. You have to pay for yours. Why should we have to pay for both ours and theirs? I'm aware that some are disabled and can't work. However, the majority of those receiving food stamps and welfare checks are just lazy and don't want to work. Anyone who doesn't believethat should do some research. Someone sent me a joke recently that is all too true to be funny. The joke is, "If you want to break up a large group of rioters or protestors, start handing out   job applications and they will disappear in a hurry." The insinuation is that hard working people don't have time for that kind of stuff. In the majority of cases, this is probably true.  

Q:

How will it impact taxpayers on the announcement that our country will be accepting a substantial number of refugees from other countries?

A:

It was announced a few weeks ago that the U.S. will be accepting thousands of refugees from other countries in a humanitarian effort. Based on what I have seen in news stories, the refugees will be given a certain amount of money to get their new life started in America andwe are helping foot the bill. There are varied opinions on this ranging from those thinking it's  a good thing we are doing to it being a ridiculous waste of taxpayer money. Each of us can decide for ourselves how we feel about it but, it won't change anything. It will still be done. Accepting people from other countries legally is what our country has done for centuries. However, the timing of this announcement is not good because we have a huge federal deficit as it is and now we have found another way to make it worse. It's a delicate subject with no easy answer.

 

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