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Lessons Learned From 2009 |
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Written by Gil Michel, MBA
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 I have come to realize that when starting a brand-new year there is a tendency to wish for the best. New things do that. A new baby in the family makes people reflect on the importance of life. A new convert makes us appreciate our salvation. And a new year gives us the feeling of another chance to “get it right” and that we get to start brand new. In hearing some of the stories of friends, families, colleagues and others, it is hard to believe that things could get much worse. A new year brings in a renewed sense of hope.
The year 2009 was marked with high levels of unemployment, further bursting of the real estate bubble, record low consumer sales, dismal stock performances, and business closings unlike we've seen in a very long time. If we look at things solely with our natural eyes, it is enough to make you depressed. Have you ever been on one of those rides in an amusement park that slowly takes you to this high point there is an initial rush and a build-up of anticipation? However, there is also a fear that begins to develop because we all know that what goes up must come down. And when it did, there was a lot of finger-pointing and name-calling from Wall Street to Main Street to politicians. The truth is, we all can take some blame for where we are financially. And the good news is that it taught us some lessons, that I think we will remember for a long time. As I speak with small-business owners and soon-to-be retirees, I am hearing a common thread in my conversations. Everyone is becoming much more discriminate about how they spend their money. The bigger house, the big screen TV, and all the extras aren’t as important as we made them out to be. People who thought that the word ‘budget’ was profanity, are now sitting down with their spouses and mapping out where their resources will be placed. It is unfortunate that calamity had to force us to develop good habits. But the two that stands out most notably are: Budgeting If we don’t put a name on our money, it will find itself where it should not be. This can be done on a looseleaf paper or an Excel spreadsheet. The fact is, you need to see with your own eyes, where your money is coming from and where it’s going. Saving Those who lost jobs in 2009 were able to “bridge the gap” more effectively when they had a savings account to cushion the blow. The discipline of saving money shouldn’t be an option, but a necessity. If you don’t have room in your budget to do so, then maybe you should reconsider downgrading something else, to make room. It’s just that important. Giving I am not a name it and claim it guy. But there is no doubt in my mind that the heart that gives bountifully also receives bountifully. I have heard countless testimonies of people receiving financial miracles because they are generous. It is true that the tight-fisted keep in what it has, but it also does not allow for much to come in either. How about you? What financial lessons did 2009 teach you? “Having food and clothing, let us be therewith content…”. (1Tim. 6:8) |
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Credit Counseling- Good or Bad? |
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Written by Gil Michel
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Dear Gil,
Is it wise to go through a non-profit credit counseling service to clean up your credit report? I recently contacted a company who helped me to come up with a budget and establish a plan to eliminate my debt. The plan called for me to send $350 monthly to the company so they could disburse the money to the creditors. Out of that $350, they would take $28 a month for a fee. After getting off the phone I realized that after paying $28 a month for 3 years, I could have paid off other debt. Please advise. Is this something that I should tackle on my own?
Thanks and Make it a Great Day!
Signed, L.R.
________________________________________________________________ Dear L.R., Thank you for your question. I try to advise people to try and avoid credit counseling if they can for a couple reasons. First, it initially takes the responsibility of handling your credit issues, out of your hands. Some of us have made some very big mistakes and also have fallen on bad times, but when one handles their credit by making the calls themselves, there is something that happens within us that makes us feel as if we are fighting our own battles rather than pushing it off on someone else. The second reason is that I have heard some horror stories of how people thought the credit counseling agency “dropped the ball” when it came to their accounts. If you are talking about a relatively small amount of creditors, then try attempting to make the calls yourself and negotiating the terms. You may be surprised at how well you do without the help of a professional. Furthermore, you will instill some confidence within yourself that you are ‘handlin; yo’ business”. I wish you the best as you take hold of your financial future. Gil |
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FDIC: Poor, Minorities Struggle to Access Banks |
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Written by Daniel Wagner, AP Business Writer
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 WASHINGTON (AP) — More than a million American households lost access to basic banking services like savings accounts last year, bank regulators say.
Those families are among 30 million households that have little or no access to such services, according to a survey released Wednesday by the Federal Deposit Insurance Corp. Poor, minority and immigrant families are especially hard-hit.
In all, 25.6 percent of U.S. households either lack bank accounts or use payday loans, check-cashing services and other costly alternatives to traditional banks, according to the survey.
The report is part of an FDIC effort to bring the so-called "unbanked" into the financial mainstream.
FDIC Chairman Sheila Bair said access to a bank account gives households "an important first step toward achieving financial security." Vulnerable families need the ability to save for emergencies and borrow on affordable terms, she said in a statement.
"By better understanding this group — who they are and their reasons for being unbanked or underbanked — we will be better positioned to help them take that first step," Bair said.
Households are considered "unbanked" if they report that no member has a checking or savings account. "Underbanked" households have bank accounts but still rely on costly, lightly regulated services like payday loans, check-cashing services and pawn shops.
The survey found that black, Hispanic and native American families are more likely to fall into these categories. Seventy-one percent of unbanked households earn less than $30,000 a year, it found.
The Census Bureau conducted the survey in January 2009 on behalf of the FDIC. It is the most thorough survey on the subject, providing specific data for geographic areas and demographic groups.
"This is giving us a picture that we've never seen before," said Barbara Ryan, the report's lead writer.
Of the 1.3 million households that stopped having bank accounts in 2008, more than 31 percent said they closed them because of overdraft fees, service charges or high minimum balance rules. A slightly larger group, 34.1 percent, said they did not have enough money to need an account, the report says.
The survey also found:
— 54 percent of black households, 44.5 percent of American Indian/Alaskan households and 43.3 percent of Hispanic households have limited access to banking.
— Households in the South are more likely to be unbanked or underbanked.
— About 28 percent of households headed by unmarried people are underbanked. For households with married couples, the number is 15.4 percent.
The FDIC in February released the results of a survey that asked banks what they're doing to improve access. Reaching out to underbanked communities was a business priority for less than 18 percent of the 685 banks surveyed. Only one in five had established new branches in low-income areas.
Bair said the FDIC wants banks to reach out to underserved groups as a "rational economic decision."
A spokeswoman for the American Bankers Association pointed out that more than 92 percent of U.S. households have at least one bank account, according to Wednesday's FDIC survey. She said the industry is focused on creating financial products for every type of consumer.
Banks are trying "to create innovative yet profitable financial products to serve the unbanked, and remain committed to serving all communities and working with the FDIC to ensure their access to these products," ABA spokeswoman Carol Kaplan said in a statement.
For example, Monroe Bank & Trust, in economically distressed Monroe, Mich., is offering limited, low-cost checking accounts. The bank sees them as a "stepping stone" to more traditional products, according to a presentation delivered in February.
Both FDIC surveys are part of an agency project to give underserved communities better access to banking services. A 2005 law requires the FDIC to track industry efforts to bring people into the mainstream finance system. |
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Written by Gil Michel, MBA
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 For as long as I can remember, the Caribbean/West Indian folks I grew up around in New York City were constantly pushing to make better lives for themselves. The popular skit on the show, “Hey Mon” on the show In Living Color, portrayed a Jamaican family as one that had members working as many as 10 jobs, to make ends meet. As one of Haitian heritage, I often saw this same work ethic in the people my father served as an accountant in his Brooklyn office. I would hear how a tax client just bought a new house, and as I grew older, I realized that these little old cleaning ladies, and taxi cab drivers weren’t using conventional means to get their piece of the American dream.
Enter the world of Susus. A susu is a method of saving money, where each person contributes an agreed upon amount, and each person in the group takes turns receiving the total. So for example, 5 friends form a susu, and decide to pitch in $200 each month. In the 5 months that the susu exists, each person would have had a chance to receive $1,000. What’s powerful about this concept is that normally, each member in that group realizes that without this structure, they probably wouldn’t save $1,000 in 5 months. Now picture doing this with 25 people at $400 every 2 weeks, and within a year, each person would have received $10,000. “Historically, the Susu method of saving and borrowing has proven to be advantageous, simple, transparent, and fast, giving users an opportunity to access a large sum of money for working capital and small investments.” according to OurSuSu.com. Of course, there is an inherent trust factor that is built into the group, which is how this method of saving money receives its strength. At a time when lending institutions weren’t so quick to lend money to working people who hadn’t developed a strong credit profile, susus emerged to become the ‘bank’ that people could depend on. Susus are now starting to become popular again in an economic environment where banks are tightening the reins on who they choose to give loans. In addition to that, the interest rates that banks are offering have many people wondering why they should even keep their cash in these institutions. With the power of the internet, there is a resurgence of susus appearing. Websites like Oursusu.com exist to help individuals educate themselves on susus, and even provide a platform by which you can form one with friends and family members anywhere in the world. It’s been said that “Desperate times call for desperate measures”. And similarly, tough economic times call for unconventional means to achieving our goals. Who knows, a susu may just be one of the tools in your arsenal to make that happen. |
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