Larry's Dollars and Sense

Dollars and Sense – April 4, 2018

Question: When you need more space in your home, which is cheaper, add on or buy a bigger home?

Answer: You need a contractor but from a financial perspective, here are a few questions to consider. How much do you owe on your current home? Have you looked at home prices to see if you could afford to replace yours and is yours in sellable condition? If you added on, would you have to refinance your home to pay for improvements? What is the interest rate you are paying on your current mortgage and what would the interest rate be in today’s market on another home? What would it cost to have a contractor add on the needed space? These are just a few of the more critical questions you need to address. There are others. As you can see, it’s not a simple matter. Answer these questions and it will put you much closer to a decision.

Question: We hear a lot about inflation and the stock market being up. Is there a downside to this happening?

Answer: Most everything has a downside and an upside including inflation. Young adults are affected more by inflation than senior citizens because they represent a high percentage of borrowers and buyers of high ticket items like real estate. When the stock market is up and we are seeing inflation, young adults will pay higher mortgage rates and higher prices for homes. Inflation impacts senior citizens in a positive way because their retirement funds grow faster than during a recession period. However, jobs are usually more readily available during an inflation period which offsets some of the negatives. I have seen just about all of the negatives and positives of both inflation and recession but how these things affect you typically depends on your age and where you are in your financial planning. It would be great if we didn’t go through these ups and downs but we will never escape them. To some degree, we will be experiencing either inflation or recession at any given time.

Question: I turned 62 and I’m still working but some people say I should start taking my Social Security benefits now instead of waiting. Do you agree?

Answer: No, I don’t agree but each individual needs to make their own choices. Unless you are experiencing some financial problems I wouldn’t even consider taking it. If you’re not having problems why take it now? Each year that you wait, your benefits grow. Actually, if you wait until the age of 70, your benefits will be substantially higher than they are now. If you are being told to take it now out of fear that it won’t be there later, I don’t believe that will happen. Some politicians have tried to scare people into believing this and it’s simply not true. It would be the end of our country as we know it if that were to happen. Just think it through thoroughly before you make that decision and while I don’t have a vote, if I did, I would vote no to taking it at 62 if you are going to continue working.

Dollars and Sense – March 28, 2018

Question: You have probably answered this one before but are U.S. Treasury Bills any safer than a bank C.D.?

Answer: If the U.S. Government lives up to their promise, there should be no difference. Treasury Bills are backed by the full faith and credit of the U.S. Government. Bank deposits, up to certain amounts, are also backed by the FDIC and the full faith and credit of the U.S. Government. The only difference in Treasuries vs. bank CD’s is that Treasury Bills will typically be for a much longer term up to 30 years. I don’t think you will find a bank anywhere that will issue a CD for this length of time. I’m not telling you this is a good or bad thing. It’s just how it is. Banks have never issued stated maturity deposits for anything longer than 5 years to the best of my knowledge. However, from a safety standpoint, I think they are equally safe.

Question: From everything I have seen or read, electric cars cost a lot more than gasoline powered vehicles. Is the cost savings enough to offset this?

Answer: My knowledge of electric powered vehicles is limited so I don’t know if the gas savings is enough to offset the additional cost. I’m not even sure how much more than a gas powered vehicle they cost. Like most things, when they are just starting to be popular, they cost more. As the technology progresses, maybe the cost differential won’t be as much. Yes, electric cars may be cheaper to operate but there are still some drawbacks. You have to charge them when not in use. Also, I don’t think a full charge on an electric car will take you as far as a tank of gas on a long distance trip. So, you have the task of finding a charging station and the cost to use it. There is no doubt that they would decrease our need for fuel. However, if you are seriously interested in buying one, I would thoroughly investigate the pros and cons of owning one.

Question: Is investing in these windmill companies a good investment?

Answer: It depends on who you ask. Some reports claim it is a very good low cost source of energy and others have their doubts. It is estimated that there are already 100,000 jobs across the country dedicated to windmills and it is considered a fast growing source of job opportunities. The federal government has appropriated a lot of tax dollars to the development of wind energy. Just using some common sense, it seems to me that it might be a better investment in the future than it has been in the past. The reason being that up until the past 5 years or so, most of the money people invested in wind energy has gone into research and development because the wind turbines were not up and running while in the development stages. Do not take this as an endorsement for investing in wind turbine companies. There are a lot of people on both sides of the argument for and against the future of wind energy. There is so much more we need to know in order to get a good comfort level on this subject.

Dollars and Sense – March 21, 2018

Question: My friend moved to the west coast. He does practically the same thing I do here but makes twice as much money. Why is that?

Answer: The next time you speak with your friend, ask him what it cost to live out there compared to here. You will probably find that after he pays his bills, he has no more left over than you do. The cost of living out there is very high compared to the Midwest. Housing is expensive, utilities are higher and just about everything else you can think of costs a lot more than here. Even gasoline per gallon is much higher than what it is for us. Don’t get all caught up in wages in other parts of the country without comparing the cost of living. I think you will find we are just as well off as your friend out west. If your friend is only making twice as much as you are, you may be better off than him after your bills are paid.

Question: It seems like my bank has raised a lot of their fees for doing business with them. Why has that happened?

Answer: I can’t speak for your bank. However, I can tell you this. Our increases in cost to provide services is no different than any other industry. Our cost keeps rising and it isn’t likely to change. Pick out several other types of businesses you frequent and compare their prices 10 years ago to what they are today and I’m certain you are paying more. Increased cost starts with wages. I doubt that you are working for the same wages you were 10 years ago. Your employer has to make adjustments in order to keep good employees. In a perfect world, everything would remain the same. Unfortunately, it’s not a perfect world. Things change. We do our best to provide the best service possible at the lowest price possible. Most businesses do this. Change is sometimes difficult to deal with but life is full of changes. If you have a particular fee you don’t understand, talk to your banker and get an explanation.

Question: What is the difference between buying a piece of commercial real estate to lease and buying a residential rental property?

Answer: There is a significant difference. However, you should know a little bit about either before buying rental or lease property. Theoretically, the commercial property will have less turnover in tenants than the residential rental. However, in either case, the key to success in owning either type of property is to develop skills in choosing good tenants. You shouldn’t turn your property over to someone without knowing about their ability to pay. In the case of a commercial property, it is not out of line to ask for some historical financial data to see how strong the company is before going into a long term lease agreement. As for the residential property, getting their permission to order a credit bureau report is reasonable to see if they have a history of repaying their debts. Stable employment is also important. Find the right tenants, determine the right amount of rent to charge and both types of property can be a good investment.

Dollars and Sense – March 14, 2017

Question: I recently found out my ex-spouse, who had always handled our finances, did not file a federal tax return for us for 4 years. What are my options?

Answer: When it comes to filing taxes, or any other tax matter, your banker is not the place to go to get answers because nothing I tell you will make a difference. However, I am going to give you the best advice you will ever get. Don’t ignore this situation. Be pro-active and contact an attorney who can advocate for you with the IRS. I don’t think the fact that your spouse was always responsible for filing the returns means you can ignore the situation but your attorney may be able to get you out of this with little or no damage. The IRS does not have a sense of humor when it comes to filing returns so it is a serious matter but it is one that can be resolved if handled appropriately. The sooner you deal with it, the better your chances for correcting it.

Question: My grandfather has mentioned how much easier it was to deal with a bank years ago compared to today. Why is that?

Answer: That can be answered in one word. Regulators. Your grandfather is absolutely correct. In my early days of being a banker, life was simple. We could lend money with a single page document and rely a great deal on our personal knowledge of an individual’s character. Thanks to our government, this is not possible today. There is page after page of disclosures and details that most customers don’t even care about. The same applies to opening new deposit accounts. Multiple disclosures and details that the average person doesn’t understand, much less care about, have made the process of doing your banking way more difficult than it needs to be. The truth is, there aren’t many things in life that are easy today compared to 40 years ago and most of it can be attributed to our Washington, D.C. politicians who think they know best. So, the next time you go to your bank to transact some new business, remember that it isn’t your banker who created all this red tape. We are just forced to comply with the laws. The penalties for not doing so are very severe.

Question: When is it safe to apply for credit after filing for bankruptcy protection?

Answer: Over the years, I have dealt with similar variations of your question. I’m not quite sure what you mean by “when is it safe” but I assume you are asking how many years after filing for bankruptcy will lenders approve you for more credit. In my opinion, unless you filed for bankruptcy due to a catastrophic illness that hurt you financially, there isn’t enough time that can pass before you are able to get credit again. Bankruptcy causes lenders to lose a lot of money and it isn’t right for someone to do this and then get more credit. I know it happens but it isn’t right. A very large percentage of bankruptcies occur due to uncontrollable spending and bad choices. A person in this group is normally forced to deal with high interest rate lenders who take risks with people like this and it’s appropriate. If you are one of a small percentage of people who was forced to file due to a major illness, it’s a different story but most don’t file for this reason.

Dollars and Sense – March 7, 2018

Question: I was told my interest rate on my loan was 8% but then the document reflected 8.12%. Why is that?

Answer: I can’t be sure about your own experience but I imagine it had to do with fees that you paid when you took out the loan. Most banks charge a fee for preparing the loan documents. By virtue of the regulation requirements in dealing with fees, lenders are required to quote the rate including the fees that were charged. For instance, maybe you paid a loan documentation fee of $150. This must be included in the Annual Percentage Rate (APR). In most cases, the fee you paid was not actually collected from you but it was likely added to your loan. It is a common practice for lenders to do this and it is perfectly legal as long as they disclose it. The only thing that is not legal is for the lender to reflect an APR excluding the fee. If you are still uncertain about this, I would suggest you visit your lender and ask them for a clarification.

Question: I bought a home with a mortgage. I looked at over 20 pages of stuff that I had to sign and didn’t understand. Why is all this necessary?

Answer: Most people wouldn’t understand all of it. Due to the housing crisis over the past 15 years, there have been many new regulations that are supposed to protect home buyers. These new rules have created a lot of additional paper and very little of it makes any sense. Unfortunately, we have no choice in the matter. We have to give you the information whether you understand it or not. There are fines imposed if we don’t do it. This new compliance has caused some to decide to get out of residential lending because they do not have the expertise on staff to track compliance with the laws. Fortunately, we do have the staff to stay in compliance. All of t has been dumped on all lenders even though most of the negative issues that created the new rules were committed by non-bank mortgage lenders.

Question: If you had to choose between investing in rental property, the stock market or farmland, which would you choose?

Answer: This is almost an impossible question to answer. All three choices have the potential to turn out well or not so well. You can receive a good return on rental property but you need to buy it at the right price and be able to do most of the maintenance yourself. The stock market can yield some very nice gains. However, you have to buy at the right time and be prepared to sell at the right time. As for farmland, it’s not a short term investment and unless you are farming it yourself, the cash rent income is not likely to give you a good return. You will have to rely on the value per acre going up over time. I guess what I’m telling you is, if you have some experience in one of these areas, that’s where you should concentrate on investing. If you don’t, your risk is going to be greater no matter which one you choose.

Dollars and Sense – February 28, 2018

Question: Are bankruptcy filings more frequent today than 30 to 40 years ago?

Answer: From 1940 through 1979 the average filings per year was about 1,250 in the U.S. and no year exceeded 4,000. Since 1979, the average filings are about 14,000 per year with a peak of over 20,000 in 1987 and 1994. I think there are several factors as to why bankruptcies are on the rise. The first thing is there are a lot more credit cards in circulation and credit is easier to get from predatory lenders. Also, we have on-line shopping which has made it way too easy for people to get into trouble financially. However, the main reason for it is a lack of accountability and pride in the younger generation. There is an epidemic of young people who don’t want to take responsibility for their actions. This does not apply to all young people but the percentage is a lot higher now than it was 50% ago. There are some who file due to excessive bills from catastrophic illness which is understandable. The rest are typically individuals who could not control their spending.

Question: Do you have any concern about future generations and their ability to run this country?

Answer: I do have concerns about the next generation running our country. However, to be fair, the previous generation before us had those same concerns about our generation. In some ways, they were right to be concerned and so are we. It seems like each new generation that comes along is less responsible than the previous one. Young people today feel entitled to whatever they want whether they earned it or not. Many of the young people today do not want to take responsibility for their actions and this is how they will raise their children. It’s very scary to think about. Our grandparents, if necessary, worked two jobs to make ends meet. There was no welfare system for them. You could dispute my opinion but the numbers do not lie. We have a growing percentage of our country that live off of our tax dollars and so will their kids. Yes, I’m concerned for what our kids and grandkids will face under the leadership of the next generation. I applaud those young people who are working and being responsible adults.

Question: How much pressure should we put on our children to go to college for financial reasons?

Answer: All parents want the best for their kids and a good education is just part of that. However, when you force someone to do something, they are not going to do it at their best. From a financial perspective, a college education is a plus but not an absolute necessity. Sometimes you just need to let them deal with things on their own time schedule. Don’t take them to college against their will. It won’t work and it will be a waste of your money. Maybe after a year or so, they will realize what kind of life is ahead without proper training and they will come around on their own. If they don’t, college is not for everyone and they can still be a success without it if they are willing to work hard enough. Your child’s happiness is much more important than an education.

Dollars and Sense – February 21, 2018

Question: Do a lot of people use coupons and are they worth the trouble?

Answer: Doing a little research, I found a lot of varied opinions on how many people use coupons. The range is 40% to 75% which tells me information is not accurate. I think everyone at some point has used coupons to save money. I also found an interesting statistic about really dedicated coupon clippers. This particular article stated that those dedicated to it spend 24% more. The theory on this is that people buy things they would not have otherwise bought just because they have a coupon. If this is true, it totally defeats the purpose of clipping coupons. If you are a coupon clipper, ask yourself if you have ever bought something you normally would not have bought because you found a coupon. This is an interesting dynamic for the really dedicated bargain hunters. I’m sure this does not apply to all coupon clippers but I can see where this could happen. Not too long ago, I had the misfortune of being behind a lady at the checkout with a fist full of coupons. I lost count after 30 coupons.

Question: Is there an increase in the number of families that would rather rent than own their home?

Answer: I can’t say they would rather rent but the trend is changing. From 2006 through 2016 the U.S. grew by 7.6 million people. During that same period of 10 years, the percentage of renters vs. owners went from 31.2% to 36.6%. This exceeds the previous record of 36.2% in 1986. When you look at these numbers, remember that it was during the housing crisis and high unemployment. So, the big increase is economy related and not due to a preference of people to rent. I would not be surprised if the percentage of renters vs. home ownership decreases over the next 2 or 3 years since the economy is improving. This is like any other issue concerning the habits of people. You can’t just look at the numbers without looking at the things that caused it to happen. The period between 2006 and 2016 was an extremely difficult time for a lot of Americans.

Question: Are families taking more expensive vacations today than in previous generations?

Answer: I don’t have any hard evidence but I would guess young families today spend more to vacation than they did 50 years ago for a variety of reasons. As a youngster, our family vacations consisted of my parents renting a pop up camper for a week. That is if we took a vacation. Most years we didn’t. There was no money to fly to Florida or to stay in hotels for vacation. Disney World was just a fantasy that never materialized. I think this was pretty much the way it was for a majority of families back then. Today, couples with children think nothing of spending the money to do anything they want and figure out how we pay for it later. This isn’t always the case but it is more often than it was in years past. This may not sit well with some but creating debt to take a vacation doesn’t sound like much fun to me.

Dollars and Sense – February 14, 2018

Question: Is there a time of year when it is best to sell a home from a financial perspective?

Answer: If we were discussing the best time of year from a visual standpoint, it would definitely be Spring or Summer because bad wintery weather isn’t affecting our attitudes like it does in the winter. However, from a financial perspective, I don’t know that it makes any difference whether you are pricing your home in the winter or the summer. I have never seen any research done that relates to your question. If you had a choice, I’m sure most anyone would prefer to buy or sell in warmer weather. There is one area that could financially impact your decision on the time of year to buy or sell and that’s the exterior condition. When things are greener, imperfections are less noticeable. While there may be a best time of year to buy or sell your home from a financial perspective, the best time for you is when you are ready and motivated.

Question: What percentage of your customers is using electronic banking vs. the conventional banking methods?

Answer: It’s difficult to give you a precise percentage. We consider electronic banking to be ATM’s, Cell Phones, Computers and Debit Cards. Some use all of these for their banking and some use only one or two. With this in mind, I would estimate that over 70% of our customers use one or more at some point during any given month. It’s almost unavoidable. I can’t imagine any retail merchant or business not accepting a debit card and cell phones are being used widely for transacting business. All of this new technology has been developed for consumers for two primary reasons and that is convenience and the elimination of the use of paper documents. The primary reason that businesses prefer you use technology based banking is for faster payments on sales. In effect, they are getting paid immediately. However, it doesn’t negatively impact your relationship with your bank if you do not choose to use these products and services.

Question: Should a person who has filed for bankruptcy and caused creditors to lose money ever be allowed to borrow again?

Answer: If the individual was forced to file for bankruptcy due to a catastrophic illness that made it impossible for them to repay the debt, I could see where it is possible for them to obtain more credit. However, if someone has accumulated a lot of debt because of poor spending habits and then couldn’t pay it back, I have a pretty strong opinion on this. Unless the individual later gets their act together and arranges to pay back the debt, they have no right to expect lenders to give them more credit. It may be perfectly legal for someone to file for bankruptcy and walk away from creditors but it is not morally acceptable. I know that a lot of people do it and don’t see the problem but it isn’t right. People can grow up and become more responsible which is great but when this happens, they should make amends with lenders and pay them back before going in debt again.

Dollars and Sense – February 7, 2018

Question: How do D.C. politicians justify receiving better benefits than the average worker?

Answer: The simple answer to your question is they cannot justify it. How many people do you know who don’t own their own business that can set their own pay and benefits? My guess is you don’t know of anyone except politicians. I read an article that said we should tell our Washington D.C. politicians that they have to abide by every single thing they vote into law just like the rest of us. This includes Obama Care. I guarantee you Obama Care would get fixed in no time at all. There are many laws on the books today that we have to live with that politicians are exempt from following. It’s been that way for a very long time and I doubt that it will change. If the time ever comes when they do apply all rules to themselves, then we can respect them. Until then, I don’t see how we can.

Question: Are politicians in D.C. required to take responsibility for the decisions they make?

Answer: I don’t believe they have anything that dictates how they should vote or the consequences of their votes. I believe there is a code of conduct they are supposed to adhere to but I seriously doubt it is monitored to any extent for compliance. It has always puzzled me why individuals continue to get re-elected year after year when we know they routinely break campaign promises after they are elected. The only reason I can think of for this is that voters are not paying close attention to the track record of those they vote into office. If they were watching closely, there would be a lot fewer re-elections. Until we begin to pay closer attention to those that represent us, things are not going to change.

Question: If I owned stock in a community bank, could I hold it in my retirement account?

Answer: Yes, you can. Community bank stock is no different than any other type of stock when it comes to your retirement fund. Like anything else you have in your fund, the value of these shares can go up or down as the market dictates. Also, your dividends will go into your retirement account when they are paid. I tell most people that they should not invest short term in bank stock. This type of investment is clearly for someone who plans to stay in it for a few years if you want to get the most out of it. If you are still employed and wish to buy bank stock, your IRA is a good place to hold it. It’s more difficult to have it in your 401K because it will likely not be listed on the approved list of investments by your 401K administrator. They support larger funds which have many different stocks in them.

Dollars and Sense – January 31, 2017

Question: My grown children suggested I liquidate my assets and gift some cash to them to avoid estate taxes. Are they right?

Answer: You have every right to question this. Unless one of your children is an accountant, financial planner or an attorney, I doubt they are qualified to advise you on this subject. There are a lot of questions you need to ask before you decide on gifting some of your assets to your children. Neither I nor your children are the ones who should be answering these questions. If you seek counseling from a qualified individual, they can help you. Even after seeking this advice, the decision is still yours to make. You may not even be subject to estate taxes depending on how large your estate is. Getting answers from an appropriate source will ensure that you are not putting yourself in financial jeopardy if you should live past the normal age for your particular health condition.

Question: Is there any difference between a Self-Directed IRA and a 401K?

Answer: There are a few differences but both accomplish virtually the same thing. A Self-Directed IRA typically does not happen through a pay-roll deduction by your employer. 401K’s are through payroll deduction. While they are basically the same in terms of what they accomplish, there is one big difference. A large percentage of employers match a portion of their employee’s contributions to a 401K as an added benefit. A Self-Directed IRA is just what you contribute to it. You can have both. However, if your resources are limited and you can only do one, the 401K is obviously the one to choose. Trying to survive solely on Social Security is nearly impossible. This is the primary reason these types of programs were created. Your contributions are tax free until you draw on it, Individuals should have this added retirement income when they discontinue working.

Question: During the recent government shut-down, why would politicians suspend paychecks to government employees during the shutdown and not themselves?

Answer: One of the most outrageous acts committed by politicians is suspending pay for non-essential government workers and still pay themselves during a government shutdown. I don’t know how they can stand to look at themselves in the mirror after doing something like this. They do it because they have the power to do so. Obviously, they have no conscience. However, I do believe that most if not all of the workers get paid for the lost time when the shutdown is over but that’s not the point. The point is, if members of the U.S. Congress had to go without a paycheck during a shutdown, political differences would be resolved very quickly. I don’t care which side of politics you are on or which side you blame. This silly game playing needs to stop and the people we elect need to start acting like employees of taxpayers because that’s what they are. By the way, it has always puzzled me why they refer to some employees as non-essential. If they are not essential, why do they hire them?

Dollars and Sense – January 17, 2018

Question: What has been the biggest change over the past 20 years in banking that has had an effect on your customers?

Answer: The #1 thing that has impacted every bank’s customers in the past 30 years is the increase in government regulations and it has not always been a positive thing. The general public would be shocked if they knew the magnitude of the regulations that have been placed on their bank and most of it accomplishes nothing but frustration for bankers and their customers. The second thing that has happened is internet based banking. Thirty years ago, no one ever thought you would someday be able to do your banking on line or on your cell phone. Now, a significant percentage of customers never go into their bank. There are other things that have occurred but these two things have had the biggest impact.

Question: My bank is pushing for me to stop receiving my monthly bank statement in the mail. Why?

Answer: Banks have been giving their customers an option to receive their bank statement on line for many years. The truth is, you really don’t need to receive a paper statement if you own a computer or have a cell phone. You can pull the information up any time you want. Some banks charge a fee if you want a paper statement. The reason your bank is asking you to go paperless on your bank statement is cost. With thousands of customers, it is very expensive to mail the documents every month. You can even pull up a picture of a check if you need proof that you paid a bill. Years ago, when banks stopped mailing cancelled checks, some of their customers thought they couldn’t possibly do without them. Guess what? They learned to do without them. They found out they weren’t as important as they thought. This will happen with paper statements as well.

Question: Is it true that most banks don’t want your business if the only account you have is a CD?

Answer: I wouldn’t go so far as to say that is true. However, there are some who are rate shoppers and they will open a CD at a bank as their only relationship if the rate is high enough. It’s pretty hard to make a CD only customer profitable if they don’t do any other business with you. I think it is safe to say that any bank would want your CD only relationship if the rate is profitable for them. If it’s not a profitable rate of interest they are paying you, they would probably be just as well off not to have the account. Any banker who tells you differently is not being honest. We are no different than any other kind of business. We want our customer relationships to be profitable. If a banker does not run a profitable organization, they will be just like the dog that chases cars. They won’t last long.

Dollars and Sense – January 10, 2018

Question: Is it just me or is everyone falling behind on the cost of living compared to income?

Answer: Some do feel as though they are falling behind in income verses the cost of living. However, you have to be careful about making this determination. First, ask yourself if you are trying to live beyond your means. Are you doing things and making purchases that you really need or are you wasting money on things that you could easily live without? If you can answer this question truthfully that you have not changed your spending habits, maybe you are not keeping up with the cost of living. If you come to the conclusion that you are spending more now than you were, maybe it’s time to make some changes. Your employer cannot be held responsible for your personal spending and you can’t expect increases in your pay just by showing up for work. You have to prove you are worth more money.

Question: Do you remember when the government sent out checks to everyone for around $1,200 to help stir the economy? Did it work?

Answer: It’s been so long ago I can’t be sure that was the amount but $1,200 sounds about right. While I was just as happy as everyone else to receive the check, I don’t think it accomplished much for the economy. There have been many ill-conceived ideas over the past 15 years to try and give the economy a boost. This was one of the dumbest of them all. This one is right up there with the “cash for clunkers” program which didn’t accomplish anything either. The extra money was supposed to be put in the hands of taxpayers so that they would spend money on consumer items. However, a large portion of the recipients used it to pay existing bills or they placed it in their savings accounts. The “cash for clunkers” program was not a huge success either. Although it did get a lot of old cars off the road, there is no way to tell how many of these buyers were ready to buy with or without the program.

Question: Is there a ratio of how much I should get back on improvements in my home if I sell it?

Answer: No, there is not and don’t expect to recover 100% of the cost of renovations. However, don’t let this keep you from making needed repairs. Some tend to let things go too long. Then, when they decide to sell, there are all kinds of things that need to be done before they can get top dollar. The time to address needed repairs is when you first notice them. This slows down deterioration and keeps your home from sliding in value. Your home typically represents a substantial part of your personal assets. Keep it in good shape. Address things that need to be done as soon as you can. Don’t put it off until the damage becomes so severe that you can’t afford to correct it. Don’t do it because you plan to sell it. Do it because you want to maintain its value. Have you ever seen what a car looks like when it sits for 10 years untouched? The same happens to your home when you let things go.

Dollars and Sense – January 3, 2018

Question: Will the tax cuts make a big difference to us?

Answer: The short answer is it won’t make much of a difference in our individual lives. For the average American, the reduction in taxes may be $1,000 to $3,000 per year which is great but it isn’t life changing. However, since there are at least 75 million tax paying Americans the total savings comes to billions of dollars which hopefully will be put back into the economy. This is what the tax cuts are supposed to do but if taxpayers don’t spend their tax savings, it won’t help the economy. I really don’t have a strong opinion on whether the tax cuts will work or not. I’ve spoken to a lot of people who are glad to see the cuts but they don’t think they are going to be looking for ways to spend more than they normally do. We have to understand that the recession has not been over very long and people remember the bad times all too well.

Question: If this is really the greatest nation in the world, why do some people criticize the government for helping poor families?

Answer: There is nothing wrong with our government helping those who are truly in need. However, the situations that bother millions of tax paying Americans are when money is given to those who are perfectly capable of working. You don’t have to look very far in any community to tell that there are many people who are very capable of working if the government didn’t make it so easy to stay at home and collect benefits. Welfare, Food Stamps, paid housing, cell phones and other subsidies amount to what they can earn from employment. The loopholes in our system make it very easy for people to qualify for benefits. In answer to your question, we are the greatest nation in the world. Tax payers just don’t like to see our tax dollars abused by those who take advantage of the system.

Question: I’m sick of hearing about how much Trump has done for this country. What has he done that has helped Americans?

Answer: Everyone is entitled to their own opinion. So, I won’t give a political answer to your question. During the campaign, he made a lot of promises like securing our boarders from illegal emigrants, clamping down on the illegal drug trades, improving trade agreements with other countries, income tax reform and getting companies that have left the U.S. to come back home plus some other things. The election results indicated that Americans wanted to see these things accomplished. If they didn’t feel that way, they would not have voted for him. It’s up to each of us to judge for ourselves whether we are pleased with what he has done or not. My opinion is not formed by the news media. I try to ignore what the media has to say because they will slant it in favor of or against the President. I suggest you do the same. Research what he has accomplished, or is in the process of accomplishing, and judge for yourself whether he has been successful or not. There are enough people out there trying to influence other’s opinions and I won’t add my name to that list.

Dollars and Sense – December 27, 2017

Question: Will the tax cuts make a big difference to us?

Answer: The short answer is it won’t make much of a difference in our individual lives. For the average American, the reduced taxes may be $1,000 to $3,000 per year which helps but it isn’t life changing. However, since there are at least 75 million tax paying Americans the total savings comes to billions of dollars which hopefully will be put back into the economy. This is what the tax cuts are supposed to do. If taxpayers don’t spend their tax savings, the intended effect won’t be good. I really don’t have a strong opinion on whether it will work or not. In previous attempts at improving the economy through tax cuts, sometimes it has worked and sometimes it hasn’t.

Question: If this is really the greatest nation in the world, why do some people criticize the government for helping poor families?

Answer: If I’ve said it once, I’ve said it a hundred times. There is nothing wrong with our government helping those who are truly in need. However, the situations that bother millions of tax paying Americans are when money is given to those who are perfectly capable of working. You don’t have to look very far in any community to tell that there are many people who are very capable of working if the government didn’t make it so easy to stay at home and collect benefits. Welfare, Food Stamps, paid housing, cell phones and other subsidies amount to what they can earn from employment. The loopholes in our system make it very easy for people to qualify for benefits. In answer to your question, we are the greatest nation in the world. Tax payers just don’t like to see our tax dollars abused by those who take advantage of the system.

Question: I’m sick of hearing about how much Trump has done for this country. What has he done that has helped Americans?

Answer: Everyone is entitled to their own opinion. So, I won’t give a political answer to your question. During the campaign, he made a lot of promises like securing our boarders from illegal emigrants, clamping down on the illegal drug trades, improving trade agreements with other countries, income tax reform and getting companies that have left the U.S. to come back home plus some other things. The election results indicated that Americans wanted to see these things accomplished. If they didn’t feel that way, they would not have voted for him. It’s up to each of us to judge for ourselves whether we are pleased with what he has done or not. My opinion is not formed by the news media. I try to ignore what the media has to say because they will slant it in favor of or against the President. I suggest you do the same. Research what he has accomplished, or is in the process of accomplishing, and judge for yourself whether he has been successful or not. There are enough people out there trying to influence other’s opinions and I won’t add my name to that list.

Dollars and Sense – December 20, 2017

Question: I’ve had some credit problems over the past 5 years. How long does it take before a lender will approve me for a loan?

Answer: It depends on what “credit problems” means. If you are referring to a few past due payments and your problems are behind you, it won’t take as long. If you are referring to lenders having to charge off loans you had with them, it will take a long time. However, there are predatory lenders who are willing to take a chance that you have corrected your problems and they will loan you money at very high interest rates sometimes as high as 25% or more. Their interest rates are so high that they can lose some money on some borrowers and still come out OK from those who do pay. I don’t recommend using these types of lenders but if you need the money, this is the penalty for developing bad credit. Conventional banks do not pad their rates to offset bad loans. Predatory lenders may approve a loan shortly after your problems occurred. Banks will want to see a longer track record of improvement.

Question: I never noticed before but our school taxes are most of our real estate tax bill. Why?

Answer: That has been the case for a long time in Defiance County and it is the case anywhere you might move to. In some areas, school taxes and levies come to more than 80% of our total bill. There may be some who think this all happened when our new school was built and that is not the case. School taxes have always made up a disproportionate part of our real estate tax bill. I don’t have any problem with this. Our schools are important to us and we need our young people to be well educated and hopefully, get them to stay in the area. We are very fortunate to have a reasonable tax base compared to many other areas. It is very common for home owners in larger cities to pay between $10,000 and $15,000 per year in real estate taxes and yes, most of it goes to the schools. It’s the same everywhere.

Question: How do you feel about utility payments being budgeted over 12 months instead of the actual usage paid every month?

Answer: I personally have never done it but I don’t see anything wrong with it. I believe you are referring to utility companies, like AEP, spreading your bill evenly over 12 months so that you can more easily budget for it. They accomplish this by looking at the previous year’s total cost and dividing it equally. If your actual utility usage comes in higher than what you paid, they will adjust it in the following 12 months. If you are on a fixed income and your budget it tight, it is a helpful way to forecast your monthly expenses. I don’t have any idea what percentage of utility users do this but, when all is said and done, you will end up paying the same amount right to the penny. It just takes the guess work out of what you owe each month. I can’t even say for sure that all utility companies give you this option but I imagine they do.

Dollars and Sense – December 13, 2017

Question: What hurts our economy more, illegal immigrants or U.S. companies moving overseas?

Answer: Illegal immigrants come to our country by the millions. They take jobs that could go to Americans. If they don’t work, they become a liability because we give them subsidies like Welfare and Food Stamps. For those that work, a good portion of the money they earn is being sent back to family members in their home country. Some commit crimes. When an American company leaves the U.S. they eliminate jobs that Americans who want to work are missing out on. They take a very small percentage of their staff with them and the rest of their labor is from people in the foreign country. The eliminated jobs in America may be substantial but it doesn’t come near the cost of illegal immigration. I hear arguments for and against illegal immigration. What I don’t understand is why anyone would think it is OK for our government to give benefits to someone who does not want to become an American citizen. If you want to be a part of this country, do it legally.

Question: I read your comments about the cost of Welfare and other subsidies. What are the actual dollars?

Answer: The most recent numbers are for 2012. The U.S. Government spent $746 billion on Welfare and other subsidies for non-working Americans. To put this in perspective, Social Security benefits, which we paid for, came to $725 billion and military spending was $540 billion. The report goes on to say that 100 million people received Welfare benefits and other subsidies. Believe it or not, there are still people out there that think the government is paying for Social Security which is not true. We and our employers paid into the system and we never get back everything that was paid in. Tax payers are not footing the bill for Social Security as some politicians want you to believe. The cost of Welfare and other subsidies is costing the average working taxpayer $8,000 per year. This is not acceptable and it has to be fixed.

Question: I hear the cost of labor to build a new car is half of what it costs to buy one. Is that accurate?

Answer: There is only one source for accurate numbers and that’s the auto manufacturers and they don’t disclose them. I have heard of estimates anywhere from 15% to 50% on the portion of a car that is related to labor cost to build them. It’s just a guess but I would think it is closer to the 50% than the 15%. Between the hourly wage of the workers plus the benefits paid to them, they are getting way more than the average worker in other lines of work. However, in fairness to the auto industry, the cost of labor represents a lot of the cost of any consumer product we buy. The cost of labor is the single biggest expense in any business including banking. It has always been and always will be the case.

Dollars and Sense Dec. 6, 2017

Question: Can I take money out of my retirement fund anytime I want?

Answer: There are several variations of a “retirement fund.” I don’t know what kind you have so I can’t answer specifically to yours. However, most retirement funds have stiff penalties if withdrawals are made ahead of the prescribed time in terms of age. Some funds allow you to “borrow” money from your fund and some don’t allow it. The best advice I can give you is to speak with your retirement plan administrator and they can tell you what your options are. The Human Resources Director where you are employed should be able to get you to the right person to answer all your questions. What I can tell you is that taking funds from your retirement fund prior to retiring should be done as a last resort whether there are penalties or not. If you compare the cost of penalties for an early withdrawal against the cost of taking out a loan and paying it back, the loan option would be much less expensive.

Question: Why can’t a private citizen or group of people file a lawsuit against politicians for the way they spend our money?

Answer: It would not be realistic to think we could sue politicians every time they did something we disagree with. There would be so many lawsuits filed that the business of government would never get done because they would be defending themselves in court constantly. Not many people keep up on how politicians vote on all the issues even though we should care enough to know. Our best approach to making politicians pay for not spending our money correctly is to vote them out of office. If you are like most people, including me, and you don’t watch what they do closely enough, we should try to change that by becoming pro-active on the important issues. Taking them to court is not an option but we can still do things to hold them accountable. For instance, if your representative votes in favor of something that is just wrong, write them a letter and tell them what you think. If enough people do that, they will begin to listen. If they don’t, vote them out of office.

Question: Do most families struggle about how much spending they can afford for Christmas?

Answer: It’s probably one of the most difficult things to deal with for the average family. We all want to give our kids and grandkids a nice Christmas. However, it’s not worth going into debt to do it. It’s acceptable to use a credit card to make purchases but if you can’t pay the bill in full in January, don’t do it. The best advice I can give you is to not spend money you don’t have. At a young age, I remember my parents telling us that we could not have everything we want because they could not afford it. There is certainly nothing wrong with admitting this to your family. What would be worse is you buying things you can’t afford and taking months to pay it back. Don’t fall into the trap of going overboard on your Christmas shopping. You will soon learn that spending money is not going to prove how much you care about your family.

Dollars and Sense – November 29, 2017

Question: Can you explain why banks penalize their customers when they cash a CD in before the maturity date?

Answer: There is a very sound and fair answer to your question. I will give you an example. Let’s say you borrowed money from your bank for a period of 4 years at a fixed rate of interest. Twenty-four months into the contract, the bank notices that rates have gone up significantly. What would you say to your banker if he or she called and said, “Hey, rates have gone up and I’m not happy with the rate on your loan. So, I would like to raise the rate to current market rates.” There is not a doubt in my mind as to what you would say. You would tell your banker to go fly a kite. You wouldn’t agree with it. The same goes for a CD. Your bank quotes you a rate for a specific term at a specific rate of interest. If CD rates go up sometime during the term of the CD and you are unhappy about it, you will either have to pay a penalty to get your money or, live with the rate until it matures. It’s purely a business transaction.

Question: Why do banks tie variable rate mortgages to U.S. Treasury Bills?

Answer: Lenders usually offer two different rate structures on mortgage loans. The first one is a fixed rate for the entire term. In other words, the rate you start out with will remain the same until you pay off the loan. The second rate structure is a variable rate which is typically lower than the fixed rate. The mortgage lending industry must choose a rate for an index to tie the loan to that they have no control over. The most popular index is U.S. Treasury instruments. Historically, these rates are pretty accurate in terms of what’s happening with the economy. Variable rate loans re-price every 12 months. The loan documents will state what rate the loan starts at and they will state that the adjustments will be tied to the index plus a margin over that index. For instance, if U.S. Treasuries were at 1.5%, the documents might quote a margin of 2% above that rate or 3.5%. This type of pricing is fair to both parties.

Question: Do a lot of people set up budgets for utilities so they won’t fluctuate so much?

Answer: I have no idea about the percentage of households that have their utilities budgeted. Budgeting is usually done so that families on a tight budget can have consistent monthly payments for electric, gas, water and sewage. This is an especially good practice for low income families. However, I’m sure there are some families that are not considered low income that do it simply to better manage their monthly costs. There is nothing wrong with this practice regardless of what your income level is. Some may choose to budget utility expenses simply because their personality is one that does not like surprises. So, they budget the expense so that they will know what to expect. Others are willing to pay higher fees in the winter and summer months so that they can enjoy the lower bills in spring and fall when gas is not needed for heat and electric is not needed for air conditioning. It’s just a preference. I believe most utility companies offer this service.

Dollars and Sense – November 22, 2017

Question: What is the reason some people buy bank stocks?

Answer: Most individuals who buy bank stocks are looking at two things. First, they look at the dividends paid which at the current time are yielding a higher percentage compared to current prices on bank CD’s and the bond market. This isn’t the case 100% of the time but often it is. The second thing individuals look at is the increases in valuation. In other words, long term growth potential. Bank stocks are not for short term investors. It needs to be looked at as a long term investment. The majority of shareholders in small community banks are local investors. They know management and the board members. This gives them a sense of security knowing the bank is in good hands. While bank stock is a great investment, it’s not for everyone. However, I’m not soliciting stock purchases. That is completely up to you to decide.

Question: Why don’t banks offer CD’s for longer periods than 60 months?

Answer: Some banks choose not to offer CD’s for even 60 months. Some won’t go more than 48 months. The reason for this is the same reason most people will not buy a CD for that long of a period. It creates an interest rate risk. A bank would have to pay a higher rate to attract customers to go out 5 years or longer and the rate offered might not be profitable for that long and the bank would be stuck paying it anyway. Customers would look at it the same way. What if you agreed to a 5 year term and the rate offered turned out to be low compared to the current market halfway through the term of the CD? Banks do not like to take too much rate risk and depositors don’t either. Sixty months is taking a risk. I don’t think you will see CD’s offered for a longer period than currently offered any time soon and maybe never.

Question: Why do people buy long term government bonds but not long term CD’s?

Answer: People do not buy these as much as they used to. Treasury Notes and Treasury Bonds used to be bought frequently for various reasons. One reason was the safety of knowing they would get their money back. Some bought them out of patriotic duty to support our country. However, many things have changed over the years and they are just not that popular these days. In addition, rates have been very low the past 10 years or more and not many people are willing to tie up their money for 10, 15 even 20 years at low rates. It doesn’t make any sense. I’m sure that the disenchantment with the way money is spent in D.C. has impacted the desire to purchase them as well. Whatever your reason might be for wanting to invest in Treasury’s, I won’t discourage you from doing so. It’s a personal choice you must make.

Dollars and Sense – November 15, 2017

Question: Why do Washington politicians feel a tax cut would benefit our economy?

Answer: Not all of them agree on this topic. However, the theory on tax cuts helping the economy is a two stage issue. First, there is the corporate tax rate. The lower the rate, the more likely it is that businesses will expand and add employees. Those new employees pay income tax so the loss in taxes at the corporate level would theoretically be offset by new payroll taxes. On the personal income tax level, it’s a simple expectation. Reduce the tax rate for families and they will use at least a portion of that tax savings to make purchases they have been putting off while waiting for the economy to improve. Do these two theories work? To a point they do work but never as much as anticipated. Many will just save the extra money which doesn’t help the economy. I think a tax rate cut is in order. However, it would not be a good idea to cut it too much or they will be back talking about tax increases shortly.

Question: Why don’t politicians ever follow through on campaign promises concerning the economy?

Answer: If you know anything at all about politics, you know most of the promises they make are not within their power alone to follow through on. They should be saying that they will do these things if they can get the support from politicians instead of telling us they are going to get it done. It has always amazed me how politicians work and we seem to just accept it without much questioning. I believe that most of the promises they make in order to be elected are sincere. They just aren’t realistic. The people we elect in Washington, D.C. are supposed to make decisions that make our lives better and safer. Unfortunately, all they do is vote against anything proposed by the other party whether it is good or not. It’s really disgusting to see them play these stupid games at our expense.

Question: Is there any law that allows me to protest paying federal taxes?

Answer: You can protest anything you want any time you want but it probably won’t do any good. The IRS is not going to give you a pass on paying taxes and if you try to not pay them, you will probably get put in jail plus pay a heavy fine. The only thing you might be able to do is fight with them over a deduction you want to take that they tell you is disallowed. Even then, you will probably lose. You cannot beat the federal government or the IRS which is part of the government. I know that most of us, at one time or another, have been angry over how our tax dollars are spent but very few act on this anger. There have been many important and famous people who have tried to avoid paying taxes on a lot more income than any of us will ever make and they lost the battle. Some even went to prison for tax evasion. If I were you, I would put my energy into something where you have a chance of winning because you won’t win this one.

Dollars and Sense November 8, 2017

Question: Why do banks charge for cashing a check that is not written on their particular bank?

Answer: If you don’t have an account at a bank and you ask them to cash a check written on another bank, they are taking a risk. In most cases, they will probably not cash it for you. If there is a circumstance under which they would consider cashing it, they will at least charge for it and rightly so. You are asking them to take a risk that the funds are in the other bank to cover the check. If there are not sufficient funds to cover it, the bank will return the check to the bank that cashed it and if you are uncooperative in making the check good, the bank takes a loss. The best solution to this problem is for you to take the check to the bank it is written on and they will cash it if funds are available. Although banks do their best to provide services to their communities, they are under no obligation to take risks by cashing checks where they don’t know the person who wrote it or the person trying to cash it.  

Question: Will the level of spending for the Holidays be a good indication of economic conditions?

Answer: In my opinion, the Holidays are the worst time of the year to judge the condition of the economy. Many people, especially parents of youngsters, lose their heads at Christmas time and spend more than they should. The credit card comes out and they begin charging knowing full well they can’t pay it all back in January when they get the bill. “Tis The Season To Be Jolly” turns into a nightmare financially for many. Don’t do this to yourself. If you do it because your kids will be angry if they don’t get what they want, you might want to take a look to see if you have taught them proper values in life. I understand the urge to want everyone happy at Christmas time. However, use your head and don’t spend more than you can pay for within 30 to 60 days. It’s just not worth it. So, even though news reports will try to tie Christmas spending to economic conditions, I don’t think it’s an accurate indicator.

Question: Why are more children remaining at home after they graduate high school or college? Is it the economy?

Answer: Based on what I have read, it happens for multiple reasons including the economy. In addition, young people are getting married at a later age than they did 50 years ago. Back then, most parents told their children that it was time to be an adult and make a life for themselves after they completed their schooling. Today, some don’t leave home until well after they graduate and some parents encourage it. I’m sure some contribute to the household expenses but there are probably some that don’t. I don’t claim to understand this type of situation but it’s not my problem to understand. Do I think it is a bit odd? Yes, I do. I think most young people are anxious for the day to come when they can cut the strings with Mom and Dad and be on their own. However, each family can make their own decisions on this and it’s really no one’s business. The only word of caution on this topic is, allowing your kids to stay at home as adults does not make you a better parent and it doesn’t mean you care about them more than parents who encourage them to leave after graduation.



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