Every January the President of the United States delivers a speech to the Congress detailing the state of the nation. I’d like to give you, my readers, the current Financial State of Union. The details of my speech (ok, a blog post but you get the drift) are based on day-to-day observations by me in the retail, financial and entertainment sectors.
Recently I made a purchase at a retail store and the sales clerk was thrown a curve ball when I offered to throw in some small change to pay the bill so I would get entirely bills for my change (as opposed to bills and coin change). Since she already rung it up at the register, she could not figure out how much change I should get when I decided to give $5.17 instead of$5 for a $2.17 purchase. I’m not sure if she was math-challenged, financially-challenged or both. She obviously did not know this extremely cool trick for giving out any amount of change without using a cash register or calculator.
Bottom line: this clerk could not compute in her head what my seven-year-old daughter has learned about money in second grade.
Many consumers do not closely watch bank fees or they do not care. Two dollars here for an ATM fee or thirty dollars there for an insufficient funds fee (that one is obnoxious). Does this add up to more than one hundred dollars per year for you? Two hundred dollars per year? It’s time to tally your annual spending on bank fees and jump ship from your bank if the fees are excessive. The epiphany for me was when I went to cancel my local bank account I’d had from 1987 – 93. I’d allowed this bank to use my money to loan to its customers for six whole years and when I went to close it they did not give two hoots about me. I was appalled when the bank teller did not even say “thanks for banking with us for SIX YEARS” let alone a “is there anything we can do to keep your business?” would have been nice. After that experience, I learned that most banks do not care about you one iota. That is, except for one remarkably, phenomenal bank. I’ve banked with them since 1995 and will until I die. As will my kids and their kids and their kids.
Bottom line: many consumers do not watch their bank fees and costs as closely as they should. Regularly reading my website will hopefully change all of that.
(Ignore this section if you paid cash for your boat or inherited it or obtained it for free.)
I am going to pick on people who own boats. Only people who financed their boat purchases over ten, fifteen or twenty years. Yes, you read that correctly. Did you know that boat loans can be longer terms than a home loan?!! Now, don’t get me wrong. I am thankful for the wonderful memories made from our neighbors the Wegleys by letting us ski on their boat here but I have sometimes wondered how much one needs to love boating to make payments for a hobby that is done only four months a year in many parts of the country. I love swimming, fishing, and water skiing via a boat as much as anyone else, but I have the following the observations:
- “The two best days of a boat owner’s life are the day he buys the boat and the day he sells it.” That expression was obviously coined by a boat owner.
- If you are unfortunate enough to live in a climate where boating can only happen four or six months per year then you need to view your monthly payments as double or triple the normal monthly amount. A $200 per month payment is actually $400 per month if you only boat six month per year, right? $2400 per year turns into $97,000 at 6% over 20 years excluding inflation and taxes.
- Although it may happen elsewhere, I have never personally known someone to downsize on their next boat purchase. People always buy bigger, faster, more expensive. So, think twice during that first purchase. It’s likely your first of several purchases.
- It sure is a lot cheaper to have a friend with a boat than own one yourself.
Bottom line: consumer spending on expensive entertainment may derail other necessities such as retirement or college planning.
The Good News
The State of the Union financially speaking has some good news in it as well. Today an abundance of resources exist to help us financially that did not exist for our grandparents or even our parents. A short list of examples:
- Looking for a college scholarship? You no longer need to look through thousands of pages of books and forms. Just go here.
- Financial calculators are no longer reserved for CPAs and financial planners. You can go here.
- Compare bank, mortgage and auto loans ad nauseam here.
Of course, you can drastically expand on that list to include your favorite financial websites as well.
In summary, the (Financial) State of the Union is that it has citizens who still don’t get personal finance and those who take advantage of the abundance of resources to maximize the savings and investing.