Wednesday, November 2, 2011

Occupy Transition: A New World Order

This is also posted today on my job transition blog...

Cue the Death Star music....

I think the NBA could not have picked a worse time to go on strike.  Those in the top 1% income bracket, arguing with those in the top .001% income bracket over how to split the money they get from the other 99%.  That is our fault. Don't get me wrong, I love the NBA, it's fantastic. But really.

Bank of America backed down from $5/mo debit card use fees because people started withdrawing their funds.  Banks are now raising their fees as well, and requiring minimum balances to get free checking or accumulate interest.  The funny part of this is that the banks are in effect penalizing you because you aren't giving them enough money to invest. They are still investing it, though.  And paying you one or two percent interest on that money while they invest it at much, much higher rates.  They look at your savings account as free money.  The banks can invest it, but if they mess up and lose it, the government will step in and pay you back what they lost. Want an idea what their spread is? Ask your bank what their interest rates are on auto loans. Subtract from that what they're paying you in interest on your savings. That's what they're making on your money.  And since many people keep most of their money in a checking account that gets no interest, that's an even wider spread.  This is just the tip of the iceberg.  The Occupy demonstrations have spread around the world. Why?  Because Occupy Wall Street is a venue, not a movement.  It's people giving voice to their anger. Anger? Over what?  In a nutshell, the same people who cratered the global economy, wiping out 401k's by the tonnage, walked away with nary a scratch. The US taxpayers paid to make them whole and now they're taking huge bonuses again.

But they have opened people's eyes.  We are now realizing that credit card companies and banks don't lend to people who need money, they lend to people who can repay the money.  Many people have found themselves without jobs, and need to use credit cards to pay for monthly living expenses. That's when reality hits and they find out that as their credit is slowly destroyed, so is their ability to borrow to keep a roof over their heads. Or, as their credit score drops faster than RIMs stock price, these same companies who enticed them with offers of low interest rates, no annual fees, etc., are raising these same interest rates.  Kinda like not getting water from a stone, so you raise the required amount of water you want the stone to produce.  If it's not making water now - oh, nevermind.What's in your wallet?  A bag of hurt.

The problem is that in the 80s and 90s we as a society stopped saving (correction, the other 99% of us did). We spent every dime we made "enjoying the good life" and when that wasn't enough, we got credit offers from our "friends who just wanted us to keep on enjoying."  Sure, they offered very low introductory or final rates, but as soon as we missed a few payments, or went over our credit limit, all bets are off. They sometimes even raised your rates because you were late paying someone else.  That's right, a totally unrelated, unconnected company.  Kinda like your cable gets shut off, so the utility company, who is being paid on time, shuts off your heat. I guess that's solidarity.

Why were we encouraged to spend ourselves almost into oblivion?  Welcome to capitalism. Capitalism requires people to spend money, not save. To keep a capitalist society rolling along, people have to keep buying stuff. That makes companies rich, they hire more people who can spend even more money.  After 9-11 we were encouraged to go out and spend to forget the beat down we just got. Every Black Friday we rush out like lemmings at 3 AM because we absolutely have to have that thing, whether it's a 60" plasma TV or new furniture or whatever. Every car commercial I see show the lease price. When I was growing up, the only people who leased cars were business owners and companies.  The biggest draws were 1) it wasn't their money, and 2) they could write it off as an expense on their taxes. Now leasing is the norm. Why? because it allows people to get into vehicles they probably couldn't afford paying for directly. See a trend?

The same people on Wall Street who "the other 99%" are mad at for getting multi-million dollar bonuses are the ones we happily give money to in the form of credit card interest payment and brokerage fees.  We fed this monster, we have to starve it.  We have to find a happy balance between spending and saving. But we also have to become more financially savvy in general. While it might be good for Wall Street if we constantly spend, borrow and spend, it might not be good for the Joneses. Among the many lessons learned in the crash of 2008 is that the experts on Wall Street may not be as financially intelligent as they may have led people to believe.  How else would IAG, Leman Brothers and others be wiped out? The answer is that individual greed was more important than practices that were in the interest of the firms themselves. In effect, a company with 10,000 employees had 10,001 agendas.  And we were the fodder.

If your company offers a 401k with matching, it's a great opportunity to accumulate retirement savings. But you have to consider that your money and you have to take as active a stance as possible in it.  For my own reasons, I'm against mutual funds (I can lose my own money for free, why pay someone to do so?)

But you can't stop there. Learn how to invest. Newsflash: It's not rocket science. If the brainiacs on Wall Street showed us anything, it's that it doesn't take a genius to wreck an economy, so it sure won't take one to invest your $20.  That's a joke, but don't miss the seriousness of it. It's your money, learn to invest it.  As for your credit cards, pay them off and cut them up. Not as some symbolic gesture. Remember, when you needed them, they weren't there. Be selfish. Instead of saving 5%, shoot for 30%. Sure, you may not get there in a month, but keep striving for it.
Don't live within your means, live under them. Well under them.  You might think I'm being extreme, but know that if Ebenezer Scrooge got laid off, dude probably didn't miss any meals.  Be selfish. It's not your job to keep the economy going. It will run over you if you falter.

I have a theory. When they retired, the people who survived the Great Depression (#1) were probably well off. They saw what happens when you don't look out for yourself financially. When they got back to work, they probably saved every penny they could.  They never forgot what it was like. Fast forward 80 years and we have forgotten. This giant suck of an economy is the wake up call. Wake up.


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