Friday, November 21, 2008

Personal Finance 101

From the 24 November 2008 Greater Niagara Newspapers

By Bob Confer

Americans have a long tradition of teaching our youth about common sense for the comments cents. At a very young age we start them on the path to fiscal conservancy by providing them with a piggy bank and the lessons that go with filling it and saving for the object of their desires.

Despite such an important life lesson we seem to forget it as we come of age. No longer limited to maintaining a piggy bank for basic childhood wants, we adopt newfound adult responsibilities, desires, and income. As they hold jobs to pay for wants and needs, many find it necessary to save little or nothing yet spend a lot in order to satisfy the culture of consumerism so prevalent in today’s world. It’s an ongoing cycle of addiction, one fueled by the messages we receive from advertisements, the media, shifty lenders, and our own peers. Today’s adults feel compelled to have the biggest, best and most when it comes to housing, cars, electronics, and leisure.

This materialism has caused many people to approach their incomes with reckless abandon and the economy has hit a brick wall. Millions of homeowners couldn’t pay for the morbid mortgages they entered into and millions more have accrued unreasonable amounts of debt on their credit cards, the next nightmare on the horizon. They all gambled on the housing bubble, they all lived beyond their means. It’s bad for them, yet worse for us a collective society. We’re all on the hook for their debts, our federal government spending our reserves and creating money out of thin air to prop up the faltering financial markets that were based on false, ethereal funds and credit payments that will never materialize.

For all those folks who spent and invested with no respect for the true value of the dollar, there are many more people who, like me, are pennywise. I’m notoriously cheap at work and at home, finding it difficult to part with a dollar. I know that if I err on the side of excess at home, I’m on the streets. I know that if I do the same at work, there will be 120 families on the street. You’ll find me saving my money to improve my future and investing in my company to guarantee its future.

I’m left asking (as are many others): Why can’t more people be that frugal? We coupon-cutting cheapskates feel let down by the world around us, wondering why we must pay for the sins of society.

Truth be told, the spenders might not be acting in a malicious way. They might just be ignorant. And I don’t mean that in a bad way. They may be uneducated in personal finance. It’s a confusing world out there with so many gimmicks on mortgages, interest rates, loans, retirement accounts and all else financial. I was fortunate enough to have fiscal knowledge drilled into my brain by my parents and the Boy Scouts.

The latter brings me to this point: We need to educate our young adults on basic personal finance. It works. “Thrifty” is just one of the twelve points of the Scout Law, ranking up there with the likes of “trustworthy” and “helpful”. Scouts are taught endless lessons on saving and spending wisely. The Scouting program knows the importance to society of a young man who respects the dollar and the penny. Because of that, most Scouts are stable in their adult lives.

That same approach needs to be applied to our high schools. Back in the day – maybe to this day - there was a class called Home Economics. There were no economics involved, it was all domestic science. We were taught how to sew and cook. It would behoove the greater good of this nation if the schools developed a course that was a true study in home economics, a year-long course for high school seniors that educated them on all the nuances of personal savings. Many seniors have study halls galore, so it would not be that difficult to add another course to their schedule. Millions of seniors venture into the real world every June and it’s imperative that we prepare them for it. They’ll be better - we’ll be better - for it.

It comes down to this:

The wealth of a person is not based on that which is spent. It’s based on what is saved. The wealth of our nation should be based on that which is spent and saved: by spending just a little on the intellect of our youth we can save our nation from a repeat of the horrible economic disaster we’re in now.

Friday, November 14, 2008

Don't bailout the auto industry

From the 17 November 2008 Greater Niagara Newspapers

By Bob Confer

You’d be hard pressed to find someone who supported the $700 bailout of Wall Street. Most folks were up in arms over how taxpayer money – our money! - was used to reward Wall Street’s excesses and bad behavior. This ire, which was shared by pretty much everyone except for Congress and Wall Street’s bigwigs, was well-intentioned and a real breath of fresh air. It was nice to finally see so many people that upset with Big Government.

Even so, I can’t help but to walk away from that uprising with a sense of pessimism directed towards the masses. I have to feel that way when I see how selective they have been with their criticism of 2008’s ongoing “New New Deal”. Where were the critics when Uncle Sam issued the economic stimulus checks? Where were the naysayers when we covered homeowners’ bad mortgage decisions? Why didn’t the media throw a temper tantrum over the government’s buyout of AIG or its cash infusion to the banks?

It’s all because people are mad only when it’s convenient for them. Their anger, their resentment, surfaces only when it’s not they or their interests who are at the financial feeding trough. Because of that selectivity, the federal government has run roughshod over our economy, making FDR’s historic efforts look almost pedestrian. By focusing only on the aforementioned $700 bailout, the media and citizens of our nation have virtually ignored the cornucopia of bailouts, buyouts, stimuli, infusions, loans and the like bestowed upon us the past six months. So far this year Uncle Sam has doled out $2.950 trillion of those giveaways and we still have a long ways to go before the economy can even begin to be healthy. Without the masses pulling tightly on the checkrein, the fed will no doubt feel obligated to issue more rescue plans which might include the salvation of credit card debtors (card debt now stands at $970 billion) or the confiscation of 401k accounts.

Nothing is out of the question unless we make a stand now. The line has to be drawn somewhere, sometime, somehow. There is no better place to start than the next item on the government’s things-to-do list: the bailout of the US auto industry.

As I was writing this column top level officials were still debating what to do to save the industry, specifically General Motors. GM was fearful that come December it would be totally out of cash and bankruptcy would occur. Based on recent history, giving them a bailout would be something akin to giving the keys for the liquor store to the alcoholic who says he’s learned self-control. By believing the loser you’re only feeding his bad habits and guaranteeing his death.

GM’s woes were brought on by its addiction to operating under sales techniques that were developed by manufacturers in the 1800’s and have been obsolete since. Back in the day, manufacturers would build to supply and not to demand, more or less dictating what the consumer would buy. Back then, the manufacturer defined the market. Nowadays, with so many choices available, the consumer defines the market and the manufacturer adjusts accordingly. GM hasn’t adjusted and is still making vehicles that the consumers don’t want, hence its cash flow problems: GM can’t sell that which it has made. Ignorant to ongoing fuel scare issues that have been with us since the 1970’s and oblivious to the burgeoning green movement, GM is putting out too many trucks and SUV’s, only dabbling in the smaller vehicles that are less expensive or use less energy…the very cars that people want and are buying from the highly-successful new American auto industry (the foreign firms who manufacture on American soil). With GM, it’s always too little too late.

Basically, the bailout – once again, our money - would only go towards temporarily masking the weaknesses of GM’s management. It would give them the cash they need to get through their current financial crisis, but, with the status quo as it is at GM, the taxpayers would never see a return on their loans because of the perpetuation of bad business practices.

The same criticism was said of Wall Street. Yet, because of how beloved the auto industry is, there are very few people who will levy those charges against GM. Even so, there are fewer people who will say with confidence that GM is doing the things necessary to change its ways. It’s destined to die, whether it’s December 2008 or December 2011. The bailout will be but an investment in that demise, the government rewarding bad behavior, just as it did on Wall Street.

Friday, November 7, 2008

An open letter to our elected officials

From the 09 November 2008 Greater Niagara Newspapers

By Bob Confer

Congratulations on your victory at the polls last week.

I know it wasn’t easy. No doubt it took months, maybe years, of blood, sweat, and tears to win the election. You can’t stop there, though. If you thought politicking was tough, brace yourself. Now the hard work begins. You’ve won the election. Now, you’ve got to win our respect.

You’ve got your work cut out for you.

First of all, if you’re new to your role, you’ve got to understand this isn’t your father’s government. If you were reelected last week, know that this isn’t the political environment you’ve grown accustomed to. There’s a new brand of accountability in the air. You’ll be expected to be the type of statesman that was once the norm in the America of long ago. You’ll be required to make some preposterously difficult decisions. In the very recent past, most elected officials have skated-by by maintaining the status quo or doling out some pork. Not anymore. We the People have become as restless and angered as a hurt animal. To be cliché, we’re mad as hell and we’re not going to take it anymore.

This sudden and welcome change of being is an outcome of the world around us. We’ve been let down for decades and that mistreatment has finally come to a head, the economy plunging into despair not seen since the days of the Great Depression. Small businesses are struggling to stay afloat. Hundreds of thousands of families have lost their jobs and their homes. All seniors have witnessed the collapse of their retirement accounts. The younger generations are entering a job market that might never let them achieve the standard of living that their parents had.

Because of this trauma to our pocketbooks, our way of life, and the very core of the American Dream, people from all walks of life have finally come to the understanding that good representation is the remedy for what ails us. We want results. We need results. We have to be that way and we always should have been. But, as a nation, we let our civic responsibilities slip and that has come back to haunt us. Because a majority of Americans found themselves more in tune with the outcome of American Idol than with past elections they overlooked where our nation was going. Because of that indifference to that which truly matters, our leadership was not held in check, and slowly but surely Bad Government – some of it too big, some of it too small – permeated the landscape, allowing the collapse of our economy to occur. Those citizens, who because of their malaise are just as guilty as their elected officials, have learned their lesson. That’s why “change” was such an important part of all the campaigns this year. The People themselves have changed and they are demanding the very same of you.

The wish list for Change is endless. Things have to change in the way our government views spending, entitlements, bailouts, the dollar, the economy, the banks, Wall Street, Main Street, education, and national defense. With such an impressive if not frightening list you couldn’t come into office at a more remarkable time in our history. The next few years are extremely important to America. We’re teetering on the edge. A few wrong decisions could destroy our economy and the America we know and love will be but an afterthought.

Please accept this mantle of responsibility with the utmost care and dedication. All of us - those who voted for you and those who did not- look forward to seeing what you can accomplish while in office, hoping that what you do or don’t do helps to make a better community, a better state, and a better country. Your legacy depends on it. Our future requires it.

Make us proud.