1. Less Than Half Have 3 Months’ Expenses Saved

    Fresh off the press, a couple of articles emphasizing Americans’ strong penchant for saving precisely squat:

    US News: More Than 1/4 Have No E-Fund

    And a related article:

    Bankrate: Short on Savings, Americans Still Feeling Positive

    No surprises here for followers of this blog: When you punish people for saving, you’re going to get less saving. When you reward people for blowing through every penny that hits the door, and then some, you’re going to have a nation of broke people.

    But hey — as Bankrate tells us, “Americans are feeling very secure about their personal finances.” This, even though “… nearly half of those surveyed have less than three months’ worth of expenses, or nothing at all, in emergency savings.”

    I’m not sure what sort of “security” these folks are aiming for, but it’s apparently one I’ve always tried to avoid.



  2. Surprise: TBTF Banks Will Screw You

    Way back in 2007, I penned a post in which I voiced my displeasure with folks who whine about overdraft fees. In the comments, I was called lots of names … “bank apologist” among the nicest of these.

    Thanks to the fine, upstanding management team at Bank of America, I now have the opportunity to make something crystal clear: The Too Big To Fail Banks (TBTF) banks will screw you any chance they get. This is not a new opinion for me; I’ve felt this way since long before I started this here money blog. I’m just reiterating it here, for those who aren’t paying attention.

    I absolutely felt this way when I wrote the overdraft-whiners post, too. The way I see it, the fact that these banks will hose you at every opportunity is a given. Thus, we as consumers and bank-users must do everything we can to NOT give them that opportunity. That includes knowing how much is in your checking account at any given time, and not executing transactions above that amount, and not giving the bank any reason at all to slap you with a $50 service fee. If you DO give the bank a reason to FeeSmack™ you, then don’t whine about it.

    It’s plain as day: The TBTF banks are in charge. Our government and our economic system require this, because debt is money, and debt underpins EVERYTHING. TBTF banks hold, service, issue, and securitize debt in enormous amounts, so they make the rules. You and I simply have to play by those rules.

    Now allow me, if you will, the opportunity to show just how far TBTF banks (Bank of America, in this case) will go to (1) bend their customers over a counter, and (2) make a buck:

    JDSupra Law News: BOA Senior Admits to Being Told to Lie

    If you have dealings not only with Bank of America, but with pretty much any bank that’s “regional or larger” in size, you really should take a moment to read the article. I’d say that Simone Gordan’s affidavit is a staggering admission, but really, it isn’t. Of course BOA reps were told to lie to customers. BOA was woefully unprepared for the various mortgage- and loan-modification programs which U.S. FedGov thrust upon them, and besides, by lying to customers, there was cash to be made.

    From the affidavit, as stated by Bank of America senior loan collector Gordan:

    Using the Bank of America computer systems I saw that hundreds of customers had made their required trial payments, sent the documents requested of them, but had not received permanent modifications. I also saw records showing that Bank of America employees have told people that documents had not been received when, in fact, the computer system showed that Bank of America had received the documents. This was consistent with the instructions my colleagues and I were given. We were told to lie to customers and claim that Bank of America had not received documents it had requested, and that it had not received trial payments (when in fact it had). We were told that admitting that the bank received documents would “open a can of worms” since the bank was required to underwrite a loan modification within 30 days of receiving those documents and it did not have sufficient underwriting staff to complete the underwriting in that time…. Site leaders regularly told us that the more we delayed the HAMP modification process, the more fees Bank of America would collect.

    Nice, huh? If you or I tried crap like this in our business dealings, we’d go to jail. But a TBTF bank does it, and they get paid.

    Are we clear on how this works yet?

    You must carry on your financial lives as if you are, well, prey.

    Because with TBTF banks, that is absolutely what you are.



  3. We Learn Nothing

    Yes, it’s a current article:

    Herald Tribune: Admin Aims to Increase Loans for Homes

    From the story:

    President Barack Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

    In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.

    I should probably just stop reading the news altogether. Everything I read just about sends me over the edge these days.

    We (deliberately) learn nothing.



  4. Half Living Paycheck to Paycheck

    Fresh new survey data from Allstate’s “Life Tracks” unit suggests that about half of Americans have nothing left over after paying for essentials:

    Allstate: Americans Struggle to Save Despite Optimism

    I find it interesting that this “half of us live paycheck-to-paycheck” stat keeps reappearing in survey after survey in recent years. I’m thinking the figures are pretty valid, at this point.

    In the Allstate survey, conducted in December of 2012, 32 percent of college grads reported living paycheck-to-paycheck, while 48 percent of non-graduates reported the same.

    For those curious about credit-card debt, there were some interesting nuggets in that arena, too. From the article:

    • Forty-nine percent say they pay credit card debt; 43 percent mortgage payments; 36 percent car payments; 17 percent student loan payments; and 15 percent medical debts.
    • Among the half (51 percent) of Americans expecting a tax return, 45 percent intend to pay off debt with the money.
    • Sixty-five percent of Americans with credit card debt say their level of debt has increased or remained the same in the past year.
    • While a majority say their savings remains about the same (about 60 percent) in the past year, just 15 percent of Americans say their short-term emergency savings has increased, and 14 percent say their long-term savings and investment activity has increased.

    The fact that 65 percent said their debt levels have stayed the same or increased in the last year isn’t a surprise, given that 40 percent of respondents were “very confident about their ability to pay for a new car.” (That was in the survey, too.)

    What’s implied, of course, is that they’re confident in their ability to borrow for a new car.

    Debt, after all, makes the world go ’round.



  5. Kiyosaki’s Rich Global LLC To File BK

    Those of you who follow the travels and travails of Rich Dad Poor Dad author Robert Kiyosaki will be interested to see this:

    NY Post: “Rich Dad Poor Dad” Author Files BK

    So it appears that one thing Mr. Kiyosaki’s “rich dad” taught him was that corporate BK is a perfectly valid method for retaining and shielding one’s personal wealth. In the three Rich Dad books I read, Kiyosaki was quite insistent that creating businesses and setting up corporations was a must.

    Because hey, you never know when you’re gonna lose a lawsuit for a $24 million breach of contract.



  6. Gen X and the Great Recession

    So according the Fiscal Times, Generation X has felt the brunt of the net-worth decimation that’s been a fixture of the Great Recession:

    Fiscal Times: Gen X Disproportionally Affected by Recession

    Yup, the chart in that page is pretty nasty. On a percentage basis, it tells us, Gen Xers’ median net worth declined by over 58 percent. That was the largest percent decline of any age group. The topic interests me because, hey, I just happen to be in that particular age cohort.

    From the article:

    Gen X, a generation that’s relatively small at 46 million and known for their political apathy and trends like grunge in their heyday, has largely stayed out of the headlines; but they’re also a generation that has tried to do everything right financially. Most worked at a stable job for years, built a comfortable savings, and likely just bought their first home at the market’s peak. Then when everything came crashing down, they were stuck with an underwater mortgage, young kids in the house, possibly a job loss, and unlike boomers, they never had a chance to diversify their portfolios, potentially losing a lot of what they had in stocks.

    That’s an interesting take on it. I don’t know how on-target it is, though — particularly the part about Xers being a generation “that has tried to do everything right financially.” When over thirty percent of an age group reports having no personal savings, well, to me, that’s an indicator that they’re doing it wrong.



  7. Pro Athletes Going Broke

    Well, if you were wondering just how great professional athletes are at managing their money, Sports Illustrated has the ticket:

    SI: How And Why Athletes Go Broke

    As far as the article goes, here’s your two-minute drill:

    In a less public way, other athletes from the nation’s three biggest and most profitable leagues—the NBA, NFL and Major League Baseball—are suffering from a financial pandemic. Although salaries have risen steadily during the last three decades, reports from a host of sources (athletes, players’ associations, agents and financial advisers) indicate that:

    • By the time they have been retired for two years, 78% of former NFL players have gone bankrupt or are under financial stress because of joblessness or divorce.

    • Within five years of retirement, an estimated 60% of former NBA players are broke.

    I mean, those figures are just plain brutal. But not surprising.

    It’s a very long article, as these things go, but well worth a read if you follow pro sports and athletes (and their foibles).



  8. U.S. Standard of Living Tailspin

    So the U.S. standard of living is getting crushed, and the trend shows no sign of abating. That, at least, is the case according to this article:

    TheStreet.com: US Standard of Living Down 50%+ Since 1970

    As I wasn’t even around in 1970, I certainly can’t make any sort of personal-experience comparisons to the average standard of living (SOL) then and now.

    (Though I can pretty much state, unequivocally, that rock ‘n’ roll music was far better then. In that regard, I’m pretty confident that we’ve seen a decline in quality FAR greater than 57 percent. But I digress.)

    The article’s an opinion piece, and clearly marked as such, but right here’s where the elephant steps on your toe:

    Using the year 2000 as the numerical base from which to “zero” all of the numbers, real wages peaked in 1970 at around $20/hour. Today the average worker makes $8.50/hour — more than 57% less than in 1970. And since the average wage directly determines the standard of living of our society, we can see that the average standard of living in the U.S. has plummeted by over 57% over a span of 40 years.

    Hmmm. Reminds me a lot of what I read in The Two-Income Trap back in 2003, except that this guy uses words like “rape” and “parasites” to describe the treatment of “average” families today by Big Business and the government. (Not that I necessarily disagree in all cases. ‘Cause I don’t.)

    But here’s the part that totally lost me, where our esteemed author is discussing structural unemployment:

    Technology always eliminates jobs faster than it creates new opportunities. This means that our economies are permanently reducing jobs (and creating structural unemployment) every day, every week, every month, every year. For more than 200 years, our governments have dealt with this permanent structural unemployment problem by shortening the work week every few decades…until now. The refusal of our governments to shorten the work week (while we have the worst structural unemployment in history) is a deliberate attempt to maintain massive unemployment — which is the strongest downward driver of average wages.

    Uhhh … say what? I mean, I know the PC revolution was pretty hard on typewriter makers and all, but … say what? And how does shortening the work week help increase average wages? (For most folks I know, if you’re not working, you’re not getting paid — politicians and welfare fraudsters excluded, of course.)

    Oh well. It’s late, and I’m probably just missing something.

    Like how much better the beer probably was in 1970. There’s your pinnacle in standard-of-living, right there.



  9. Minimum Wage Again

    Those unstable folks who, like me, are fixated on all things economic, will get a boost from this quaint Bloomberg piece:

    Bloomberg: Today’s Minimum Wage Lower Than LBJ Era

    I dunno. No matter what Congress and our state legislatures say, I’m pretty confident that the true minimum wage is and will always be zero. But what do I know. I don’t work for any kind of economic or policy think-tank.

    Here’s the one passage I adored:

    The studies find minimum-wage increases even provide an economic boost, albeit a small one, as strapped workers immediately spend their raises. A 2011 paper by economists at the Federal Reserve Bank of Chicago found that a $1 minimum-wage increase lifts household income by about $250 and increases spending by about $700 a quarter in the following year. The spending increase is driven by a small number of households that primarily buy vehicles.

    So a wage boost lifted income by $250, but spending went up $700 for the same period? You mean the wage increase encouraged people to go out and spend STILL MORE money than they have? Why, that’s great news!

    (If you’re a proponent of debt slavery, that is.)



  10. Daily Student-Loan Idiocy

    Man, I could practically write a standalone blog just on the topic of student loans, couldn’t I? I mean, the fodder is everywhere.

    Bloomberg: Student Borrowers Lack Understanding of Loan Terms

    This little snippet is pretty darn tough to ignore:

    Marjorie Gelin Goodwin, 37, one of the respondents, said she owes about $107,000 in federal loans and about $15,000 in private loans for college and graduate school. She is in forbearance on her federal loans, meaning she isn’t making payments. She didn’t understand that her private loans would have a variable rate that could fluctuate so greatly, she said in an interview.

    “I was surprised by how much my student-loan payments would take away from my income,” said Goodwin, who works at a nonprofit organization in San Francisco. “I’ll be retired and still paying my student loans at the rate I’m going.”

    You just really have to read that article. As that great philosopher, Homer Simpson, might say:

    “The stupid, it burns!”