Showing posts with label financial crisis. Show all posts
Showing posts with label financial crisis. Show all posts

Thursday, January 29, 2009

Boyce Watkins Tells All on Money Management in an Interview with AOL Blackvoices




Smart Money Tips With
Dr. Boyce Watkins




By Alexis Garrett Stodghill, BlackVoices.com

Dr. Boyce Watkins is a renowned scholar and speaker in the area of finance. As an African-American financial expert, Dr. Watkins has made it his personal mission to educate our community through writing books and essays, making media appearances, public speaking and more -- so that we may become more empowered with knowledge when it comes to the all-mighty dollar. BlackVoices.com asked the doctor to share his wisdom and advice for folks seeking tips to successfully navigate the current economic storm. According to Dr. Watkins, it's still possible to get your finances in order -- in fact, it's imperative.



As a black finance expert, what is the most common problem you see in the black community when it comes to personal finance management?

The most common problem is that historically, African Americans have been excluded from the opportunity to build wealth. Money was made from our labor, but we never got much of it. That led to a laborer mentality in African-Americans that taught us how to go out and get jobs rather than learning the art of CREATING jobs. This problem was further exacerbated by the fact that building a company requires capital, which we typically don't have. Most African-Americans have far lower inheritance levels than whites, and this impacts your economic opportunities in life. Also, when you've never had much money, you are usually not very good at managing it, so we are as bad as the rest of America when it comes to our spending, saving, investing and borrowing habits.

How would you suggest that someone with little knowledge of personal finance get started on the road to financial stability?


First, get educated. Empower yourself with financial literacy. The greatest university in the world is called Google.com. You can research any topic you want. Secondly, start small. You don't have to conquer the world in two steps. Just start by saving 10% of your income. You might say you don't have money to save, but you actually do. If your boss came into your office and gave you a 10% paycut, you'd find a way to survive. Find a way to learn to save. Finally, get a "side hustle." Challenge yourself to find small ways to supplement your income. The riskiest thing to do in this economy is to get all of your personal income from one source.


You have two college degrees, a master's degree and a PhD. What would you say is the relationship between level of education and income?


Education not only gives you many opportunities to earn more money, you usually earn more money with less work, doing a job that you might actually like. Personally, education was the difference for me between being financially well off and living a life of poverty. Education also provides job security, which is often overlooked. Autoworkers, for example, were always able to make high wages with little education. But once the Big Three started to buckle, they were stuck with unskilled labor opportunities. Everyone should get as much education as they can get, since education can be a path to both a wealthy bank account and a wealthy life.


Would you share some tips for sound money management in 2009?

Yes.


-First, keep investing, especially in the stock market. When the market is low, that's the best time to find cheap stocks. Then hold on to your investments in a well-diversified portfolio (meaning, keep your money spread out). Before you know it, the downturn will have put money in your pocket.

- Learn to adjust your financial habits. Part of the reason we are in this mess is because Americans were borrowing too much money and working hard to live paycheck to paycheck. Get out of that habit, because the government is not going to be able to save us for much longer.

- Cut the toxins out of your life. If you have any bad habits or bad people draining you of your resources (a relative, a friend, or even yourself), renegotiate that relationship from one that is financially destructive to one that can be productive. For example, you may have to cut the financial umbilical chord from a dependent child, or tell that brother that he can't borrow money from you anymore. Cut the toxic energy out of your life so you can rethink your way of seeing money.


You have written extensively on love and money issues. What is your advice for best blending marriage and finances?

In 'Financial Lovemaking,' I tell couples to "find a rhythm." Merging your money is the same as merging your body (ie. sex): No one can tell you how to do it, since we all enjoy different things. You find out what your partner needs, share your own needs and then find a way to make the process comfortable and fulfilling for both parties. If your partner is a saver, then you need to respect that. Given that there is usually a deeply psychological reason that your partner is a saver, you are in serious trouble if you have habits that create financial instability in your relationship. Also, MAKE SURE you know what you're getting into: Many couples focus solely on love, lust, and physical appearance and spend almost no time observing the financial disposition and habits of their partners before making this major commitment. That is a recipe for disaster.
Before you commit your life, your future, your children and your money to someone, remember that LOVING together means LIVING together. If someone is financially irresponsible or brings a set of (what I call) "financial venereal diseases" into your life, it is going to be hard to live with them. You should check the debt levels, income levels and credit score of anyone to whom you choose to commit. Make sure they don't have any financially destructive habits, like alcoholism, drug abuse, gambling, or even the shopaholic's disease. Make sure that your financial values are in line with your partner's: For example, don't marry a woman who needs a $40,000 engagement ring if you think that a $500 ring should do the trick.


If you don't ask the hard questions, you can be locked into something with someone who literally destroys your life later down the road.


What is your opinion of the current recession? What is the best way to weather it?

The current recession may very well be the tip of the iceberg. There are serious long-term problems with our economy, and the break down of our financial system is merely a symptom of bigger issues. Additionally, this recession has a deeper problem. It is occurring during a time in which our global financial markets are integrated unlike at any other time in world history. That means that we are dealing with a problem of historic proportions on a landscape on which we've never operated.

The best way to cope with the recession is, in part, through what the government is already doing: Utilizing massive fiscal stimulus plans and encouraging global cooperation. Two other things they could have done are a) to have not wasted 700 billion dollars persuading Americans that Wall Street Bankers need to be protected, and b) to have spent more time helping Americans adjust their expectations.


President Obama seems to be trying to manage expectations, but he has already set the bar very high with his long list of campaign promises. The economic problem for Obama is that it will be extremely difficult to boost our economy back to where it was before, particularly since much of our financial gains over the past 7 years were illusions created through easy access to credit and a poorly regulated financial system. It's similar to an athlete on steroids trying to get off the drugs and then regain old form. It's very difficult to do.

On an individual level, I encourage families to remember that the government may not be there to take care of you in retirement. If you are not saving for retirement, it is critical that you do so. You should also find ways to structure care for the elderly in your family so that they are going to be OK. Also, tighten your own belts and get out of the habit of living from paycheck to paycheck. This is not a secure economy, and seemingly financially stable companies are disappearing overnight. The riskiest thing you can do in this economy is to get all of your income from one source. Find a way to make money from multiple avenues.


What has inspired you to come this far with so much self-determination, as a black man who was born to a single teen mom, then becoming a teen parent yourself?

I wake up every single day with a purpose. Dr. King and Malcolm X died young, so I never knew how much time I will have. But I am absolutely determined not to waste a single day and do all I can to help reshape what it means to be a black scholar and black leader in America. When I get emails from young people telling me that I've inspired them to change their thinking, then I know I've done my work. I know that I am not going to be on this earth forever, but I love the idea that I can impact people in such a way that the spiritual influence can last for generations.


I realized that most black professors are scared into being quiet on social issues, due to heavy political ramifications for speaking up. I also realized that many of us would rather sit in the ivory tower than to take our knowledge to the world. I never wanted to do that, and I've always felt that the role of the Black scholar in America is to use his/her knowledge to enlighten the world and uplift his/her people. That is my mission, and it is something I will continue to do until the day I die.

I also learned that it is not enough to be intelligent. You must be courageous and also sure of who you are. If you seek your validation from your historical oppressors, you will always end up chasing your own tail. Additionally, there are a long list of problems that need to be solved within our community, and it's up to all of us to do whatever we can to try and solve them.


Are there any words of encouragement or wisdom that you would like to share with the BlackVoices.com audience?


I realized a few things long ago that carry me to this day:

1) Success doesn't happen by accident. You must be deliberate with your actions and think carefully about where you invest your life, your love, your energy and your time. Everything must be proactive.

2) Extraordinary outcomes only come through extraordinary efforts. In life, you get what you give. So, if you want more, you must sacrifice more. You must be willing to do things no one else is willing to do, if you want to have things that no one else has. Never waste one second choosing to be ordinary.

3) Education is everything. Get as much of it as you can. Don't just become a student, BE AN EXTRAORDINARY STUDENT. Never let anyone tell you what to think. Keep your mind liberated so you can find truth and meaning in your endeavors.

4) The best way to get "pimped" is to spend your life trying to work for somebody else. Even if you are the highest paid slave on the plantation, you're still a slave, and you're still on the plantation. Get off the plantation and find a way to true wealth and prosperity. But don't get into the habit of worshipping money. Your goal is to live a wealthy life instead.

5) Keep BS out of your life so you can focus on achieving your goals. Most of us don't do half of what we plan to do because we spend all our time on silly, wasteful activities. There are 8,760 hours in a year and 168 hours in a week. You should budget your time the way you budget your money and not let anybody waste it.

6) Never allow yourself to be without goals. It's not where you are that matters, it's where you're going that determines where you end up. Always be aware of where you are going, and what you need to do in order to get there.

Keep a life full of purpose, and that will make every day worth living.

Wednesday, November 26, 2008

Creating Consumer Confidence Tips From Boyce Watkins

Dr. Boyce Watkins
www.Boycewatkins.com

If you wish to see a video explaining consumer confidence, which is one of the driving issues behind the recent moves in the stock market, please click here.

This has been an interesting week, with auto execs showing up on private jets to request a bailout from the government and the Dow moving to below 8,000 points for the first time in 5 years. I still hold to the fact that this is a great time to get into the stock market if one has never done so before, especially if you are under the age of 50. By the way - please visit our sponsor, GreatBlackSpeakers.com if you are interested in hiring a top notch African American speaker or seeking to become one.

Take care!
Boyce Watkins
http://www.blogger.com/www.boycewatkins.com
Click here to join our money advice list.

=====================================================================================
If you listen carefully to the words of Treasury Secretary Henry “Hank” Paulson and Ben “Big Ben” Bernanke (chairman of the Federal Reserve) you might notice a trend in their language. The word “confidence” is used a lot when they speak. Many of their monetary proposals are not necessarily valuable for their financial power, but also for their psychological power.

Some of you may wonder what confidence has to do with anything. After all, if you’re broke, confidence doesn’t exactly put money in your pocket. If you’re 100 pounds overweight, confidence won’t help you win the Olympic 100 meter dash. When you are flying on a crashing plane, confidence doesn’t keep the plane from slamming into the ground. But confidence is important to an economy, and one of the most significant drivers of economic growth. In fact, over confidence has driven US economic growth for the past 10 years. Here are some reasons that confidence matters in the minds of Hank and Big Ben:

1) Confident consumers spend money

If you think you might lose your job next year, are you going to max out your credit cards? I certainly hope not. If you are worried about being able to make ends meet, are you going to buy that big screen TV? Not unless you want your wife to leave you. So, even if it doesn’t hold any truth, the mere forecast of a weak economy is enough to make many Americans hold off on consumer spending, one of the great driving forces of the American financial system.

2) Confident companies invest money and hire workers

Investments involve risk. Your hunch may work out, and it may not. If you don’t believe the economy is getting better, you are not going to consider taking that risk. No one plans to go to the beach if the weather man says that it’s going to rain. When economic rain is in the forecast, companies pull out their umbrellas and hold off on new projects. This reduces the number of jobs in the economy, because nearly every job created in America is the result of someone making an investment.

3) Confident Americans do not take their money out of banks

In case you didn’t know, your bank does not have your money. Your money is part of a large base of financial capital that is loaned out to individuals and consumers seeking to get a good return on their investment. So, without investing, your bank would have no interest in paying you any interest at all. So if, say, 30% of all customers of the same bank decide to get their money out at the same time, the bank would have serious financial problems. It is a lack of confidence that could cause customers to “run” on their bank and take out their money.

4) Confident investors keep their money in the stock market

The stock market is a place where fortunes are made and lost. Some part of that fortune is psychological, given that no asset can have a value which exceeds that which someone is willing to pay for it. When investors lose confidence, they take their money out of the stock market, and reductions in demand for stocks lead to massive paper losses in the market. Additionally, most Americans are “momentum traders”, meaning that when the market goes up, they tend to buy more, and when it goes down, they tend to sell. History shows that it is actually the opposite approach that tends to work best.

5) Confident banks make loans

Banks have to keep a certain portion of their funds on hand at all times to meet federal requirements. If they are fearful that their customers might come and demand their cash, they hold onto their capital to ensure that it is available. If they are afraid that their borrowing customers will not be able to repay loans due to a weak economy, they also hold back on issuing new loans. The truth is that when economic forecasts are grim, conservative bankers become even more fearful than the rest of us.

The bottom line of this article is that confidence matters. So, the next time you hear Ben Bernanke give a speech, you can be confident that he is going to use language that makes you feel more secure. Whether you choose to believe those words is up to you.

Dr. Boyce Watkins is a Finance Professor at Syracuse University. He does regular commentary in national media, including CNN, BET, ESPN and CBS. For more information, please visit http://www.blogger.com/www.boycewatkins.com. To join our money list, please click here.

Monday, October 13, 2008

"Black News: Dr Boyce Watkins Explains Credit Reports"


By Dr. Boyce Watkins
http://www.drboycefinance.com/

Where do Credit Scores come from?

Unlike babies, credit scores do not come from a financial stork. There are 3 major credit bureaus in the United States: Experian, Trans Union and Equifax. Companies subscribe to their services to obtain information about you to decide if you are credit worthy or not. Under the old system, the credit scores ranged from 375 to 900. Under the new VantageScore system, they range from 501 to 990. The new system is more consistent among various credit bureaus, so you don’t end up with scores that go all over the place.

How can I get a copy of my report?

I personally go to a site called Myfico.com, where you can order reports from all 3 bureaus or just one. You can also go to freecreditreport.com (you know, the site with the really funny commercials). The law says that you are entitled to at least one free credit report every year. Also, if you are denied credit for any reason, you can write the bureaus, sending along a copy of the rejection letter, and request a copy of your credit report. If you choose to pay for your report, it will likely cost you about $8 dollars.


What factors go into calculating a credit score?

The factors that go into calculating a credit score are a little vague and it’s protected like the recipe for KFC chicken. While the formula is well-guarded, we do have some guidelines on what factors are theoretically used to determine whether or not someone should loan money to you.

The factors are broken into what they call “The Four C’s of Credit”: Character, collateral, capacity, capital and conditions.

Character is their way of trying to decide if you are a good person or not. I don’t agree with this, since having bad credit does not make you a bad person. It just makes you a person who does not have a good track record when it comes to borrowing money.

Capacity is represented mostly by your income level and how much money you’re expected to earn in the future.

Capital is noted by the amount of cash you have in reserves and other liquid assets at your disposal. If you have capital, that means you can withstand a short-term decline in income and still make payments.

Conditions are reflected by the environment in which you live. It might include the state of the economy, your line of work and other external factors that might impact your credit report. For example, during the liquidity crisis in America, conditions for lending are very, very bad.

Now you know where credit scores come from. You probably have more questions, since there is a lot of ground to cover. To get more information, please feel free to learn along with me and my students by visiting http://www.drboycefinance.com/.



Dr. Boyce Watkins is a Finance Professor at Syracuse University. He does regular commentary in national media, including CNN, ESPN, BET and CBS. For more information, please visit www.BoyceWatkins.com

Wednesday, October 8, 2008

Dr Boyce Watkins: Fighting with Bill Collectors


One of the groups that was not bailed out during the recent financial crisis has been the American consumer. Congress took care of the firms on Wall Street, but they didn’t take care of the millions of Americans forced to confront the realities of bankruptcy, foreclosure and uncomfortable confrontations with menacing bill collectors. It appears, sadly, that every man and woman must find their own way through this financial tragedy.

Bill Collectors really want their money, like the rest of us. Some of them seem to feel that it’s O.K. to resort to flat out thuggish intimidation to get their money back. That might work on The Sopranos, but it shouldn't work in real life.

Part of the reason abusive bill collectors can have their way with the public is because many citizens do not know their rights. Bill collectors prey on the uninformed in a terrible way: They may threaten to have you arrested, harass your relatives, call all hours of the night, and engage in other types of atrocious behavior to get their money out of your hide.

One woman successfully sued a rogue bill collector after he called her repeatedly with threatening language. The woman, a senior citizen, was told by the man to "Stop with the sob stories and pay your god d*m bill!" This kind of behavior is not acceptable, and bill collector harassment doesn’t have to keep you up at night.

The Federal Trade Commission states that complaints against bill collectors are rising, reaching the highest level they've seen in the past 3 years. Most of the complaints focus on vulgar language, trying to collect more than the amount of the true debt, and extra fees, such as court costs.

You have rights that can protect you from bad and malicious bill collectors. You want to keep these in mind as you work yourself out of debt:

1) There is something called "The Fair Debt Collection Practices Act". If you are not familiar with this document, get familiar with it. You can read it by clicking here.

2) A bill collector cannot contact you at work if your employer does not approve of the contact. Let the bill collector know that this is the case and they must legally stop contacting you at your job.

3) Bill collectors cannot call you before 8 am or after 9 pm. The only exception is if you give them permission to do so.

4) A bill collector can only contact your friends and family if they are trying to find a way to get in touch with you. However, some of them may do this in order to harass or embarrass you. If that is the case, you may want to tell your friends to tell the bill collector, "She does not live here and I do not know how to get in touch with her. Please don't call here anymore." Then, get the bill collector's information from your friend and reach out to them when you can.

5) You can get bill collectors to stop contacting you altogether by sending them a letter telling them to stop. You still must pay the debt, but they won't be calling you during dinner.

6) The bill collector cannot curse at you or use foul language and they must tell the truth about how much you owe. They cannot threaten to sue unless they are serious about it, and they can't touch your 401k or IRA.

7) If the bill collectors call you, you can demand that they send you a written notice of the amount you owe and who you owe the money to. If you do not believe that the debt is yours, you can write a letter to them stating that this is not your debt. They must then send you proof that the debt is actually yours.

If you feel that a debt collector has violated any of these rules, you can contact the Federal Trade Commission at www.ftc.gov. Remember that you are not powerless in this situation.

Dr. Boyce Watkins is a Finance Professor at Syracuse University and author of Financial Lovemaking 101: Merging Asset with Your Partner in Ways that Feel Good. He does regular commentary in national media, including CNN, CBS, NBC and BET. For more information, please visit www.BoyceWatkins.com. This information does not constitute legal advice. For legal advice, please consult your attorney.