|
Episode #1819
More Money Traps
Lewis: Mitchell Lewis, Host
Reid: Harvey R. Reid, H.R. Consulting
Williams: Lisa Williams, Center for H.O.P.E
Lewis:
If
you are thinking, “My problems would be solved if only
I could make more money,”—think again. We’ll
talk about the “More Money Trap” next on Black
Issues Forum.
Voiceover:
This program was made possible by contributions to UNC-TV
from viewers like you. Thank you.
[THEME
MUSIC]
Lewis:
Good evening everyone, and welcome to Black Issues Forum.
I am Mitchell Lewis. Thanks for joining us. It’s an
issue that affects not only the African American community
but Americans at large—money. When is more money the
answer, and when is more money a trap? On a future episode
we’ll talk about strategies for growing your money,
but tonight’s discussion is dedicated to those who are
looking to gain control of their finances. We have two very
exciting guests with us this evening. Harvey R. Reid, a financial
literacy consultant who founded his own company, H.R. Consulting
in Chapel Hill. He conducts workshops on life skills and household
money management. And Lisa Williams, a guest from previous
programs whose sage financial advice and wit are just too
good to present only once. She is the CEO and founder of the
center for H.O.P.E. in Cary. Lisa also hosts Living in
the Black, a nationally syndicated radio program on financial
management. You can listen online or locally on WNCU radio
90.7 FM. Lisa, welcome back; and Harvey, welcome to the show.
Williams:
Thank you.
Reid:
It is good to be here, Mitch.
Lewis:
Now, both of you have very inspiring stories about how
you pulled yourself from the proverbial bootstraps, if you
will, to get rid of your financial problems. So that our audience
won’t think that you guys were born with a silver spoon
in your mouth, tell us how you faced your financial challenges.
Lisa, I’ll start with you.
Williams:
There came a time in my life when I decided that I didn’t
want to be where I was anymore. As in everything, we have
choices in our lives. I had a choice to continue to be homeless
or not to be homeless, and I chose to do whatever it was going
to take to move from that situation. That meant asking for
help from people I normally would not have sought help from,
opening doors for folks and having folks open doors for me
so that I could walk through just to do those small jobs to
give me some type of finances so that I could pay for a one
room place to live.
Lewis:
Harvey, what is your story?
Reid:
I started out at one time being in the position of a welfare
recipient and making the commitment that I wanted to change
that situation—primarily for my children as a single
parent at that time. I also got involved with the many people
who could help me. I did the process of just learning from
others who already had some insight.
Lewis:
You were talking about outside help and pride because it seems
like that’s a big problem in acknowledging that you
have a financial problem. Talk a little bit about the outside
help.
Reid:
Once a person is able to get past recognizing that they
really have some needs, then seeking out folks who have information,
have knowledge, and some background in finances is very important.
Finance is something that we are going to deal with life long.
There is a great deal of experience and a great number of
organizations and groups that can help and assist a person.
A person has to be willing to pursue those things.
Lewis:
Lisa, what are your thoughts on that?
Williams:
I agree with him wholeheartedly. Mine was a little different—my
situation, because I was 12 years old when I was homeless.
As a child I didn’t really have the pride issue; it
was just not knowing who to ask and who to tell what had happened
to me so that I could get help. When I finally realized that
I didn’t need to keep the secret anymore because I was
living outside and I desperately needed shelter, it became
obvious to me that anyone who said, “Are you lost? Do
you need help?”—that I should open up to and say,
“Yes I am, and I do need some help.” Once I did
that doors opened for me. Folks stepped into my life who were
able to provide shelter for me and food at different times
of my life until I got myself on my feet and started making
some decisions and choices in my life. That is when things
changed for me—when I really started taking ownership
of my situation.
Lewis:
Harvey, what questions should folks ask themselves to
find out if they are in that “I need more money”
category?
Reid:
One of the things they need to ask themselves is, “Do
I know my budget? Do I know how much income I have, and how
does my income compare to my expenditures? How does my income
compare to my debts?” They should really kind of understand
what the flow of that is. Once they recognize that then they
can pretty much pinpoint where they might need to find some
assistance.
Lewis:
Anything to add to that Lisa?
Williams:
When people want to move from that situation or find out
where they are, I want them to decide, “How much debt
do I have? Is this something I want to continue to live with
or not?” They need to make some choices around their
money situation. A lot of folks don’t know what they
have or how much debt because they are too scared to look.
At some time in your life you must take off the blinders.
You know you have to confront what you have and deal with
it openly. Open the drawers and pull out the bills that you
haven’t opened yet because, trust me, they are there.
I have folks coming to me with trashcans full… Pardon
me, trash bags full of unopened bills. Therefore, they can
never tackle the issues of their real debt problem or their
financial problems because they have never looked at what
has come in the door. Don’t do that.
Reid:
Those bills actually represent their budget. Those are
the facts of their budget. One of the things they need to
know about their budget is, “Where are the facts? Who
do I owe and how much do I owe them? When do I need to pay
them?” They need to collect up all that information
so they can set up some type of schedule for themselves. That
is how they gain control.
Williams:
Absolutely.
Lewis:
Speaking of facts, we’d like to share with you some
quick facts about Americans and our debt problem. From a 1998
report by the Common Sense Foundation, in 1995 consumers were
using credit cards, car loans, and other installment loans
to borrow at a pace of $10 billion a month. From 1993 to 1997
credit card debt alone doubled to over $422 billion. About
55% to 60% of all households carry a credit card balance.
Their balances average $7,000 and cost more than $1,000 a
year in fees and interest. As debt increases…
Reid:
Yes.
Lewis:
I see you are agreeing. As debt increases, personal bankruptcies
also increase. Credit card debt constitutes 16% of all debt
on the average bankruptcy petition. In 1997 a record 1.3 million
people filed for bankruptcy. In North Carolina, personal bankruptcies
have increased 185% since 1980. Speaking of bankruptcies,
what are some of the pitfalls in actually filing for bankruptcy?
Lisa?
Williams:
I don’t advise my clients to file for bankruptcy in
most instances. Sure, bankruptcies—the law and intent
of them is good for some folks perhaps who suffer medical
conditions and they have astronomical bills. They can’t
pay them because they are completely ill, and they are unable
to work. Certainly there are instances, but for me it is about
changing the way you do business. It is about not eating out
at McDonalds every single day and spending $5.00. Let’s
say 20 days you work a month, spending $5.00—that is
$100 bucks. Saying, “Oh, by the way, I cannot pay my
electric bill that is $90.00.” You spent $100 at McDonalds.
You said, “I really need to file bankruptcy because
I’m having issues paying my bill.” “All
right, give up McDonalds.” “I can’t do that.
I can’t pay my mortgage, but I can pay for cellular
phones and I can pay for cable television. I can go get a
$100 hairdo. I can’t pay my bills, so I’m going
to file for bankruptcy.” Now, you see—I have issues
there. What I like to do with my clients—and Harvey
probably is the same way—I sit down with them and identify
those issues that we can change so that perhaps we don’t
need to go the route of bankruptcy because we can do some
other things a little differently. If I can help you bring
about $400 or $500 back into your home, then most likely you
don’t need to file for bankruptcy. That is not the case
for everyone, most certainly.
Reid:
Bankruptcies are primarily for people who have a great deal
of assets originally, and they are really trying to do it
to protect their assets. People who file for bankruptcy who
don’t have a great deal of assets actually create a
hindrance because it is usually on your credit report for
seven to ten years. Therefore, you can’t access resources,
and for people who don’t have a lot of money, they have
to use their credit to even access assets because they have
to pay for them over time. If you have bankruptcy many times
people are not going to do business with you because they
assume that you are not able or willing to pay. You’d
rather not pay a person, and you’d rather do bankruptcy
than pay a person. It is kind of a history that follows an
individual over time.
Lewis:
Lisa, sometimes… Well, we’ve seen it a lot
on television and other places about credit counseling services.
Is that a viable option?
Williams:
Absolutely. There are some very good nonprofit organizations
doing those types of services. That is certainly something
people should look into prior to going to bankruptcy. They
should also just open their eyes and their bills first of
all to get a handle on what kind of condition they are in.
That is the first thing the counselor is going to ask you
to begin with. They want to know how far behind you are, who
you owe and the account numbers. Have you made contact with
these folks already to let them know what your predicament
is? Many people are losing their jobs here in North Carolina.
Our creditors understand that. They don’t understand
why you don’t pick up the telephone and call them. They
don’t understand when you avoid them. They don’t
understand when they are trying to help make a payment plan
with you, and you are refusing to talk with them. You know,
at some point we need to take it upon ourselves to say, “I
am responsible. I’m a responsible adult, and I must
make the calls.”
Lewis:
Harvey, you’re thoughts?
Reid:
Counseling is a form of education. Most people’s
education on finances is really through trial and error, and
mostly error. Many times they are still paying for it. Counseling
allows for you to at least get some exposure to how you can
manage your money and to give you some encouragement on the
things you can do. There are all types of education. Sometimes,
like in my organization, we provide financial education which
works with counseling. It helps you get the information together
to go to counseling. You need to take facts to counseling,
not just what we call estimations or “guess-timations.”
That is very important to do.
Lewis:
There is a saying that says that it is probably best to
talk to a person because a computer has no emotions, something
along those lines. Let’s take a look at where African
Americans are in terms of sharing in this issue. As of 2001,
according to a 2002 report by the Business Women’s Network,
African American buying power was already at $572.1 billion.
This was a 95.6% increase from 1990. Within the next five
years that buying power is projected to increase by nearly
30% to $682 billion annually. Who is doing all the spending?
It appears that it is the women accounting for about 56% of
all African American spending. Twenty-seven percent of American
families with an income of less than $10,000 have an outstanding
credit card debt that totals more than 40% of their income.
As many disparities that exist in our country, here is an
area where African Americans are on equal footing with whites.
According to a 2000 report in the Sun Reporter, 46% of both
African American and white households have credit card debit.
Now, Lisa, you were laughing while I was talking about how
women seem to have more problems with credit than men. I can
see that is questionable. What are your thoughts on that?
Williams:
Unfortunately the women clients I have—they’ve
asked me to stop picking on them and try to pick on the men
some. I have seen that it is the case, that most of my clients
that I have are women, and they are coming in with credit
card debt. I always ask the question, “Did you really
need a second pair of black shoes? Can you wear both of them
at the same time?” The response is, “Well Lisa,
you must understand. It was on sale.” I say, “It
was on sale? You don’t have an emergency fund, but you
bought another pair of black shoes.” They say, “The
dress is for a party.” I say, “You are going to
buy a dress for a party, but you haven’t taken care
of your investments or your retirement accounts?” We
will go out and charge our future up so that we can’t
live tomorrow. That is devastating. My males, though—let
me go there. I have to talk about them a little bit because
I will get calls. They are buying the latest gadgets, the
latest palm pilot or a new set of golf clubs because Tiger
Woods has done something spectacular. “Lisa, I just
had to have it so I could show Norm down the street that I
could play well if I had those clubs.” We are impressing
our neighbors, our co-workers, and our friends. Credit is
being used by both males and females to do that. Sometimes
it is an emotional piece as well. People start charging because
they are not emotionally balanced. That is a trap that I hope
that most women—because I see it more with women—will
back away from. It is not a footing I want to be equal on
with my white counterparts.
Lewis:
Harvey, do you see this as sort of “keeping up with
Joneses” in a way?
Reid:
Certainly many people do that. That is what we have been
promoted to do, and that is what we are educated to do. A
lot of the promotions that we see consistently are about,
“Get it today and pay for it tomorrow.” Relating
to the issue about women, the other issue that goes along
with women is that they are the majority of primary money
managers for most households. Therefore they use credit cards
to resolve a number of issues in their household and in their
spending. So it is not unusual that they would be the highest
spenders or in higher numbers. Simply because they are the
primary managers of household finances, and especially dealing
with single parents—they are going to use whatever resources
they have to try and make ends meet sometimes. Unfortunately,
credit cards seem to be some of their solutions. They may
not always use them wisely.
Lewis:
Lisa, do you see this as a problem as far as a socioeconomic
status, or is it across the board?
Williams:
It is across the board. We have clients that—we
certainly do seminars in shelters and other women’s
organizations. We go out into the homes of people who are
making $50 and $60 thousand, and then on the other spectrum
I have my doctors and my attorneys who are making six-figure
incomes. When they come to the table they all come with the
same issues and concerns. “I got myself in this mess,
and I don’t know how to get out.” I ask the question,
“Why are you charging? Why are you billing it?”
They say, “It is what I know. No one has ever taught
me anything. Lisa, I went to medical school to learn how to
heal people. No one taught me about my finances.” When
I ask the woman who is raising her two children alone she
said, “My parents didn’t teach me. My mother didn’t
know. This is all I know.” So, it is across the spectrum.
It really is.
Lewis:
Let’s talk about money traps. Harvey, what do you
see as some of the major money traps affecting people now?
Reid:
One of the major money traps is people think that if they
had more money then they could fix their problems. What many
people will experience is they have a poor money management
system. What they end up doing is taking more money and putting
it into a bad system. It is very important that they learn
to address what resources they presently have so they can
identify what would really benefit them. Going out and getting
consolidation—that could happen. You can get a consolidation,
but if you get a consolidation and go out and start spending
money all over again, you really haven’t resolved your
problem. But you have actually expanded it.
Lewis:
How about refinancing? How important or how damaging is that?
Reid:
Refinancing can hurt you in a couple of ways. One is,
many times when people are trying to refinance they are trying
to move debt around. Some people will actually refinance unsecured
debt making it secured debt. That can sometimes get them into
trouble. If something goes wrong with those debts then they
can lose their house or lose the assets that they may have.
That can be a problem for folks.
Lewis:
Lisa, sometimes folks turn to part time jobs or home businesses
trying to gain some extra income. Is that a good thing or
a bad thing? How does it work?
Williams:
I always think it is a good thing, but I think you need
to have your priorities in order. You can go get a part time
job if it is to pay off those credit cards, a student loan,
or if you want to make extra monthly payments on your mortgages.
Basically, you have a specific reason for doing the job. What
generally happens is, folks will get a part time job or start
a small home business and decide, “I have extra money.
Forget the fact that I am still in debt with the credit cards
or that I’m behind on my mortgage. I’m going to
go buy a new car with that extra money.” It is not extra
money. You got the job for a specific purpose. We tend to
forget. That is why I ask people not to keep it all in their
heads but to write it down and have it on their refrigerator,
on their car dashboard, on their bathroom mirror, because
they are hopefully going to brush their teeth when they get
up in the morning. They have to see the goal. This is the
reason I’m working. This is the reason I have the home
business. When I bring the money in, this is where that money
will go. They need to understand how it is going to be applied
and when they will see some results. That is the key to it.
Lewis:
Harvey?
Reid:
The thing I would add to that is, people have to recognize
that even when you add something to your life like that it
has a cost in and of itself. Starting a new business has its
own cost even if it is home-based. If you are going to get
an extra job, you’ve got to consider if you need a babysitter
because your money could very easily… In my own personal
experience as a single parent, getting an extra job meant
that I had to give that money to the babysitter because that
is who is watching my children. It may not always be to an
advantage. You have to assess all of the advantages and disadvantages
to that to determine whether you are really going to benefit
from it.
Lewis:
If we can’t afford anything else, one thing Americans
can afford is more concern and education on how to
avoid getting into debt trouble and how to get out. Let’s
talk about credit cards. What do people need to do with their
credit cards Lisa?
Williams:
I don’t know how you want me to answer that one
today. There is nothing inherently wrong with credit cards.
It is the folks who have the credit cards. If you do not have
control over your budget and your money, if you do not have
a clue on how much you make and how much is going out, you
need not have credit cards. That is plain and simple. Most
folks will disagree with me. For those folks who disagree,
that is okay. If you want to say, “Lisa, I need one
credit card for emergencies, if I have to fly somewhere and
I need a credit card to fly or to rent a vehicle.” Most
certainly—that is fine. You know that we all define
emergencies differently. Getting a new dress may be an emergency
for someone. Buying that tie may be an emergency for him today—something
of that sort. What I ask people, if you must have a credit
card, do not have more than one major credit card. Truly understand
when you need to use that credit card. If you can’t
pay cash for it, don’t use the credit card. If you can’t
pay for it within that 30 or 28-day grace period then you
don’t need to have it right then. Plan for it, and get
it a little later. Again, there is nothing inherently wrong
with credit cards. It is just when we don’t know how
to use the tool properly. That is with anything in life.
Lewis:
Let’s talk about investments. What do people need
to do to try and ensure that they don’t get into credit
problems or to try to prevent from getting into a bad credit
situation. What are some of the things that they need to have
or some of the people they need to be in contact with?
Reid:
One place people need to go to is to get some form of
counseling. Go to someone with some experience. There are
also financial folks that can help you talk about investments,
but you really need to assess whether you have those additional
monies to put into investment. Investments have a tendency
to grow slowly, but debt grows very quickly. You need to deal
with your debts even before you consider really investing,
because if you are putting money into investments and you
have a great deal of debts you are simply not transferring
the money. You are keeping money somewhere else instead of
transferring it over to alleviate the debt. Debt has a lot
higher interest rate, where investments may grow fairly slowly.
We have to address that factor.
Lewis:
You work a lot with people in social services. How do
you counsel them?
Reid:
We primarily do classes to give them some basic understanding
of money management. We are helping them to understand and
identify the income of their household which includes all
the partnerships and everyone involved. We educate them on
the fact that they must identify their expenditures. What
are your expenses? Then talking about dealing with credit
and what their credit report says, we teach them about those
things. Many people don’t even know how to order their
credit report. That is a problem, because if you can’t
get your credit report, you really aren’t managing the
full picture of your economic situation.
Lewis:
Lisa, you were talking early about how sometimes we weren’t
really taught how to take care of our finances. As far as
children are concerned, when is it a good time to start teaching
them about finances, and what should they be taught?
Williams:
I start with my children—and you know, I have a
whole slew of children. I have five children under 13. When
we start taking them to the grocery stores even as babies
say, “This is a dollar. This is what we can buy.”
Not that they were grasping what we were saying at that time,
but it became a ritual with us. Routines are what children
really need in order to learn. We began to do that when they
were three, four, and five years of age. We took them to the
bank so they could deposit some of their money in a savings
account. Clearly that is not where we wanted their money at
that time—we wanted it in investment vehicles, but we
needed for them to get into the habit of taking their money
or sending their money to an institution so that they can
start getting some type of interest on it. I believe that
if you get the habit going early they will stick with it.
My children have done that, and successfully so. They now
have their own brokers that call them and let them know what
is going on with their portfolio. They expect that now. It
is not for them to grow into, but it is for them to manage
as they are growing. For us that is what it is about. If I
can just sort of recap a little bit on that credit card issue
that you asked about a little earlier. I think it is also
important, as Harvey said over here, that most of the time
folks are spending anywhere from 18% to 24% on credit cards.
Even those people with decent credit. It is interesting that
they want to go and invest and get 3% and 4% on their money
when they are still paying 18% to 24% on their credit card.
The other piece to that is most people aren’t really
getting the true cost of what having credit cards is all about.
If they are late just one day Mitch, they are going to pay
anywhere from $29 to $35 late fee on top of their charges
and finances. And, if you have a bounced check there is another
$35. We are talking late fees and over the limit fees. That
is $29 to $35. Before you ever attack that balance there you
have already spent almost $100 on late fees and over the limit
charges and interest.
Lewis:
What about services involved like the automatic payments
and drafts? Plus or minus in your opinion?
Reid:
I think the automatic drafts are positive in that it creates
consistent payment to your debtors, but the issue is if you
are not consistently putting in the resources to pay your
debtors then it is actually going to cost you. Banking can
actually cost you if not done properly and not managed well.
If you are having a draft come out and you don’t have
the money in the bank, now you are charged by the bank for
having insufficient funds. It is really about management and
organizing your money to make sure that if you are going to
set up such a situation that you can manage it.
Williams:
I think it is a good thing though. Just like anything
else, it is a good thing; it is just whether or not we manage
it properly. There is nothing wrong with having automatic
drafts. It is a good system. It is up to us to do what we
need to do in order to make sure the money is there.
Lewis:
Let’s try to empower some people here. What advice,
or what words of empowerment, would you give people who are
struggling right now with their finances?
Williams:
Make a decision. Make a decision if you want to live tomorrow
the same way you are living today. You make the decision,
become accountable and then seek help if you need help to
get it under control. There is not shame in asking for help.
That is a sign of courage and strength. That is what I would
ask people to do—make a decision, change their attitude
about the way they are leading their life today.
Lewis:
Harvey?
Reid:
The thing I would advise is to collect up all your records
dealing with your finances and put it all on paper. Write
it all down so you can see what the facts are. Once you see
what the facts are then you can deliver that information to
people who can assist you and give you good advice about it.
You need to develop a good record keeping system and collect
up all your information so you know exactly what you are dealing
with.
Lewis:
Thank you for a very enlightening conversation. I’d
like to thank both Lisa Williams and Harvey Reid for sharing
their expert insights on avoiding more money traps. If you
would like to get in touch with our guests or obtain a copy
or transcript of tonight’s program, visit us online
at www.unctv.org/bif. When you visit be sure
to give us your comments and program suggestions. You can
also call us on the BIF line at 919-549-7167. Join us each
and every Friday night at 9:30 p.m. for more stimulating discussions.
For Black Issues Forum I am Mitchell Lewis. Good night.
[THEME
MUSIC]
Voiceover:This
program was made possible by contributions to UNC-TV from
viewers like you. Thank you.
[THEME
MUSIC]
|
