Tuesday, February 24, 2009

Saturday, February 14, 2009

Credit Card Companies Secretly Raising Rates

By Dr. Boyce Watkins


In case you weren’t sure, credit card companies are not out to help you. If you are financially illiterate and uninformed, they are going to exploit you. If you are worried about the financial crisis, they are going to prey on your fear to get money out of you. They are also doing exactly what the rest of us are doing: trying to remain protected in a fragile economy.

The stimulus is stymied. The bailout is a failout. The stock market has consistently given a “thumbs down” to every piece of legislation passed in response to this crisis. Our economy is like the sick man who won’t respond to antibiotics. While the results of the latest package are yet to be seen, the truth is that no one is sure what will work. Every company is out to protect their assets and hold on to their cash, which means they no longer have much interest in loaning money to you.

Yes, this is true even if you have a good credit score, which is the ironic part.

Customers are opening their monthly statements to find that credit card companies have started to either ration credit (give less of it) or raise the interest rate being paid on outstanding debt. This doesn’t even count all the dirty tactics used, like using your payments to pay off low interest debt first, quietly getting rid of the grace period or charging interest on your balance from the prior two months vs. the current one. Even when you’ve been making payments on time for years, banks keep raising the bar to maximize shareholder wealth. When liquidity is scarce, those giving out water demand a higher cost per bottle. Additionally, higher default rates have justified the increase in interest rates, but higher interest rates increase the likelihood of default. It’s a nasty cycle, really.

Lawmakers are trying to intervene. Congressional hearings have taken place. Banks are being scolded by senators who keep telling them that this form of business practice is unethical and that they are gouging the American consumer. All this might be true, but what is also true is that you can’t force banks to loan you money. Also, it is very difficult, if not impossible, to legislate a strong economy.

If you have a less than stellar financial history, there is an even greater opportunity for your credit card company to raise your interest rates. If you have defaulted on other loans or are a slow payer in other areas, then they have no problem telling you to pay up or ship out. The days of easy money are long behind us, and companies are dramatically shifting their business practices.

The bottom line is that THEY’VE GOT YOU. They know that you’ve become addicted to the debt they so readily offered in the past, and this debt has become the lifeblood for the lifestyle to which you’ve chosen to become accustomed. They know that they can charge you a higher interest rate because you can’t do anything about it. Like a drug addict who is angry about paying more for his product, you really don’t have any other choice.

Well, maybe you do.

Here is one solution: tighten your economic belt. That means putting together a financial fitness plan today that consists of getting rid of as much debt as possible. I’ve mentioned in prior articles and on our website that paying off debt can be one of the best investments you make with your money. This is especially true if you have a stable job and are paying a high rate of interest to your credit card company.

So, the Dr. Boyce Challenge for this month is simple: Create a budget which includes the steady elimination of credit card debt. That means you should list every single expense you have for the entire month on one piece of paper or a spreadsheet. Don’t leave anything out. Count the money you want to use for getting your hair done, your nails, paying your mortgage, car note, whatever. Count everything. That will be your first step toward obtaining financial fitness.

As you create the budget, allocate at least 10% of your monthly after tax income toward reducing credit card debt. So, if you earn $3,000 per month after taxes,$300 per month should be allocated toward removing credit card debt, not including interest. So, if you owe $5,000 in credit card debt, you can remove this debt in roughly a year and a half. While $300 may seem like a lot of money to find in your budget, it’s there if you look hard enough. In fact, if you spend $10 per day on lunch and/or coffee, you can find the bulk of the money by taking your lunch to work. Make this one of the first bills you pay, not the last. The last bill is the one that only gets paid half the time. It’s easier to negotiate with creditors if you don’t need them so much. Take small steps toward finding your financial freedom.

Next month, we will move to step 2 of the Dr. Boyce Financial Challenge. While I confess that this change won’t be easy, I can promise that it will be worth it in the end. Be strong and remain focused, this is your opportunity to shine.

Dr Boyce Watkins is a Finance Professor at Syracuse University and author of “Financial Lipo 101: From financial fat to fitness”, to be released in April, 2009. For more information, please visit www.DrBoyceMoney.com.

Thursday, February 12, 2009

Stimulus Battle May Threaten Obama’s Agenda

It is a quick, sweet victory for the new president, and potentially a historic one. The question now is whether the $789 billion economic stimulus plan agreed to by Congressional leaders on Wednesday is the opening act for a more ambitious domestic agenda from President Obama or a harbinger of reduced expectations.


Deal Reached in Congress on $789 Billion Stimulus Plan(February 12, 2009)

President Obama and Gov. Tim Kaine on Wednesday at a parkway project in Springfield, Va., that could get stimulus money.Both the substance of his first big legislative accomplishment and the way he achieved it underscored the scale of the challenges facing the nation and how different a political climate this is from the early stages of recent administrations.

While it hammered home the reality of bigger, more activist government, the economic package was not the culmination of a hard-fought ideological drive, like Lyndon B. Johnson’s civil rights and Great Society programs, orRonald Reagan’s tax cuts, but rather a necessary and hastily patched-together response to an immediate and increasingly dire situation. On the domestic issues Mr. Obama ran and won on — health care, education, climate change, rebalancing the distribution of wealth — the legislation does little more than promise there will be more to come.

In cobbling together a plan that could get through both the House and the Senate, Mr. Obama prevailed, but not in the way he had hoped. His inability to win over more than a handful of Republicans amounted to a loss of innocence, a reminder that his high-minded calls for change in the practice of governance had been ground up in a matter of weeks by entrenched forces of partisanship and deep, principled differences between left and right.

In the end, Congress did not come together to address what Mr. Obama has regularly suggested is a crisis that could rival the Great Depression. What consensus has been forged so far is likely to be tested in the months to come as he faces scrutiny over the effectiveness of the stimulus package and the likelihood that he will have to ask Congress for substantially more money to heal the fractures in the financial system.

So this was hardly a moment for cigars.

If this is the 21st-century version of Franklin D. Roosevelt’s 100 Days, Mr. Obama seems to be pursuing it more as an urgent but imposed necessity than as a self-selected mission.

While he has deployed his political capital freely to win approval of the package and to begin pushing his version of a financial-system rescue, he has left little doubt that he is eager to move on to the rest of his domestic agenda. At his news conference on Monday night, Mr. Obama said with a hint of exasperation that a costly economic rescue package “wasn’t how I envisioned my presidency beginning.” Regardless of the government’s budgetary straits, Mr. Obama has signaled that he sees his other signature initiatives not just as salvageable but as more urgent than ever.

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Sunday, February 8, 2009

Obama’s Package Gets Items Sliced

A coalition of Democrats and some Republicans reached a compromise that trimmed billions in spending from an earlier version of the Senate economic stimulus bill.

Senators worked late into the night to trim billions from the original stimulus bill.

Senators worked late into the night to trim billions from the original stimulus bill.

CNN obtained, from a Democratic leadership aide, a list of some programs that have been cut, either entirely or partially:

Partially cut:

• $3.5 billion for energy-efficient federal buildings (original bill $7 billion)

• $75 million from Smithsonian (original bill $150 million)

• $200 million from Environmental Protection Agency Superfund (original bill $800 million)

• $100 million from National Oceanic and Atmospheric Administration (original bill $427 million)

• $100 million from law enforcement wireless (original bill $200 million)

• $300 million from federal fleet of hybrid vehicles (original bill $600 million)

• $100 million from FBI construction (original bill $400 million)

Fully eliminated

• $55 million for historic preservation

• $122 million for Coast Guard polar icebreaker/cutters

• $100 million for Farm Service Agency modernization


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Tuesday, February 3, 2009

Obama Daughter Look-a-like Gets Rich Off Her Looks

Ariel Binns is cute, smart, outgoing and looks remarkably like first daughter Sasha Obama.

Young model Ariel Binns, right, resembles Sasha Obama.

Young model Ariel Binns, right, resembles Sasha Obama.

The similarity has not gone unnoticed by the fashion industry. Harper's Bazaar magazine cast the 6-year-old Brooklyn, New York, first-grader with model Tyra Banks in a photo spread showing an African-American family in the White House.

Binns, a child model, was peering out from under a big wooden desk in an image reminiscent of John F. Kennedy's time in office.

When it comes to fashion there's nothing like a powerful brand to boost sales, especially if that brand is a dynamic first family.

"Marketers are finally waking up to it -- you know -- black is beautiful," says global branding expert David Rogers who predicts African-American models will play a more prominent role in fashion photography as a direct result of the Obamas. "It's just going to become part of the fabric of the fashion imagery of pop culture, which is a great thing," says Rogers. Video Watch young first daughter look-alike model »

At Wilhelmina Kids, a modeling agency in New York for kids and teens, agents say there is increased demand for first daughter look-alikes.

"It's a trend because, what little girl doesn't want to emulate the first kids?" said Marlene Wallach, president of Wilhelmina, which represents Binns.

Unlike the Bush twins or Chelsea Clinton, global branding experts say the appeal of the Obama girls is unique -- and infinitely marketable. After the first kids appeared in their J.Crew outfits on Inauguration Day, the company's Web site got so many hits, it crashed.

Click to read.

Helping Your Parents in Retirement

Question: My mother is 50 years old and has no 401(k), IRA or any type of retirement account that she can rely on when she is no longer able to work. What type of plan can I set up for her so she can start saving money? L.K., Lancaster, Pennsylvania

Answer: The issue of what adult children can and should do to help assure that their parents are financially prepared for retirement is one that's getting more attention as lifespans increase and we become increasingly reliant on our personal savings to fund our post-career lives.

Typically, though, this is the type of question I get from baby boomers who, already squeezed by simultaneously saving for retirement and paying school and other child-rearing costs, now face the prospect of also having to provide financial assistance to retired parents.


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Monday, February 2, 2009

Black Wealth Report: Black Women's Hair Should be a Black Business

The Black Hair industry is a multi-billion dollar industry. This industry has created other revenue generating vessels such as, conferences, schools, distribution, competitions, marketing, and even research. With an industry that is so huge and driven by the black dollar, one would expect that this industry would be under the direct control of those that make it successful, the black race. However, it is not. Though blacks still control many of the hair salons and barbershops, there is still a major disparity in many of the other businesses within this industry. Plus, recent trends have begun to emerge in the marketplace that threatens the ownership of those two entities. There is a new business model for salons, Korean-Owned and Black-Operated. This new model is growing rapidly and becoming a success among the community. While customers can continue to receive services from a familiar black stylist, the dollar ultimately goes to the Korean community.

It’s absolutely not a bad thing that Koreans are becoming fierce competitors and business owners in this black industry, so standing on the sidelines boycotting these establishments or calling for them to discontinue is a way that further perpetuates the blacks’ “right to survivorship” thinking. Blacks should not expect to be able to merely sit on a golden egg that was handed to them and not expect others to want a piece of it. The golden egg must be protected and guarded like the lion guards its kill from the hyena. Since the system we live under a capitalist system, the way a person or group rises to great wealth and sustainability is through competitive edges. Is this true? The retail segment of the black hair business is another entity that works to cipher the dollar from black community and be sent elsewhere. After research of over 800 black served beauty supply stores, we uncovered an ownership base of less than 5%. Of these same stores during a 6-month evaluation we found more than 97% of black consumers.
Is this a huge snowballing problem that should be addressed? Do blacks have the resources and opportunities within their communities but are simply not harnessing these opportunities? The problem of a low number of retail stores does not begin there. It begins at the distribution level. There is still a significant amount of black manufacturers of products but once these products leave the black manufacturers, they are placed in the hands of Korean distributors then the problem begins. Once the Korean distributors get a hold of the products they do two things: 1. They selectively distribute the products to retailers and sometimes at different prices. 2. They study the black products and soon create prototypes and begin marketing these prototypes to their huge Korean retailer base. Lucky White, CEO of Kizure Products, has boasted this as being one of her major dilemmas in her business slowdown. She is not only being competed against by other equipment manufacturers, the distributors are acting as lobbyist for her competitor.

In an industry that resulted in billions due to pioneer, Madame C.J. Walker, a black woman born into poor conditions in the early 20th century, one would expect the blueprint to this industry to be studied and executed by blacks across America but sadly this has not been the case. Why? It is not as simple as setting up shop and waiting for high profits anymore. Retail storeowners are facing many competitive obstacles such as capital, a large selection of products, and pricing. In most cases, getting an account with a Korean distributor as a Black person means you face an uphill battle. First, the distributor must approve your location before agreeing to supply your store. If they agree, now payments must be made in cash upfront with no delayed terms of payment. This is perhaps the hugest obstacle a new black storeowner faces. Then, this is a rippling effect. If distributors are consuming the capital instantly, then there is less available for the new black owner to obtain an abundant variation of products. Lastly, the pricing advantage many Korean stores are able to provide for the black consumer keeps them coming back over and over again, showing very little regard to a black storeowner down the block. This pricing advantage is also a resource for the Koreans because of the relationship they have with the Korean distributors.

However, the nail has not yet been driven into the coffin of the black lockout of their stake in this industry. I am living proof. I emotionally entered into this industry when I was thrown out of a Korean-Owned beauty supply store while I was attempting to make a huge purchase for my salon. The owner felt uncomfortable with me browsing and being selective. His frustration grew to rage so he then threatened me with a golf club eventually throwing me out of his store. Like many black men, I didn’t know of the huge lockout that took place in this industry until I had already signed a $5,000 lease for a location. My uphill battle began as distributors wanted cash and many didn’t even return my phone calls. Little did many of them know my persistence is abnormal. I took daytrips on airlines to physically walk into locations in New York and Miami until I got what I wanted. My goal was to give our community options in shopping while receiving the respect they deserved. My one location turned into three in 18 short months. Trial and error was my ally. As I learned, I perfected. Here a few things that an aspiring owner can implement.

Communicate with other owners – Find other owners willing to communicate with you in your market and even throughout the country. They are more than willing to share valuable information with you and you should do the same.

Automate the Store – In this fast-paced era, do not rely on spreadsheets and manual inventory tracking. This can slowdown your customer fulfillment process and tie up valuable time that could be used elsewhere.

Be a competitive and creative owner – Do not do what the next guy is doing, do what he isn’t. Establish store niches.
Establish Non-Competitive Clauses – Secure your market share within your mall at the least. Do not leave the gate wide open.

Manage the Cash Effectively – From your gross, pre-allocate percentages for capital expenditures, marketing, taxes, procurement, payroll, etc and have different bank accounts for each one with the monies being deposited systematically. Do not rely on self to divvy up or disburse the funds as you receive revenue.

Form Alliances Outside the Black Hair Industry – I once went to a children’s theme park with my sons and discovered that a local pizza franchise provided the pizzas for the business at a discounted rate. These opportunities exist for beauty storeowners as well. I established plenty. One place is funeral homes.

Seek Consulting – Never think you know it all. I had two beauty storeowners that acted as my mentors for the first year. I compensated them for intense assistance but for quick advice they were glad to help. Expect nothing for free. Allocate funds for this too.
Location, Location, Location – Do not pick a convenient location for you, pick a convenient location for the customer. There are moneymaking opportunities even when there is an existing beauty store. Don’t be afraid of the competition. The way you operate may be the way the customers in that market prefer.

Though I have highlighted distribution as the component needed, it is not the way to launching strategic efforts, and neither is boycotting. Building up the amount of black-owned retail stores is the first step in a strategic plan like this. The demand must first be created if a black distribution plant is to be successful. The black hair business is a cash cow but in its current state the cow is jumping over the moon with the moneybag heading to other communities.

Devin Robinson is the author of Taking it Back: How to Become a Successful Black Beauty Supply Store Owner who resides in Atlanta, GA. Visit his website athttp://www.takingitbackblack.com/.

The need for Money: Vivica A. Fox Becomes a Psychic Friend

Sunday, February 1, 2009

Study shows that subprime lending costs Minorities over $213B

The social advocacy group United for a Fair Economy just released a study stating that the cost of the mortgage crisis has been $213 Billion to minority groups.  The cost was calculated over the 8 years of the Bush Administration.

"Millions of African Americans lost their homes as a result of predatory lending and complicated contracts," says Dr. Boyce Watkins, Finance Professor at Syracuse University.  "This was a double whammy for senior citizens, including my own grandfather."

The report was entitled "Foreclsure: State of the Dream".  In fact, the study concludes that the impact of the crisis on the Black community was "the most massive loss of wealth for African Americans in U.S. history."


Your Black Wealth: Bank Bailouts Used to Hire Foreigners

Banks collecting billions of dollars in federal bailout money sought government permission to bring thousands of foreign workers to the U.S. for high-paying jobs, according to an Associated Press review of visa applications.

The dozen banks receiving the biggest rescue packages, totaling more than $150 billion, requested visas for more than 21,800 foreign workers over the past six years for positions that included senior vice presidents, corporate lawyers, junior investment analysts and human resources specialists. The average annual salary for those jobs was $90,721, nearly twice the median income for all American households.

The figures are significant because they show that the bailed-out banks, being kept afloat with U.S. taxpayer money, actively sought to hire foreign workers instead of American workers. As the economic collapse worsened last year — with huge numbers of bank employees laid off — the numbers of visas sought by the dozen banks in AP's analysis increased by nearly one-third, from 3,258 in fiscal 2007 to 4,163 in fiscal 2008.


Click to read.