Here’s Joe: Chopping Onions and Saving Money

Joe Woods large
I’ve been watching a lot of US Open Tennis. As any fan knows, that means being inundated with commercials pitching financial advice. As a fee-only financial planner, I groan at most financial commercials partly because I suspect a lot of people get most of their financial information from them.

But I saw one (over and over) that I like!

This commercial shows Joe Woods on his first day on the job in the kitchen, wearing an apron and chopping onions. The voiceover says that his boss told him two things: cook what you love, and save money.

The narrator informs us that Joe gets promoted to waiter. Joe is still chopping, and his outfit changes to a black vest. The narrator details Joe’s many promotions and wardrobe changes. He ends up owning his own restaurant specializing in northwestern fish and game. He’s still chopping, and he’s still saving. It implies—isn’t that easy? Courtesy TD Ameritrade.

I like the commercial because it:
  1. Illustrates the first financial fundamental: save money.
  2. Implies that saving isn’t for the wealthy, it’s a path to wealth.
  3. Focuses on the actions that Joe controls rather than on what he has no control over.
The commercial would be better if it:
  1. Illustrated the first fundamental of financial planning more specifically. It would be great if it said something like, “When Joe became a waiter, he kept saving 10% of his income. Even tips.”
  2. Addressed the wide swath of people who didn’t start saving when they were bussing tables. What about everyone else?
But, let’s put this commercial in perspective. Most financial industry commercials try to get people to act by generating fear. That makes everyone watching feel slightly worse. Joe Woods models financial empowerment. Thanks Joe!

Here’s the
commercial in case you want to see it (again!)


Who Wants to Be a Millionaire?

McNary Blog 2
Welcome guest blogger: Judy McNary CFP(R)

I posed this question at a seminar recently and all hands shot up.  It doesn’t matter whether you are old or young, you politics are red or blue, or your diet is omnivorous, vegetarian, or something in between. Being a millionaire sounds pretty cool.

As a financial planner, I have the opportunity to work with quite a few people who are millionaires. Many are multimillionaires, too.  I love working with them because they are enjoying life and it shows.  Some travel quite a bit. Some spend a lot of time with family and friends. Others volunteer. Most do a combination of these things but no two clients are the same. 

What’s interesting to me is that none of the people I work with became millionaires by winning the lottery or by inheriting it from some previously unknown relative who died on the plains of Africa.  In fact, the one thing they all have in common is that they made a habit early on to spend less than they make.  By setting aside a little bit of what they earned – no matter what – and investing, their savings grew to the point that they’ve retired early or work part-time or do whatever it is that makes them happy.

Spend Less Than You Make.  These five words are so critical to financial success I named them The Platinum Rule. There are many ways to become financially solid but all of them are built on this one rule. Let’s face it, nobody aspires to be wearing a blue vest and helping people get shopping carts when they’re 80. Avoid the dreaded Walmart greeter path by putting The Platinum Rule to work in your life today.  Right now. K?

Judy McNary is the author of the new book Coin. It’s irreverent and practical guide to personal finance for the new grads. Click here for more information or here to get the book on Amazon.

Breaking up with My Bank

Dear Bridget,

Although I like a good vampire movie, I don’t like it when I feel like my big bank has fangs in my neck. Between high fees, low interest earnings, and lousy service I am fed up. Don’t get me started on the way they game the political system and the foreclosure crisis. I’m ready to change. Help!

Not heartbroken

Dear NH,

Wow! Call me Bridget the Big Bank Slayer.

If you want to switch banks, here are some suggestions:

Suggestion one: stop auto-pays at your current bank.
The big banks focus on convenience; they were the first to figure out banking online makes it difficult to switch institutions. Auto-pays make it that much tougher to leave.

To prepare for the break-up, stop auto-pays; paying everyone manually through your online banking system is fine. Consider getting a regular paycheck instead of direct deposits. Or, find out what your payroll department will require for you to change the direct deposit of your check. Once you’ve switched to a new bank and you feel good about it, go ahead and start up the auto-pays again.

Suggestion two: Explore your local community banks
Local community banks are privately owned local banks. That means that they take deposits and loan them out to the local community. Large national banks may do some community lending, but with local community banks your dollars on deposit should help the local economy, not trickle off into corporate never-never land or the derivatives market.

If you look around when picking banks you can typically find a local community bank that is convenient to where you live or work. Online banking will probably be available, perhaps with an interface that seems more basic than as with the too-big- to-fails. When I got fed of with my big bank, I checked the ratings on Yelp before picking North Community Bank in Chicago for a lot of my banking.

Suggestion Three: Explore Credit Unions
Credit unions are created when groups of people pool their resources, hire a manger to run the operation, and provide banking services to themselves. Credit unions are owned by their members and can limit their membership.

They are run typically in a straight-forward manner with transparent agendas. They’re not trying to lure you in and extract fees. They’re trying to provide the best service to the most members.

Often credit unions originate with employers. I’m still a member of Summit Credit Union in Wisconsin, which I joined because my coworkers at my part-time job working for the state government when I was in college told me it was a good deal. Other credit unions have geographical boundaries. Here’s a website to help you locate a credit union that might work for you:

Suggestion Four: Find a Community Development Bank
Just add “development” to a community bank and you’ve got another type of bank. The difference between a community bank and a community development bank is that a community banks lend money to the community at large and community development banks focus their lending on people who don’t have access to regular banking. In other words they reach out to the economically disadvantaged.

Community development banking has taken off since legislation that encourages it was passed in the 90s. Although a rapidly growing sector of banking, there are far fewer community development banks than either community banks or credit unions. While deposits up to $250,000 are insured by the FDIC, this type of bank typically lacks some of the convenience factors of other banking institutions.

I posted a listing of community development banks on my website from Green America:
Green America Listing of Community Development Banks

For many people, the ideal would be banking at a community development bank down the street. Unfortunately, most people don’t have that available. Just like many decisions, picking a bank requires striking a balance between idealism and pragmatism.

So how to make decisions? Here’s my recent experience. I have one account I’m interested in moving right now: my high-interest Internet savings account.

I recommend high-interest Internet savings to stash emergency funds. Personally I’ve had this type of account with ING Direct for over 5 years. These accounts pay about 1% right now. That might sound pathetic until you open up a Chase statement and see the interest on their savings accounts: .01%. That’s right, the Internet accounts pay 100 times more.

From the bank’s perspective, I think these accounts are a marketing tool to get deposits. As a customer, my big concern is that a high-interest account will suddenly and silently become a not-very high-interest account. The biggest risk I’m taking in switching is that the bank will withdraw the high-interest.

So what are my options? My local community bank and my credit union don’t offer high-interest Internet savings. I haven’t found many that do. If I’m going to bother switching, it’s going to be to a local bank.

Chicago was home to one of the pioneers in community development banking, ShoreBank. Politicians of almost every ideology like banks that help people who can’t get loans, and ShoreBank was located in the community where Barack Obama got his political start as an Illinois state senator. I would venture to guess that somewhere there is a photo of a young-looking Obama smiling in between the founders of the bank.

ShoreBank got in trouble like a lot of banks did and ended up being taken over by the FDIC and selling its assets to a group called Urban Partnership Bank a few years ago.

Urban Partnership Bank is the ultimate political hot-potato. When ShoreBank was in trouble, some folks on the right claimed that because of the bank’s association with Obama, they were getting preferential treatment.

But the folks on the left have a lot to hate, too. Because who owns Urban Partnership Bank? It’s a private bank owned by a consortium of foundations and companies (including Goldman Sachs and Citibank). The owners sounds like fat-cats with questionable motives to many on the left.

So back to my banking decisions. When it comes to what I call sustainable personal finance, I’m not a purist; I’m a pragmatist. Urban Partnership Bank has a high-interest Internet savings account. Their mission is to loan to people who can’t get loans. They’re paying 1% and are FDIC insured. Political hot-potato or not, I’m going to give them a try.

by Bridget Sullivan Mermel


Don't Max out Your 401(k)

If you were to get on the Internet and poll the financial
gurus, the message you would get load and clear is: Save
No matter how much you've saved, you will be woefully
short when you get to retirement.

The first suggestion of these pundits? Put money in your
(I will use "401(k) as a surrogate for all retirement
savings plans: 401(k), 403(b), SEP, SIMPLE etc.)
I'm not against 401(k)s. Actually, I'm a big fan. However,
think the advice is wrong.

Here's my message: Save 10% of your income. Put your money in
a savings account. This will become your emergency fund.