Credit Card Companies are Certainly Out to get You During This Crisis

By Dr. Boyce Watkins

www.DrBoyceMoney.com

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.

Technorati Tags: black money,black wealth,african american money,african american wealth

Financial Liposuction: My Fun Way to Talk about Money

If you want to know what I was up to this weekend, I was in NYC freezing my butt off. What's most interesting is that I was supposed to fly US Airways, out of Laguardia around the same time the plane went down in the Hudson. Of course I would not have been on that flight, but that's too close for comfort!


I saw Raven Symone backstage, as she went into the makeup room right after I did (they make you wear makeup when you go on TV - one day I'll videotape what happens backstage so you can see it). She is a sweet girl and not nearly as overweight as people say she is. In fact, I think she is beautiful, positive, intelligent, an excellent role model and the best child actor I'd ever seen (back in the day).


Beyond that, life is the same. As I mentioned before, my publicists have me doing more press these days, since my Financial Lipo project is on the move, along with many others. This should be an exciting year....or so I hope.

Black Financial Speaker Boyce Watkins on Managing Credit

Keeping it Real on the Financial Crisis

by Dr. Boyce Watkinshttp://www.boycewatkins.com/

1) FDR had it partially right when he said that "We have nothing to fear but fear itself." While we have other worries as well, the greatest obstacle to economic progress is the HUGE psychological impact of Americans watching the stock market plummet right in front of their faces. This is going to cause consumer spending, lending, borrowing and investing to freeze like a deer in stadium lights. When people stop spending, economies start dying.

2) This crisis was a long time coming. De-regulation pushes down on the economic gas, but increases the chances of an economic crash. The dramatic growth of the past 8 years was a result of the same policies that are leading to the huge challenges we are faced with today.

3) Much of the impact of this crisis is a financial illusion. A large percentage of the devaluation in stock and home prices is driven by the fact that the original value was incorrect in the first place. When prices are out of whack, they must correct themselves. While a crisis may also be a correction, a correction is not necessarily a crisis.

4) Prepare for a period of "Financial McCarthyism" in America. Many baby boomers are closing in on retirement, and scared to death. To boot, many of these individuals have not properly prepared for retirement. When Americans get scared, politicians get nasty. We will likely see some of the most Draconian legislation in history.

5) What makes this crisis such a concern is that even before the meltdown, the economy was already quite fragile. With soaring gas and food prices, the economy was the #1 issue on the minds of most Americans. The decline of many financial services firms was, for the most part, a logical continuation of the fact that many homeowners were defaulting at the start of the year. This crisis is most certainly going to shift the political landscape and might give us our first Black president.

6) Yes, this market drop was the largest in history, 770 points in one day is nothing to sneeze at. But keep in mind that this drop doesn’t even make the top 10 in terms of percentage declines.

7) The American consumer is not off the hook. The “Wall Street Greed” angle of this story completely denies the fact that many American consumers tend to overspend and over borrow. Many Americans were buying homes they could not afford and borrowing against their home equity in order to go on vacation. It takes two to tango and banks rarely forced anyone to take the loans being offered to them. If Obama can tell Black Men to take more responsibility for our economic challenges, then he should be willing to say that to the rest of America.

Why So Serious Son? Is Risky China the Joker or the Hero in the Anxious Quest for Olympic Advertising?

I taught a Financial Theory course at the Shanghai University of Finance and Economics three summers ago. Some Americans perceive China as a horrible place, devoid of human rights, with a machine gun toting policeman standing over every man, woman and child. I found quite the opposite. In some ways, I was more liberated in China than I am anywhere else. My students were polite and less demanding than the externally cold (yet internally warm) Northeastern students I teach in the states, and every meal seemed to cost $2 dollars.

There was also another dimension of the complicated economic soul of this growing country: the dirty skies, the huge wealth disparity, and the fact that every river seemed to smell like a broken toilet on a really bad day. Finally, there’s the politics: I was told to not even say the word “Tibet” when applying for my visa, and I knew that issues in Africa were touchy as well.

Therein lies the multi-billion dollar contradiction that we call China. The Joker/Batman aspect of this country leads to both economic salivation and stomach churning nightmares for any corporate executive looking to take advantage of this growing and powerful market.
The problem with the Olympics in China is that major corporations (and even presidential candidates) can’t miss it. The action and growth are there, as the world scrambles to profit from what will be the largest middle class demographic in the world within just a few years. The Olympics is a “can’t miss” advertising event for several reasons.

First, the fragmentation of media reduces the opportunities to hit really large audiences. The audience for the Olympics during prime time is right up there with American idol, and it’s all yours for a mere $750,000 per 30 second spot (not quite lunch money, but you get the point).
Second, you don’t find an audience of this quality every day. Olympic viewers in the US tend to be wealthier and more highly educated than a typical television audience. With NBC committing to over 3,000 hours of coverage, you’ve got a lot of opportunities to hit your market.
Third, companies who advertise during the Olympics are considered to be innovative and ground breaking trend-setters, much better than their petty competition. Who doesn’t want to be ground breaking?

Sounds like a dream, right? Not so fast.

While every Batman has a Joker, China has not proven which one it actually is.
Sure the Olympics are already political. We can even turn our heads sideways and wonder “How does Iraq have a rowing team?” But the problem is that these Olympics and this country are a bit more political than most. In Finance, political risk is just as nasty as other types of risk when it comes to possibly losing your investment.

First, there is the situation in Tibet and that little human rights thing. While terrorism is always an issue at every Olympic gathering, you can’t help but wonder if you should stay home during this one. In fact, China has told many athletes to stay away, including star speed skater and activist Joey Cheek. There are a lot of people angry at China, including many in their home country. It is times like these when the Chinese government is glad to stomp on individual liberties.

Did I mention Darfur genocide? People are angry about China’s role in that too. The risk for corporate sponsors ranges from the obvious to the subtle. There is the obvious risk that terrorists can steal the spotlight, and at worst, kill some of your customers and employees. There is the subtle risk of those pesky protesters destroying the value of the Olympic brand and venue with which you’ve paid to be associated. Finally, there is the reality that corporations are the Achilles Heel for any controversial organization: the easiest way for a protestor to undermine a government or organization is to hold its corporate sponsors hostage for their desire to financially support an entity accused of being harmful to others.

At the end of “The Dark Knight”, the Joker explains how he and Batman really need each other. Similar to the popular film, the United States needs China. American corporations need China. Business needs to be in the front row of the billion dollar drama across the sea, and they can’t run away from the risk.

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

Black Money, Black Marriage, Black People

By Dr. Boyce Watkins
www.FinancialLovemaking.net

People fall in love every day. Some fall in love forever, and some just love the idea of falling in love. We are all familiar with the bliss and agony of love, and our mating, dating and procreating choices define much of the quality of our earthly existence.

But many of us love in all the wrong ways and make short-term choices with serious lifelong consequences. For long-term relationships, reality eventually sets in, and we learn that LOVING together means LIVING together. The thrill you once got from a long, seductive kiss is replaced by the excitement of a good home appraisal or bank account increase. Financial insecurity and emotional insecurity become one and the same, as we find there is a strong correlation between financial deception and emotional betrayal. A big part of living is MONEY. According to a study by the Council of Relationships, money is the number one reason for divorce. This alarming reality is a strong reminder that not discussing the financial and practical dimensions of your relationship can cause you a lifetime of misery.



Some consider it taboo to discuss love and money in the same sentence. I consider it ESSENTIAL. While we might mull all day over a potential mate’s emotional compatibility, sexual compatibility, professional compatibility and spiritual compatibility, most of us don’t spend one second thinking about financial compatibility. Many couples step into serious relationships and marriage without knowing their partner’s income levels, debt levels, credit score, retirement savings, or any of the other significant pieces of information that are going to have a dramatic effect on their love life. Merging your life with a financially irresponsible person is like putting your children into a car with a drunk driver. Once you are in the car, your fates are inextricably linked.

Money plays a huge role in our quality of life, emotional well-being, ability to raise our children properly or ability to spend time together. Money can either be a tool to enhance your love or a weapon to destroy it. Many people have seen their love and relationships ruined by financial problems, financial deception or financial exploitation. How we manage, confront and conceptualize the power of money plays a huge role in how our relationships evolve. That is what Financial Lovemaking is all about.

You think money doesn’t matter in a relationship? Well, here is just a small list of ways that someone could ruin your life financially:

• A partner with horrible credit could keep you from ever getting loan.
• A partner with terrible spending habits can ruin a family’s financial security.
• A partner with a substance abuse or other costly addiction could deplete a family’s assets.
• A partner with unhealthy connections to deadbeat relatives, who always need money, may drain your assets.
• A partner with an income that is too low due to a lack of education or poor professional choices could ruin you financially.

• A partner may steal money from you or borrow it without your permission and use it for something frivolous (i.e. a bad business investment, gambling, etc.)
• A partner who makes bad financial choices may get you into trouble with the IRS.
• A partner who decides to separate from you may end up dragging you and your money through a long and costly legal battle.

I just gave you the short list of ways that money directly impacts your love life. I am sure you can think of experiences you’ve had or those of your friends. In fact, I encourage you to visit our Financial Lovemaking blog to share your personal story on how love and money have impacted your life.

I am not here there to say there’s nothing going on but the rent. However, I can say that nothing else goes on if the rent is not being paid. So, good Financial Lovemaking is necessary for good love. Don’t forget that.

Dr. Boyce Watkins is a Finance Professor at Syracuse University and author of “Financial Lovemaking 101: Merging Assets with Your Partner in Ways that Feel Good.” He does regular commentary in national media, including CNN, NBC, CBS, MSNBC and BET. For more information, please visit www.FinancialLovemaking.net.

Dr. Boyce addressing the National Black Law Student Association

Topic: Dr. Boyce Watkins speaks on working with Jesse Jackson and Al Sharpton during the Don Imus situation. Using capitalism and the internet as a form of activism.

Oprah Winfrey, Bob Johnson, Barack Obama: What Gives in this Election?

By Dr. Boyce Watkins
www.BoyceWatkins.com

Oprah Winfrey’s support for Senator Barack Obama, while certainly admirable, has cost her some support among fans. According to a recent poll, Winfrey’s approval rating was 74% before the election, dropping to 61% after turning her support toward Obama. At the end of the Jeremiah Wright controversy, her approval rating dropped further to 55%.

I admired Oprah a great deal for stepping out in support of Senator Obama. I also knew that she would pay the greatest price for this bold political move. What surprised me about Oprah’s support for Senator Obama was the fact that she was willing to do damn near the exact opposite of what made her a billionaire: take political sides in a nasty race. She also had the audacity to support a highly qualified black man over a well-respected, powerful woman. When reporters asked me about Oprah’s decision to step out on the limb of controversy, I simply said “Damn, I thought I was the only one crazy enough to do things like that. Oprah’s going to get fried for it.”


Entertainment is based on popularity. The more of a jelly-like spine you have, the better off you’re going to be. You have to be able to move with the crowd and makes folks feel good. DL Hughley from Def Comedy Jam even appeared on several shows referring to the black women from Rutgers University as “Nappy Headed Hoes”, all so he could build a little extra fame on the back of a very serious issue. Entertainment moguls like Oprah Winfrey and Bob Johnson are the best when it comes to telling people exactly what they want to hear, and they’ve become quite wealthy for it.

But it is Oprah’s willingness to take a serious stand on critical social issues that will serve as the dividing line between the legacies of billionaires Winfrey and Johnson. Oprah will be celebrated and remembered 100 years from today. People will only think that “Bob Johnson” is the name of an exotic sex toy. Johnson’s time capsule will contain DVDs of BET (Booties, Exploitation and Thugs) videos, while Oprah’s capsule will contain pictures of the young women attending the school she built in Africa. I am not a woman, but even I am empowered by someone who stands up so firmly for women’s rights. So, I give a big “You go girl” to Oprah for doing something that many wealthy black entertainers with predominantly white audiences are not quite willing to do.



At the same time, it was Oprah’s decision to be a BLACK woman (not just a woman) and support Barack Obama over Hillary Clinton that led to the backlash from her audience. Simultaneously, it was Bob Johnson’s allegiance to Senator Clinton that led to him being compared to Uncle Ruckass, the first class Uncle Tom from the TV show “The Boondocks”. Both billionaires shifted away from their policies, and both of them are getting hammered for it.

Oprah and Bob were reminded of a valuable lesson: Popularity and politics just don’t mix.

People don’t pay their black entertainers to take political stands. They pay them to dance, sing and make jokes. One can’t wear the white suit of entertainment and swim in the dirty waters of racially-divisive American politics.

One thing I know about money is that it can empower and liberate you. The problem is that money can also enslave you. Many black professors at top white universities fear losing their precious jobs if they speak out on social injustice. So, we spend our entire careers writing research papers that no one ever reads, while a world that starves for our intellect dies around us. There are hoards of angry black middle class Americans who fear opening their mouths because they won’t be able to keep up the payments on the Lexus. We all understand, on some level, the tradeoffs that Oprah, Johnson and Obama are forced to make.

One of the great dilemmas of the black experience is that we judge one another on our ability to obtain wealth, power and popularity, three things in short supply in our community. Rather than asking WHY Bob Johnson has a billion dollars, we presume that he is a great man only BECAUSE he has a billion dollars. Our measuring stick for success is one that provides prominence and respect to those who’ve been most willing to sell their soul to obtain scarce social resources. This creates a sticky set of incentives, as we keep our eyes on the carrots while taking our eyes completely off the prize.

You (Barack Obama) can’t get elected with 13% of the vote, so you are forced to engage in a disturbing amount of diplomacy and “bridge building”. You even become the only major politician to not show up in Memphis on the 40th anniversary of Martin Luther King’s assassination. In addition, you are asked to denounce a different black male associate nearly every week, while your opponents have equally questionable affiliations that receive no attention from mainstream media.


You (Oprah Winfrey) are a TV mogul who can’t earn a billion dollars from your black audience, so you build a predominantly soccer mom constituency that will penalize you for supporting a black presidential candidate. The audience helps you pay the bills, as long as you keep feeding them more Dr. Oz and Dr. Phil without even considering building shows for many black experts across the country who DO NOT have that annoying country accent.

You (Bob Johnson) can’t quite get your message onto a mainstream TV network, so you create a network for African-Americans and spend 20 years feeding them nothing but naked women, gold grills, jock-grabbing “gangstaz” with guns and other profitable garbage. You don’t feed garbage for the survival of the network; you feed it because you want to have a billion dollars instead of 100 million. That’s what makes you a “playa”.

The sacrifices are great, and it is my argument that we should not only question the merits of the sacrifice, but also whether the rewards are as valuable as they seem. For every billion dollars of income earned by Bob Johnson, I speculate that there is at least another two billion dollars in lost productivity from a generation of kids who memorized the lyrics from “Back that Ass Up” before they began kindergarten.

Perhaps it is time to reconsider our social currency.

Does Cornel West have to be at Harvard to be important, or will we respect him at an HBCU?

If Barack Obama loses the presidency for refusing to condemn another black man, will he get as much respect from his Black Home as he would from the White House?

Oprah Winfrey and Barack Obama, to a measured extent, have earned my respect for putting their vast social capital on the line. As a Finance Professor, I understand Bob Johnson, since I have taught thousands of Capitalists to analyze money.

But one thing I know about money and democracy in a racist society is that if you measure your success by wealth, power and popularity, you end up with a Pandora’s Box of contradictions that keep you up all night and on the toilet all day.

Life is too short to work so hard on things that don’t matter. Perhaps we should set new standards.

Video: Dr. Boyce Watkins Speaks on Oprah Winfrey and Barack Obama

Financial Leadership Gone Wild: Our Government's Response to the Recession

by Dr. Boyce Watkins

The United States is respected throughout the world for its powerful economy. We are also, unfortunately, known for our arrogance. U.S. Monetary policy, headed by Federal Reserve Chairman Ben Bernanke, is both art and science, and the success of Alan Greenspan has forced any subsequent Fed Chairman to become a Financial Da Vinci.

The 2008 recession provides just the right landscape for an allegedly great monetary artist to strut his stuff. The US economy saw its financial chickens coming home to roost, and the recession was a long time coming. These financial chickens included excessive spending by American consumers, mixed with irresponsible borrowing and lending on the part of both individuals and banks. Personal responsibility is thrown out the window when discussing wealthy and middle class Americans, as financial leaders are called upon to bail out the banks, the consumers and everyone else.

Two great weapons in the arsenal of the Federal Reserve are government spending and interest rate cuts. Higher government spending increases consumer demand for the goods and services we continue to buy but almost never need. Interest rate cuts reduce the cost of borrowing for everyone in the economy. This marginal decline in rates serves to stimulate investment by all Americans, since the cost of borrowed money is lowered.

The government bailout package for 2008 included a massive spending bill, one that featured tax refunds and support to help consumers keep their homes, even if they were the causes of their own demise. Another financial steroid being employed has been the strong and consistent cuts of the Federal Funds rate by Federal Reserve Chairman Ben Bernanke. Bernanke has become known as “Bold Ben” by the media, who are consistently stunned by the Chairman’s massive and powerful attempts to control the economic downturn.

The strong and bold financial leadership by our government has been applauded by some, and demonized by others.

Republicans, known for being fiscally responsible, have created budget deficits our country has never seen. Between the Iraq War and the 2008 recession, spending continues to go up, even when tax revenues are expected to go down. The ready availability of additional lending to support our massive spending bills has our financial leaders behaving like teenagers holding a “really awesome” American Express card.

Continuously cutting interest rates may provide additional stimulation to the economy, but the problem is that cutting interest rates, allowing the value of the dollar to slide and frivolous government spending is a recipe for serious, horrific and uncontrollable inflation. Inflation is like a Pandora’s Box: Once it’s out, it’s extremely difficult to reign it back in. It’s hard not to feel that “Bold Ben” and “Big Bad Bush” aren’t gambling with our children’s futures and current taxpayer resources.

Sometimes, when you party too hard, you are forced to deal with the hangover. Americans have been blessed with a financial celebration that has lasted over a decade. We danced with lamp shades on our heads: not saving effectively, spending like crazy and borrowing to cover our financial insanity. But rather than simply allowing the party to end and letting everyone sober up, our financial leadership has taken on the irresponsible behavioral norms of American consumers. Their excessive rate cuts and spending increases have kept us pumped up on Financial Dope in order to avoid the impending crash.

This is not solid financial leadership, and something has GOT to give.