I am working on a post, “Why Medicare Sucks.”  I am having difficulty writing it.  Not because Medicare is perfect.  It isn’t.  But because so many users of Medicare believe it is a great program.  Great insurance.  It isn’t.  I have written about the perils of the stock market and home ownership as wealth-creation vehicles.  Both are lousy wealth-creation vehicles, but most of the people who were told to invest in the markets for retirement or that a home was an investment have learned the bitter truth.  The same with Medicare.  As I put the post together, I will take you from my cousin’s practice in Atlanta, to a conversation that I and 2 other doctors had almost a decade ago on the beach in Santa Monica, to a conversation I had with a retired doc who told me that the happiest day in his practice was the day he closed his doors to both Medicare and Medicaid.  The post is coming.  Watch out for it.

Now for a rather abrupt change of topic.  Something rather interesting happened the other day that I just have to share.  As I mentioned before, when I was getting my financial life together, I read beaucoup books on personal finance.  Still do.  But I came across some advice from Suze that I should manage my property tax and insurance payments myself.  At the time I was paying a certain amount each month to my mortgage company so that they could escrow the funds for me and make the property tax and insurance payments on my behalf.  Millions of American homeowners do this:  pay additional money to the bank each month that the bank then sets aside, so I was not special in this regard.  You can understand why the bank might want to do this.  When a bank loans money for a home, they actually own the home and they just let the mortgagee live in it.  The insurance is there to protect the bank’s collateral, the home.  Property taxes actually trump a mortgage.  A home owner or mortgagee can fall so far behind in property tax payments that a county can order a home sold for the unpaid taxes leaving the mortgage company stuck with a loss on the mortgage.  It is in the mortgage company’s best interest to collect the property tax payments from the mortgagee and pay the taxes.

The reason I don’t escrow is simple I want to control my cashflow and banks are allowed to keep a cushion in the account as stipulated by the mortgage contract.  As an example, that cushion may be equal to 90 days of property taxes and 60 days of insurance premiums.  The bank is not required to pay interest on that cushion.  So for a home with a $720 dollar insurance premium and a $2400 dollar tax bill the monthly escrow amount would be $720+$120+$2400+$600 = $3840/12 = $380.  The balance in the escrow account must never drop below 60 days of insurance premiums plus 90 days of property taxes or, in this case, $720 dollars.  If it does, the mortgage company will increase the mortgagee’s payments to escrow to make sure they can make the property tax and insurance disbursements and maintain their target cushion.  If you are a home owner, you know that that cushion represents a new washer, dryer, water heater and it is just silly having that money literally locked in a bank just to make the bank feel better about lending you the money in the first place.

But what happens if the bank doesn’t actually do with the money what they were supposed to.  What if they don’t make the payments or make them on the right property. This is a rare occurrence, but something that happened yesterday put me right in the middle of such an event.  I made property tax payments on the properties that I hold before I went on vacation.  When I returned, I ran the checks to make sure they had cleared.  Two of the properties I hold are right next door to each other.  I placed the property tax checks for those properties with coupons in the same envelope and sent it in.  When I ran the checks I realized that the county treasurer had only cashed one of the two checks I placed in the envelope.  When I called the county treasurer they told me that they had received so many property tax checks they were behind in data entry, the fact that they hadn’t cashed my check didn’t mean they had lost the check and asked me to check back with them in a week.  They ran the account for the property and pronounced that the tax account had a surplus on it and that Chase Financial had been making payments as well as lil’ole me.  That’s all well and good except that Chase wasn’t the lien holder on the property.  B of A was.  In other words Chase was mistakenly making tax payments on a property they had NO financial interest in.  How could this happen?  I asked and a mistake of this type can happen pretty easily.  See a financial institution like Chase sends over a portfolio of parcel numbers to county tax assessors across the country.  These parcel numbers are data entered in to a company like Chase’s system a simple key error could produce an incorrect parcel number. The parcel numbers are not sent with a corresponding property address which would allow crosschecking to occur at the county tax assessor’s office.  The tax assessor sends the bill to Chase or any other requesting financial institution and the institution pays the bill. No questions asked.

By this point I had the supervisory treasurer on the phone and she gave me the contact for Chase Financial.  Her contact information was not valid and it took me several tries to get a live body on the phone which, at least for Chase, is virtually impossible if you don’t have a Chase account.  The rather stunned Chase property tax representative said, “Now, let me get this straight.  Chase is making property tax payments on a property we have no financial interest in?”  When I told her yes, she made a move to get off the phone to confer with her supervisor.  The problem with conferring with her supervisor was that she had no information, she was so flabbergasted that all she could do was think to confer with her supervisor.  I pointed out that she had no way of researching the property without a parcel number and situs address.  I provided both.  Now the information I provided was the correct information for MY property (okay the one I co-own with B of A), but the parcel number should allow Chase to back track and find an associated loan number and correct property address.  I also gave the Chase representative the name of the supervisor in the county treasurer’s office so that they could request their money back.

Why did I even bother to phone Chase?  I wasn’t worried about myself because I don’t have Chase’s money, the county treasurer’s office does. I phoned because somewhere out there a home owner or investor is paying into escrow believing that their lender is correctly making payments on their behalf.  At this point that home owner or investor is now one year behind in their property taxes and it is not their fault.

This odd situation is a reminder to me that the homeowner or investor is ultimately responsible for all expenses on their property even if they escrow and it behooves the homeowner or investor to follow up with their property tax office and insurance company to make sure those payments are made.  If your accounts are delinquent and you escrow, be sure to obtain documentation of your delinquency from the tax office then contact your lender’s property tax division.  Make sure they have the correct address and parcel number for your property.  If they don’t correcting the information will require you to provide that information to your lender in writing.

Please comment.

My photo gallery is the group of rotating photos that appears on the right side of this blog. One of those photos is a money shot. A shot of me palming some cash. $10,000 to be exact. Worried what people would think, I was reluctant to include the photo in my gallery. But there is a story there. One worthy of a blog exploring the realm of personal finance. The year was 2003. I had already retired about $80,000 in debt and had begun saving money. My money, your money, my debt, your debt are nothing but numbers on a piece of paper. I do not believe this is an accident. Financial institutions and popular media exist to separate us from the reality of our money. Witness the Visa card commercial popular at Christmas. The toy store is humming with purchases, the cash register ringing, when someone has the audacity to present to the register with cash rather than plastic. Immediately the festive atmosphere in the store grinds to a halt as someone is forced to make change. The customer actually apologizes for paying in cash. Good riddance to that customer and the store is abuzz again as people swipe their cards. The value of the transactions is never shown, people just mindlessly swipe their cards. Of course the hangover that inevitably follows that level of frenetic spending is never shown, just happy people swiping their cards. In 2003, I had retired some serious debt and, for the first time in my life, was saving money. I never wanted to go back to the debt nightmare that it had taken years to get in and out of. I knew I had to get a hold, literally of some of my money. To touch it, to feel it. Then it would be real and I’d have a visual when I sought to spend it. So I called my bank manager, Tom, and asked for some time in the vault. Tom used to work in an outpatient mental health facility and he told me he was willing to do anything within reason to help me feel comfortable with my money. But why the vault? Tom was a bit concerned. I told him that I wanted some time in the vault because that was where my money was. Tom agreed and we agreed on a date and a time. I went to the bank at the designated time, Tom met me with a withdrawal slip, and asked me to fill in the amount of $9500 dollars in order to avoid triggering a Patriot Act alert. I got the remaining $500 dollars from the ATM. I then sat in a private room just outside the vault and played with my money. I threw it in the air (so that it was raining money). I spread it around the floor (so that I was sitting in money). I waived it under my nose (so that I could smell the money). I took pictures. I never knew who was on the $100 dollar bill until that afternoon at the bank. Now I will never forget. When I finally emerged from the room, I ran into Tom. Literally. He was about to knock, apparently I concerned several people and they thought Tom should look for me. It was just me and Benjamen in a closed room. What could go wrong? The town that I live in is very dependent on a cash economy. It is not uncommon for Tom to see cash deposits of 5 and 6 figures. Many people here are connected with their cash. When it runs out, their lives stop. Through years of financial mis-education, I was utterly disconnected from my money. The ones followed by zeroes on my credit card statement that just kept multiplying until I was left with the hang over. Now I have a visual, the plastic that comes out of my wallet corresponds to a set amount in my bank account which in turn corresponds to the wad of cash I held in my hand that day. That exercise one summer day in 2003 may have seemed silly to those who watched me, it certainly was fun and it lead to a level of consciousness I have about my money. I now spend consciously. Conscious spending, isn’t that really the beginning of freedom and a healthy relationship with money?

It was 1997, June, and I had just come to the realization that I was drowning in debt.  I had a pretty morbid thought when I was driving home one day after work, that I was better off dead.  At least the life insurance I had would be enough to cover my debts, there would have been little left for my loved ones but my debts would be handled. In June 1997, I decided to get my financial house in order.  I sat down with myself, pulled out the credit statements and started to figure out what it would take to tackle that debt.
I realized that I had to cancel some cards, renegotiate rates and renegotiate some services in order to free up an amount of money I could reliably apply to my debt.  Getting a raise in the short term was not possible,  I had to work with what I had.  Some of my debt, I had deferred allowing interest to capitalize, meaning that I owed more on some debt than the original borrowed amount so I had to call various lenders to see what I could do to address the capitalized interest.  This was my plan: cancel all but 2 cards, consolidate the consumer debt between those two cards, park one card carry the other for emergencies, then commit a set amount to apply against the parked card. I could not use the card that I continued to carry except for an emergency.  So my first money rule was that if I did not have the cash to make a purchase, I could not make the purchase.  I then contacted my student loan company.  The only way to address the capitalized interest was to pay it.  I think in pictures so putting the debt into a spread sheet was of no help to me.  Instead I drew four lines of different lengths on a piece of paper.  Each line had a dollar value assigned to it.  Two lines were devoted to the cards, one line to the student loan and the other line to the car. I had decided to go luxury as befitted my station.  Silly me, the car payment was basically a mortgage payment.  At one end of the line was the date I was to start making debt payments at the other end was the projected date the loan would be paid. My lines looked like this:

Start Date————————————————————-End Date

Start Date————————————————————End Date

Start Date———————————————————–End Date

Start Date———————————————————-End Date

So where does WalMart come in?  Any plan will face a challenge not long after implementation.  My challenge came in the WalMart camera department.  My partner and I had a habit of taking pictures everywhere we went.  Both of our cameras went dead leaving us to buy box cameras every time we traveled.  I decided to buy a new camera while I was in WalMart.  The camera cost $320 dollars.  Because of money rule number 1, I couldn’t put the camera on a card and I didn’t have the cash in my account to pay for it.  I remember standing in the camera department when the realization that I made a six-figure income and could not afford a &$%#@!$ camera dawned on me.  I realized that I was broke.  That image of me standing in the camera department unable to make a desired purchase and that feeling of failure and helplessness have sustained me over the last decade as I vastly improved my financial outlook.  The epiphany in WalMart lead to money rule number 2: that anyone can be broke at any income level.  Eight months into my debt elimination plan, I decided to begin saving.  I saved $50 dollars every two weeks.  There was a time when I would have thought that $50 dollars was too little to save.  Now I realize that no amount is too small.  Money rule number 3:  Any amount of money can become the basis to start a savings plan.  I was able to gradually increase my bi-weekly savings until I had saved $5000 dollars.  I was tempted to use all of that money to pay off one of my credit cards.  By this point, my credit card debt had been reduced in half.  Applying the 5K toward that debt would not have retired the debt but it would have knocked the remaining balance down significantly.  I called a friend who was an investment banker at the time and she asked me how often I had come across lump sums of money.  I had to admit not very often.  She then asked me how long it would take to retire the credit card debt if I did not apply the funds.  If I stayed on pace, the credit card debt would have been paid within 18 months.  We decided that I should hold on to my savings and stick with my payment schedule.  From this I derived money rule number 4:  That there is an opportunity cost associated with each expenditure of a lump sum of capital therefore lump sums should be tapped for emergencies only or invested so that their value grows.  With these 4 money rules, I retired $80,000 dollars in debt between June 1997 and April 2001.   With my debts driving me, I was forever going to personnel and my supervisors seeking a raise.  When I began to feel better about my financial situation, raises found me.  Over the years I have thought often of that evening spent in WalMart, the personal humiliation that I felt and the desire never to feel that way again.

What are your debt reduction story and your money rules? please comment.

I used to have this problem. After I had gotten out of debt I became very good at not spending money while engaging in small acts of financial self sabotage. I got very focused on making the amount of money in my bank account grow every month. About once a year, though, something would happen that would threaten to undo several month’s work. I would over spend. Not by just a few hundred dollars, but by quite a bit more. To remedy the situation, I would have to take money from my savings account to cover the excess spending. I was engaging in a frustrating pattern. The pattern wasn’t enough to undermine everything I was working for, but it was enough to annoy and unnerve me. While listening to a T. Harv Ekker seminar, I heard the solution to my problem. Develop a spending plan. In other words, Give myself permission to spend. What a novel idea! According to T. Harv the mind is ruled by the conscious and subconscious minds. The subconscious mind governs desire and motivation and action and can often act like an undisciplined child. Frankly, when I over spent, I felt like a child. To remedy the situation, I developed two accounts one called Short Term Purchases and the other was called Long Term Purchases. Short Term Purchases were the purchases I wanted to make 30 to 60 days out and Long Term Purchases were the purchases that I wanted to make 4 months out or longer. If I wanted to take a trip or buy a computer, I saved money into the Long Term Account. If I just wanted to go out to dinner without guilt I took that money out of the Short Term Account. I then decided on an amount of money that would go into both accounts every month. I set the amount that went into the accounts as an amount that I was comfortable with that would still allow me to save in line with my financial accumulation plan. The key is that I am always depositing money into those accounts. If I spend it, that is okay. If I don’t, that is okay as well. Giving myself the permission to spend did the trick. The massive overspending stopped and I felt better about my overall financial plan.

Would having a spending plan assist you? Please comment.

You are fed up, you don’t like the way the economy is going.  The value of your 401K is shrinking and your heart tells you not to follow the popular advice to invest for the long haul.  You have to work overtime to pay for last year’s Christmas; you don’t know where the funds for this year’s holidays are going to come from.  You’ve missed yet another ball game.  Sesame Street is baby-sitting your children and there is no end in sight.  Panic is everywhere as the unemployment rate rises and you wonder if you and your job will become another statistic.

Your friend comes to you with a business opportunity that has “just come across his desk” and he urges you to take a look.  You do because something has to change.  You are tired of feeling vulnerable and vulnerable is what you feel as daily you go to your mailbox, afraid of what you will find there.  You decide to  attend your first opportunity meeting.  You are learning about the industry of Network Marketing.  Everything you heard growing up about MLM or Network Marketing tells you to run for the exit, but the presenter says, “this is not your father’s MLM.”  You look and it isn’t.  You won’t have to deliver or inventory products, the company will direct-deposit the checks you earn to your account, the products are high quality, you won’t have to sell anything or hold “home parties” if you don’t want to, and you can get information to people and sign them up all over the internet.  The Network Marketing industry has caught the attention of best-selling authors and economists and they endorse it. You are told that you need just 4 things to be successful:  Belief in the industry, your company, the products and yourself.  You say check, check, check, check and you hand over the check and get started.

But there was one thing that they didn’t tell you that you need and it turns out to be the most important thing that you need for success.  That all-important thing will make or break you in the industry, it will determine your success or failure…it is your team. 

That is right, your team. 

It is your team that will determine whether or not your Network Marketing business will grow and at what pace.  It is your team that will determine the enthusiasm you and your prospects feel when they look at your opportunity.  It is your team that will help you through the hard times that will inevitably occur in your business.  It is your team that will propel you to success.  Some people find that they don’t have a team when they start their business.  They find that the group of people that they got started with are just as flat-footed as a duck and as unimaginative as a post.  It is the rare individual in that situation that will reach out crossline or downline and build a team and build success with their chosen Network Marketing company.  Most will quit not understanding how close they came to success and that all they lacked was one critical element.  You see, a team will provide the leverage that you need to build a long-term residual income. You cannot build a successful business alone.

What are the qualities you should look for in a Network Marketing team?

Does your team have a vision or mission?  All great organizations do, your team should be no different.  Once you find out what that vision is, does it resonate with you?

Does your team offer training?  What format is the training?  If your team only trains on Wednesday nights and Saturdays, will that fit for you?  Do you have to leave your home for training and business presentations? If so, does that fit for you? One of the things that you will have to do is edify your team’s training system to you new distributors; if you are not attending the live training, they won’t either.  You’ll get stuck having to create a training system that is more to your taste or watch your organization die and your income disappear for lack of one.

Is your team training purposeful or do the calls seem directionless?

Is your team enthusiastic?

Do your team members help each other with presentations to prospects?  Three way calls?  Will you have to do it all?

Is the culture of your team one that you can work within? Does everyone dress alike at business meetings? If so, are you comfortable with that?  Are women allowed to present at business meetings?  If not, are you comfortable with that?  If you are a professional, are there other professionals or other successful business owners on your team?  Are the people on your team similar in age to you?

Do your prospective team members have integrity?  This one is much easier to answer than you would imagine.  All you have to do is talk to people at the opportunity meeting about what is important to them and what their business has done for them. 

Do you like your team members?

Yes, team is the critical success element.  Without it your Network Marketing business is doomed to failure.  There is no way around that.  The importance of team is made all the more difficult because you may have been invited to look at an opportunity by a friend.  Did your friend join a good team?

The time is right for Network Marketing. Owning your own business is one of the few ways you can be in control of your financial future. 

You will be successful if you remember to evaluate the fifth element.