President’s Corner – Personal Finances

Married members came into our office recently to consolidate their debts into a second mortgage loan. They wanted to amortize the loan over fifteen years, but we felt a second mortgage loan based on old debts should not have a term more than five years. We explained to the couple that in order to get rid of their debt as soon as possible at the smallest possible cost to them, they would have to accept the lower term. We showed them how much less interest they would pay with a five-year term versus a fifteen-year term, and they could afford the monthly payment on a five-year loan.

Our members hemmed and hawed but eventually accepted the loan. Before the ink on the documents had a chance to dry, however, they took out a cash advance on their Credit Union credit card for $6,000.00. To quote Captain Jack Ross (played brilliantly by Kevin Bacon) after giving his opening statement during the murder trial in the 1992 classic “A Few Good Men,” “These are the facts in the case, and they are undisputed.”

Why did our married members advance on their credit card? Was it to buy a new refrigerator? Could it have been a down payment on their child’s college tuition? Or, as I suspect, was it to show the Credit Union that they thought they knew best when it came to their finances?

This scenario happens much too often. I’ve thought about why some people are frugal with their money, while others can’t wait to spend it? I watched my parents manage money growing up and came to the conclusion they did it the right way. I certainly did not get everything I thought I wanted. Mom and Dad took a lot of nice vacations, both with and without my brother and me. I did not attend a private college but was fortunate an excellent university was close by. When Dad passed away, I helped Mom with her finances and was pleasantly surprised at how much Dad squirreled away. Mom is living a stress-free life because she doesn’t have to worry about money. According to her financial advisor, she can live well into the ripe old age of her early three figures.

However, many people struggle in their later years because they did not prepare earlier in life. They saw their parents struggle with money but did not make any adjustments to their own finances. I understand what parents say can influence one’s life. Mom once told me that croutons were bad because they were just fried bread. Croutons are actually sautéed or baked, but the fact that Mom said they were fried stuck in my head.

Croutons haven’t changed much over the years, but personal finances have changed substantially. I receive an annual “checkup” from the same financial advisors. Second opinions are always encouraged with medical issues and would seem to be fitting with finances as well. Mom and Dad may be great resources but may not always be right, especially about croutons.

David M. Green
President/CEO
(925) 335-3802