I want to take the opportunity to thank everyone for reading the blog through the year.  2008 will go down in the history books as a year to remember.  One year later and we have a totally different financial and economical landscape.

I will be taking some time off and will return January 5, 2009. 

I hope that everyone has a safe and wonderful Christmas Season

Merry Christmas Everyone

Tags: Bob Brooks, Deceptive Money, Merry Christmas, Prudent Money

Well the good news is that the Federal Reserve Board and other regulators finally did something that Congress didn’t have the guts to do.  After all, federal regulators don’t take campaign contributions from the credit industry.  This is why Congress does nothing in regards to regulation.

Someone finally hammered down on the credit card industry.

Yesterday the regulators voted to end a great deal of the abuse in the credit card business.  It took long enough.  Most of the damage has been done.  This should have been done years ago.  Fortunately for the credit card industry, they have plenty of time to do the rest of the damage before the party is over.

Most of the blogs and articles are writing about all of the good regulation that has been handed down.  I will not waste your time because it really doesn’t do anyone any good.  Basically, the industry will not be able to change due dates, raise rates because they want to, or practice double billing.  The absolutely ridiculous part of it is NONE OF THESE REGULATIONS GO INTO EFFECT UNTIL JULY 2010.

So, the credit card industry has plenty of time to raise the rates on as many people, good credit or bad, before they cannot do so.  They have 18 1/2  months to do as much damage as possible.

Thanks for nothing, regulators!!  These self-serving politicians and regulators are all about their own agendas.  If they were serious about taking care of the American consumer, these regulations would go into effect immediately.  18 months?  Give me a break.

Gear up for the firestorm.  If you thought the credit card industry was out of control, you haven’t seen anything yet.  The offers to seduce consumers to transfer money over at low interest rates will greatly increase.  They will trick consumers into transferring money and then sock it to them as they change the terms and conditions.

I received this e-mail through Ask Bob just the other day.  Unfortunately, I think that this will happen a lot before regulations take place.

Bob, 

 I’d like to share that I’ve had a Citi card for almost 20 years with a 10% interest rate (or so I thought)  Last week I got a note in the mail that my interest rate was going to be the prime rate plus 19.99%.  I have never defaulted on a loan or missed a payment and always pay more than the minimum balance.  There is no justification for this interest rate hike except that they could do it.  As soon as my balance is paid off this card is history.

Make sure you watch your statements like a hawk.  Make sure that they don’t change your billing dates.  I think that they are about to get out of control.

Tags: Bob Brooks, Congress, Credit Card Industry, credit industry, Deceptive Money, Federal Reserve Board, politicians, Prudent Money, regulation, regulators

Dear Bob,

I think that I have a big problem on my hands.  Let me give you a little background first.  I took out student loans to go to college.  I have been paying on them ever since. I have never missed a payment, always paid on time, and most of the time paid a little more.  I received a letter from Wachovia yesterday (who bought my loan in 2007), saying that starting 11/28/08 instead of paying $95 a month I need to pay $1,035.55 for the next year to pay the loan off. 

I called them and told them that I can’t pay that amount and inquired about my options.  She told me that I had none.  She said that they did a review and looking at my account, if I continue to pay $100 (which is what I chose to pay over the amount that was due), the note would not be paid off in time.  I asked her why wasn’t I billed a higher amount 10 years ago then.  This wasn’t supposed to be a balloon type note. It was supposed to be gradual.   She said that there was nothing that she could do.  

I have paid them over $13,000 since 1994. 

Well, come to find out, the payment was supposed to go up gradually over time and that didn’t happen.  So, Wachovia stuck it to her.  As I said yesterday, banks are desperate for money.

Yet another bank changing the terms of a loan and not working with the consumer.  It is pretty tough to handle that large of an increase in a loan payment.  Let’s look at her options:

1)       Her husband told her to tell them that she would settle the debt for $3,000.  He told her to tell them that she would give her $3,000 and that is it and if they want to file a claim on the credit report they were more than welcome.  

That wouldn’t be a real good idea because defaulting on student loans has very large consequences.  It is one of the few loans were the creditor can garnish your wages to get their money.  They would ruin your credit and still get the money at the same time.  That is not a good option.

2)     Do nothing at all on the grounds of it not being fair

Credit applications don’t have the word fair written in them.  In fact, with most consumer-based loans, you give them the right to be unfair.  They can change the terms and conditions at will.  

3)     Refinance the debt or pay it

That is the only good option.  If your credit is still good, it is possible to accomplish that objective and that is just what she did.

She made two critical errors this loan, which had nothing to do with making the payments.  First, she didn’t have any of the original paperwork.  Chances are the bank didn’t have all of the details right and she probably could have disputed the details and maybe had the payment changed back.

Second, she didn’t fully understand her loan and failed to monitor it along the way.  If your loan is more than just a fixed payment over a specified time period, then make sure you know when the payments are supposed to change and make sure that they do change.

Today, no one has the luxury of not paying attention.  In desperate times, banks are doing desperate things.  Raising a person’s payment from $95 to $1,000 when a payment has never been late is desperate.

Tags: balloon note, banks, Bob Brooks, credit, Deceptive Money, gradual note, loan, Prudent Money, Student Loan, Wachovia

The mutual fund industry is out in full force trying to convince you to not sell your investments and just stay invested.  They work to convince investors by presenting statistics that are so convincing that you would never want to sell your investments.

The last thing that the mutual fund industry wants you to do is sell your investments.  Is that advice for their benefit or your own good?  In other words, is there a real strong benefit for staying invested in their mutual funds?  So, they write these papers with all of the statistics showing you why it makes sense to stay.  The problem is that the numbers are misleading and not telling you the whole truth.

One such paper is entitled The Cost of Missing a Market Rebound.  Their premise is that you don’t want to sell your investments because you might miss the rebound.  They illustrate this by showing you the last 9 bear markets.  In the paper, they write that the average bear market lasts 384 days.  Of course, this bear market has lasted about that amount of time.  Thus, you would conclude that since it has lasted the average length of time, it is close to being over.

The second point they make is that the average bear market loses -32%.  Thus, you would conclude that since this bear market has lost almost 50%, then the worst is probably behind us.

Then if you conclude that we are probably very close to the rebound, then the good news is that the average investment performance the first year after the bear market is a 36% gain.  So, if you get out now, you might miss the rebound.

Here is what they are not telling you while begging you to never sell your investments.

1)      They are comparing 9 normal bear market cycles.  In a client newsletter I recently wrote, I talked about normal bear market cycles versus unusual bear market cycles.  A bear market cycle is one that occurs because of normal recessions or high inflationary periods.  An unusual bear market cycle occurs when an economy is facing major imbalances and problems.  That would describe our situation today.

This paper that I am referencing only looked at the last 9 bear markets.  All of those bear markets would be considered normal bear market cycles.  To compare today’s bear market with the last nine is comparing apples to oranges.

2)      If you compare this bear market cycle to the last one that occurred as a result of a credit crisis, history would show that we have a long way to go before this thing is over.  In addition, the average loss has the potential to be much greater.     

The bottom line is that if you are going to stay invested and not make any changes, then do so on the basis that you are confident in your investment strategy and not because a financial advisor told you to stay invested because you are a long-term investor and that you don’t want to miss the rebound.  The key is not that you miss the rebound.  The key is that you miss the next 30% decline.  

Tags: bear market, Bob Brooks, credit crisis, Deceptive Money, financial advisor, investment strategy, mutual fund industry, normal bear market cycles, Prudent Money, unusual bear market cycles

On Thursday of last week, 70 year old Bernie Madoff, a former chairman of the NASDAQ Stock Market and very well-respected individual, was arrested for securities fraud.  It is alleged that he ran a Ponzi scheme that now has an estimated loss of 50 billion dollars, making it easily the largest fraud in the history of the financial markets.  

This is a fraud that has affected individuals and institutions all over the world.  A prized leader within the Jewish community, he was viewed as someone members of that community could depend on.  As a result, many of his clients were among the richest and most powerful Jewish families in America.

The wealthy, the middle class, institutions, foundations, non-profits, a Senator, Hollywood actors, and athletes were all victims.  Some lost everything.  Some lost hundreds of millions of dollars.  Retirement wiped out.  College funds wiped out.  Foundations facing serious financial blows, all in the name of steady financial returns.

It was ingenious how he set it up.  It wasn’t your traditional Ponzi scheme.  He even gave money back to people when they asked for it.  

Ponzi schemes were named back in the 1920’s after Charles Ponzi, who made his money hawking an investment in international postage stamps that promised to double investors’ money in 90 days, sucking in 40,000 people who lost millions.

In most cases, you had to be invited to be invested.  Madoff even encouraged people to invest a small amount at first to make sure that they were comfortable with the process.  Any who questioned Mr. Madoff’s investment process would be quickly dismissed.  After all, you don’t question the process of someone who was making strong consistent returns year after year.  

The way it was vaguely described to us was that the the investment managers had a system that consisted of placing a series of instant trades all at once.  Through this magical formula, they created a tiny 1% guaranteed, no-risk profit for the group. You do that 20 times a year, subtract the management fee, and you are left with a handsome 15% annualized return.  Man, these guys were good.

He did just enough to keep the trust of his investors and pulled off the greatest financial scam ever for a very long time.

Ironically enough, this same type of thing happened in the 20’s as well.  It is amazing to see the similarities between the 1929 crisis and today.  This highlights the problems of a debt crisis.  You never know what is going to come out of the woodworks from day to day. 

Tags: Bernie Madoff, Bob Brooks, Deceptive Money, financial markets, NASDAQ stock market, ponzi scheme, Prudent Money

This really does feel a lot like no man’s land right now.  The market goes up and then the market goes down and really goes nowhere.  The news is decidedly negative and yet the market continues to weather the storm.  It feels like a market on life support to me.  Let’s take a closer look at what is going on right now.

First of all, this week looks like a make or break week to me.  Let’s take a look at the positives:

1)     We are in what is typically a positive season for the stock market.  However, this is Christmas and Santa is supposed to be showing up on Wall Street for the famed “Santa Claus Rally”.

2)     The biggest positive that you hear on Wall Street these days is the market’s ability to continue to advance even when there is so much bad news.  Yes, the economic news continues to be very negative.

3)     The second biggest positive is that everyone is convinced that the stock market hit a bear market bottom in November.  I would agree if this were a normal bear market cycle.  Unfortunately, my analysis shows a best case scenario of a bottom is down -31% from Friday’s close and the absolutely worst case scenario for this bear market is down -48% from Friday’s close in the S&P 500.  Incidentally, you want to back up the brinks truck and buy stock in the event that worst case scenario plays out.

4)     35 more days – President-elect Obama becomes President.  The market seems to really place a positive on an Obama Presidency.

The negatives remain the same:

1)                 The credit markets are still in very bad shape.  With the exception of the Libor rate, nothing has really shown improvement in a very critical part of our markets.  In fact, I don’t think that we can get any type of a healthy stock market rebound until the credit markets get out of the ditch.

2)                 The real estate markets remain in lock-down.  Prices continue to fall and supply of homes is still very high.  It is going to take a while for things to improve. 

3)                 Corporate bankruptcies could really surprise investors in January.  It looks to me that companies are doing everything possible to stay afloat.  It is a worrisome trend when you start seeing retailers going into bankruptcy before the biggest part of the Christmas shopping season.   Congress didn’t come through for the automakers as I wrote about last week.  Bail-out or no bail-out, a bankruptcy of one of the big 3 automakers still has a high probability.

4)                 The health of the consumer is still quickly deteriorating.  Between foreclosures, unemployment, and extremely high levels of debt, the consumer worries me the worst.  This creates a crisis of confidence.  That is a huge problem.

So, watch the behavior of the market this week.  We have a Federal Reserve Board meeting which always sparks some drama plus some key bank reports and economic data.  If the market can pull through this week, Santa will show for the market.  If not, things could end the year as badly as it started.  If I had to place a higher probability, I don’t think that we end the year on a good note.

As always, I am not trying to be gloom and doom.  I am just trying to balance the financial media who want you to drink the kool-aid.   

Tags: bankruptcy, bear market, bear market bottom, Bob Brooks, credit markets, Debt, Deceptive Money, Foreclosure, market, President-elect Obama, Prudent Money, real estate markets, Stock Market, Unemployment, Wall Street

With banks in tight financial conditions due to the current financial crisis, consumers need to be extra careful about the fee structure that comes along with their accounts.  The latest FDIC study points out the banking system’s preferred way of making money when it comes to fees.  74% of the fees that are earned by the banking system come from account overdrafts.

This latest report shows that banks made 1.97 billion dollars in overdraft fees.  That number comes from a study of 2006.  Some outside groups suggest that in 2007 that number was more like 17.5 billion.

The enormous costs come from the fee itself which can be $37 or more plus the interest costs of the overdraft protection programs.  

Let me give you an example.  Let’s say that you purchased a cup of coffee.  The coffee was $2.05.  You had $2.00 in the account.  The bank went ahead and honored the debit because of the overdraft protection.  That caused an overdraft fee of $35.  Then you went and run some errands.  You spent $10 at the drug store and then another $5 for lunch.  

That combined $15.05 worth of purchases just cost you a total of $105.  The bank allowed you to borrow $15.05 for the small cost of $105.  That is an interest cost of 697.67% on that $15.05 loan.

With banks getting more and more aggressive with enticing programs and higher fees, it is time for the consumer to be very careful.  Here are some things to consider:

1)       Keep it simple – Banks will want you to sign up for all of these types of programs that help you save or help you stay out of trouble.  Just avoid them and keep your account set up very simple.  Programs like the Keep the Change program can be a nightmare to manage and creating a high probability that you will make a mistake.

2)       Place a higher value on organization – It is easy to get lazy with the management of your finances.  Resist the urge to do so.  There is too high of a price for mistakes today.

3)       Check into the fees of your current checking account – It is easy to just assume that your banking account has no trap doors.  Don’t be so sure!  Make sure that there are no gotcha’s.

4)       Shop and compare – Make sure that you are not paying too much in fees – Banks are extremely competitive today for your banking dollars.

Fees can be higher or lower depending on the size of the bank.  For instance, banks larger than $20 billion in assets charged an average of $33 to $34 in overdraft fees compared to banks with less than $100 million in assets, who charge an average of $24 per error.

Tags: banks, Bob Brooks, debit, Deceptive Money, FDIC, fee structure, overdraft fees, overdraft protection, Prudent Money

Between bank bail-outs, homeowner bail-outs, and now potential auto bail-outs, the government has done everything humanly possible to make sure that the system doesn’t go into the tank.  How are they doing?

Let’s start with the TARP (Troubled Assets Relief Program)

The panel that overseas the Treasury Department Bail-out is expected to release a not-so-flattering report concerning the Government’s handling of the bail-out.  

In the report, there are 10 questions to Treasury.  Some of the questions address the lack of a clear strategy, lack of accountability, and why nothing has been done to prevent foreclosures.  They even question whether the money that was just given to banks was a giveaway or a fair deal.

This comes at a particularly tough time for the Treasury, seeing that it has to go to Congress to get the other $350 billion dollars of TARP money.  

Foreclosure Prevention Programs

Top US banking regulators said that some of their foreclosure prevention programs are floundering and that they have no agreed plan for the future.  More than half of the homeowners who have participated in these programs, which resulted in lower payments, are still in danger of foreclosure.  This is just 6 months after first participating.

I don’t know why this is such a shock.  First, mortgages are contracts and difficult to rework.  Second, most people have home values far less than what they owe and see it better to walk away then to stay.  Third, the consumer is in a bad place financially today and even a lower monthly payment would not help.  

Auto Bail-out

An agreement has been reached and now has to go to vote.  This is where the difficult part starts.  There is a good chance that this proposal to loan the auto industry $15 billion will not pass.  Republican politicians are going to be very difficult.  Failure of GM receiving money will bankrupt the company.  Bankruptcy would potentially be the death blow to this company.

Tags: bail-outs, banking regulators, bankrupt, Bob Brooks, Congress, Deceptive Money, Foreclosure, Government, Homeowners, John Thain, Merrill Lynch, Mortgages, Prudent Money, socialism, TARP, treasury, Treasury Department Bail-out

Chicago workers at Republic Windows and Doors who orchestrated a sit-in have spoken their mind and caused Bank of America to cave in.  Bank of America yanked the line of credit forcing the company to shut down operations and lay-off workers.  The workers were upset that they did not get 60 days notice and severance pay before being laid off.

People are laid off all of the time and with hardly any notice.  Sometimes people get severance money and sometimes not.  Thanks to Bank of America, they have just sent a message out to every worker in America.  If you didn’t get something that you felt entitled to, just protest loud enough until you get your way.  As I tell my 4 year old, life is not supposed to be fair.  Americans just believe that they are entitled.

OK, that gives me heartburn.  The bigger pain that this gives me is the fact that Bank of America, who originally thought that this company was a bad credit risk, is now willing to loan them money again.  What’s worse…BOA is loaning them OUR MONEY.  Why not loan them TARP money?  I guess Ken Lewis and the gang feel It is better to lose taxpayer money rather than the bank’s money (if indeed the bank actually has money).

Bank of America sides with the employees by stating they were concerned “about Republic’s failure to pay their employees the Employee Claims to which they are legally entitled.”

Since when does Bank of America have an unlimited amount of funds to defend the rights of 200 workers?  Oh wait a minute – I know – when they took the Government hand-out from Paulson. 

If they are indeed entitled (I really don’t like that word), then it is Republic Windows and Doors’ problem, not Bank of America’s.  Bank of America was going about their day to day business of assessing poor credit risk by withdrawing credit lines…well until…they loaned the credit risk more money.

Tags: Bank of America, Bob Brooks, Deceptive Money, Prudent Money

Complacency will be the reason that companies fail.  For years, companies skated along and conducted business as usual.  They didn’t plan for the future.  Many companies were wasteful.  Companies resisted necessary change.  Many companies just assumed everything would always work out and never prepared themselves for the worst case scenario.

That has been American business over the past decade or so.  Now, hundreds of companies find themselves in dire need because of the credit crisis.   Unfortunately, so many companies are so far gone and, without a miracle, will not make it.  The auto industry is representative of this financial trainwreck. 

From what I can tell, it would be virtually impossible to revive GM.  We would in a sense be giving them billions of taxpayer dollars to just tie them over until some REAL money can be given to them.  We are giving them money to make payroll and absorb losses.  That is not an investment in American business.  That is throwing taxpayer money into an endless money pit. 

Politicians argue that this 15 billion dollars was set aside to help the auto industry transform their production of gas guzzling beasts into energy saving vehicles.  The reality is that money will be used to absorb losses.  They have a long way to go to just shore up the company before they can start thinking about going green.

The biggest assumption made in any of these bailouts is that the economy and business will turn around, credit will free up, and the American consumer will start buying cars again.   For this bailout to work, that will need to occur very fast.  Since the bailouts began in September, the credit markets have worsened and the health of the consumer as greatly deteriorated.  The likelihood of the economy , credit, and the consumer turning around anytime soon is low.  The auto industry doesn’t have time.  They need things to turn around now.

GM was told to just file bankruptcy and reorganize.  GM claims that no member of the auto industry can file bankruptcy because consumers would not buy a car that might be going out of business.  Well, do you think the American consumer feels like buying a car from GM right now?  They probably are already bankrupt in so many ways.

America needs to be allowed to be rebuilt.  The weak need to rebuild on their own or go away.  The strong will survive.  Yes, it will be painful.  However, it will build a stronger and greater America for the future.

Tags: Auto Industry, Bailout, bankruptcy, Bob Brooks, credit, Deceptive Money, GM, Prudent Money, taxpayer dollars

A coordinated trick that debt collectors and some credit card companies use that could put you and an old debt in the hot seat…what you need to know!

Let’s start off with a review of what happens with a debt that has gone to a debt collector.  When this occurs, you want to focus on one thing.  How long are you in danger of getting sued?  Most people worry about their credit report.  The damage to a credit report is already done and only time will fix it.  The biggest concern for anyone who has a debt in collections and cannot pay is the legal system.

In the state of Texas, creditors and/or debt collectors have 4 years from the first missed payment to file a lawsuit.   Beyond that period, a debt collector has no power over you and everything is completely negotiable.  The goal here is to pay that debt back.  The problem is that the debt is typically inflated by much more than you originally borrowed.  Thus, it always makes sense to negotiate on the pay-off.

Once again, you are in good shape if you are past the period during which they can file a lawsuit against you.  Here is the trick that debt collectors and certain credit card companies are doing to put consumers back in harm’s way.

A consumer who is in debt collection will receive a letter from the debt collector offering a brand new credit card that will allow them to transfer the balance from the debt collector to the credit card company.

It looks like a good deal.  There is also the opportunity to build your credit and, at some point, get additional credit as you pay the debt down.  If the consumer didn’t know how debt collection works, it would probably be an offer that would be tough to turn down.

If the consumer takes that offer, the following would occur:

1)     They would satisfy the debt with the debt collector as paid in full.

2)     They would create a brand new debt.

3)     They would sign a credit card acknowledging that they owe money above and beyond the original debt.

4)     If they were to default on the new credit card, they would create a new 4 year time period (State of Texas) where the creditor could file a lawsuit.  They would also create additional debt on top of the credit card for penalties and additional interest.

If you think about it, the strategy is smart by the debt collectors.  They took an old debt where they were handsomely rewarded through all of the trumped up charges.  Then the new creditor has a fresh debt on their books and can file a lawsuit if the account were to ever go into default.

The consumer would have just created a lot of potential problems when they were probably close to the overall time period where they could even get the debt removed from their credit report.

The moral of the story – debt collectors are never in the business to arrange a good deal for you.  Always be leery of any offer that they give you.    

Tags: Bob Brooks, credit card, Credit Card Companies, credit report, Debt, debt collection, debt collectors, Deceptive Money, Prudent Money

Raise your hand if you are tired of seeing Senator Dodd and the rest of the politicians grilling some executive on TV and playing God over whether or not they are going to survive?  How many are tired of the word “bail-out”?

Debt is at the heart of this crisis. 

Over the last few decades, we have built an economy where economic growth has been produced by the creation of debt and poor business fundamentals.  Debt has an end game and it is here.  Economic growth that is produced through the creation of debt eventually fails unless it has been combined with good fundamentals.

We are seeing all of the companies that had good growth but lacked good fundamentals knocking on the door of bankruptcy.  

Bailing out companies with poor fundamentals and bad business models will prove to be a tragic mistake.  What politicians will not acknowledge is that creating more debt to fix a debt crisis is not a solution.

However, this is where the politicians become the problem.  They want to fix things.  They want to look as if they are the saviors and heroes of the moment.  They want the credit.  After all that is how they get campaign contributions and get re-elected. 

Until Congress gets out of the way and allows businesses with poor models and poor fundamentals to fail, this country will NOT climb out of this mess.  Printing money and creating trillions of dollars worth of debt will just keep pushing the problem out into the future.

Politicians, it will be a huge mistake to bail out the auto industry.  You give them one dollar and you will give them 100’s of billions of dollars more.  It will not stop.  The industry is broken.  This country has to be allowed to rebuild its self.  We don’t need to go back to a situation where economic growth is the result of the creation of debt.  We need a new economic model.   

Please Government, get out of the way and let this country rebuild itself.

Tags: bail-out, bankruptcy, Bob Brooks, Debt, Deceptive Money, economy, politicians, Prudent Money, Senator Dodd

One way that companies are getting consumers to spend money using credit is through utilizing the no interest period financing.  You buy today and either make a minimum or, in some cases, no payment for a period of time.  By the end of the promotional period, you would pay the entire debt off and pay no interest at all.

Well, I would encourage you to be very cautious about those offers in this environment.  

Credit card companies are desperate right now.  They are raising rates as well as cutting back on credit lines.  Remember, any of the terms and agreements of those promotional accounts can change without any notice at all.  

Here is one trick that I have actual proof some of credit card companies.  Let’s say that you go to Circuit City and buy a big screen television.  The TV has a 12 month promotional period attached to it with no interest.  If you pay for it by December 3, 2009, then you are in good shape.  You will have received an interest free loan from the credit company.

However, if you are even a day late in paying it off, all of the interest would be applied.  Well, what if the credit card company changes the date?  Think it is possible?  What if they not only change the date but change it two or three times?  What if the credit card company changes the date to November 15^th rather than the original 12 month period that was intended to end in December?

Believe it or not, I have looked at two different instances where this has happened.  In the first case, the credit card company moved up the original promotional date by 2 months.  In the second instance, the company moved the date up a month and then moved it two other times.  

So with these games the credit card company is counting on you not to be paying attention.  In both cases, the listener had to fight the credit card company and, through the help of the store manager, was able to get it resolved.

When the store manager was asked how this could happen, the reply is that it happens and had no real explanation.

So what you need to do if you are buying anything on a promotional period?

Get the individual that is selling you the product to write the date and the terms of the deal on the contract and sign it.  Most of the time, they can print it out for you.

After taking all of the paperwork and making a file, mark on your calendar the due date so you will not forget.  Most importantly, always check your statement and never assume that everything will stay the same.

Tags: Bob Brooks, credit, Credit Card Companies, Debt, Deceptive Money, Prudent Money

The plan states that “two out of every three families – 68% – have been noticeably affected by the financial setbacks in America. Nearly one out of every four (22%) said they have been impacted in a “major way,” almost four out of ten have been affected “only somewhat” and about one out of every twelve (8%) say they have not been affected too much.”

George Barna, who conducted the study, stated that “the giving patterns we’re witnessing suggest that churches, alone, will receive some $3 billion to $5 billion dollars less than expected during this fourth quarter. The average church can expect to see its revenues dip about 4% to 6% lower than would have been expected without the economic turmoil. We anticipate that other non-profit organizations will be hit even harder.”

This is a critical time in the life of the church for many reasons.  First, this financial crisis affords the greatest opportunity to get people who are not saved into the church.  You would be hard pressed to find a time better than this to show people Christ.

Second, the timing of this financial crisis has been especially serious.  The fourth quarter and in many cases December see the biggest percentages given to non-profits and churches   What doesn’t make its way to church budgets in December will cause programs to be cut and church employees to lose jobs.

Finally, giving is where people cut first.  The impact could be enormous.  

As Christians, what steps do we take?

It is important to realize that salaries, utilities, and expenses are paid through giving.  Churches have budgets of expenses just like any company.  They depend on church members to give.  Sadly, a small percentage of most church memberships actually tithe.  Additionally, a smaller percentage of most church memberships give sporadically.  

If you are not giving, give something to the church this December.  If you are facing tough times and are a regular tither and/or giver, I would encourage you to pray about finding ways to continue giving at this very critical point.

Don’t make the mistake of thinking that a small amount will not make a difference.  Small amounts given by the masses would make a huge difference.

For example, let’s say that you had a membership of 1,000.  Of that, 20% or 200 people gave faithfully.  Let’s assume that half of those who do not give gave $50 in December.  That would amount to $20,000 of giving to the church.  That could make up anywhere from 10 to 15% of a church budget.  Yes, the large numbers of people giving makes a difference.

Finally, if you just cannot give anymore or give at all, pray for your church.  Pray for the finances of the church.  Most importantly, pray that the church doesn’t miss one of the greatest opportunities of evangelism that this country has seen in decades.

Tags: Bob Brooks, church, Deceptive Money, finances, financial crisis, Prudent Money

I always get a kick out of the “landmark” studies concerning health issues.  The conclusion is always the obvious.  Is it any big shocker that smoking can lead to cancer?  A lot of money and time was invested to come to the conclusion of the obvious.

Well, we have the same thing with the economy.  The NBER, the Governmental Agency that calls the beginnings and endings of recessions made it official today telling us all something that we already knew.  The economy is in a recession and has been since December 2007. 

The stock market, which acted as if it were a brand new news item, didn’t handle the announcement very well at all.  After putting in the best 5 day performance in the history of the markets last week, the stock market managed another dubious honor.  Today was the single worst December daily loss in the history of the market.  It should be no big shocker as to when the previous record occurred – 1929.

So what does this mean for the stock market in general?  Well, financial media will give you these conclusions:

1)                  We are in a process of trying to end this bear market and get started with a new bull market.

2)                  Investors are just taking some profits from an almost 20% 5 day stock market gain

Unfortunately, I don’t think that it is that easy.  

1)                  Holiday Sales Reality – Holiday sales were estimated to be higher than last year at this time.  However, there is one caveat.  In order to get people to buy more items, prices had to be cut to the bone.  Of course, this has a huge impact on profit margins.  Profits are what drive Wall Street.

2)                  Consumer credit is still a big problem – It was estimated that credit card companies and banks were going to cut 2 trillion dollars of credit lines over the next 18 months.  This comes at a time where consumers rely on credit more than ever.    

3)                  Lack of Leadership – We are in a unique situation today with no leadership in place.  This illustrates the problem with the political system.  Congress is dealing with a few issues.  However, for the most part, they are off until next year as far as making any major policy decisions.  President elect Obama cannot do anything until sworn in as President.  Finally, President Bush has shut down for the most part.

4)                  The Crisis of Confidence – The markets have driven a stake into the hearts of investor confidence.  It is tough to be confident when one moment the stock market is up 20% and in one single day the stock market losses almost 9%.  

This week could prove to be very volatile.  It just feels like the stock market is telling us that the next shoe is about to drop. 

Watch the unemployment numbers at the end of the week.  This becomes the single biggest economic report of the month.

Tags: Bob Brooks, Deceptive Money, NBER, Prudent Money, recession, Stock Market, Unemployment