Tuesday, December 29, 2015

The Financial Lessons Of James Bond


Everybody's favorite spy is back in theaters with the release of "Spectre." To mark the occasion, we decided to take a look at his 50-plus year history to see what lessons we could learn about life and money from the greatest secret agent in film history. 

Develop your revenue streams. The Bond movies regularly earn more than $100 million in product placement, ensuring the profitability of his missions long before you or I pony up $7.50 for a ticket. For instance, in the Ian Fleming novels, James Bond wears a Rolex Oyster Perpetual. It's a signature accessory, and in one scene early in the series, he drops the watch onto his fist to use it as a knuckle duster when punching a bad guy in the face.  The scene is beloved by many fans of the novel, which is why it was recreated during a scene during the Daniel Craig era. But it's surprising when Craig's Bond makes the move and he's wearing an Omega watch.  Of course, the most famous Bond-worn watch is Sean Connery's Rolex Submariner, but he's also worn a digital Seiko and a Tag Heuer.

Bond has also forsaken his Aston Martin in favor of BMWs and Jaguars, while appearing in commercials for Heineken - a beer that should not be shaken or stirred. He's indulged in Red Stripe and Coke Zero, flown Pan Am, used L'Oreal, and if you want to dress the part, you need look no further than Tom Ford, the luxury menswear designer responsible for providing the suits and evening wear for the Daniel Craig era. 

Do you have enough revenue streams?  Could you find other ways to make money?  There's never been a better time to develop additional income.  With the prime interest rate so low, you can lock in an amazing fixed rate on a home equity loan to pursue your business idea or side project for building your fortune during the weekends. You can distribute your product, cultivate a customer base and conduct all of your transactions online, leaving a much larger chunk of your capital to produce a high-quality product or service. 

Keep cool.  In "Goldfinger," or any of the Connery-era Bond films, the climax tended to revolve around an impending countdown to doomsday, stopped at the last moment by Bond.  He's fought enough odd-looking henchmen to fill a small stadium, dispatching each with a quip that mixed fantastic timing with unflappable calm.  He's flown airplanes sideways through hangars and driven tanks through Moscow's rush hour.  Through it all, James Bond stays cool.  The man can scuba dive up to the bad guy's island hideout, unzip his wet suit and immediately have on a perfectly pressed tuxedo.  Cool.

Are you cool?  Not in terms of driving the carpool and earning the grudging respect of the tweens in the back seat, but in terms of the ability to drop a one-liner in the face of worldwide annihilation. To put it another way, how rattled are you by the rough year the stock market has had? Don't let a hiccup on Wall Street ruin your retirement. Instead, buoy your investments with our fantastic savings products. You can reduce your exposure to risk, making it easier to take a deep breath, while having easier access to your money in times of stress. 

Keep your house in good order.  The film plot of "Skyfall" was two hours of "The Dark Knight" followed by half an hour of "Home Alone." The climax of the film involves a return to Bond's childhood home, which he manages to turn into a fortress with an afternoon's work. 

If your house isn't ready to repel invaders, don't worry.  Home improvement is easy with a home equity lineof credit.  You get all of the spending flexibility of a credit card, so you can use the money you need when you need to on a revolving line of credit, paying it back in chunks when you can afford to do so, but you can do it at a much lower rate than a credit card because you secure the loan with the equity you already have in your house.  And the interest you pay may be tax deductible (consult your tax advisor on this one). 

Don't be fooled by the luxuries James Bond enjoys.  It might not seem like a path to financial security, but what if you bought all of the luxuries that James Bond buys? In the films, we've seen him drive incredibly expensive vehicles in wonderfully exotic locations while wearing fabulously expensive clothes. We've also never seen him buy any of them. He's received them from MI6, which is why it's so easy for him to blow them all up.

Are you trying to live the James Bond lifestyle?  James Bond doesn't even live the James Bond lifestyle. He lets the taxpayers foot the bill while he gets by on a public servant's wage. You'll be much happier living within your means and finding the luxuries when you can.

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Tuesday, December 22, 2015

Financial Lessons Of The Big Short



A friend of mine teaches at a university where the 2008 financial crisis came up during one of his recent class discussions. He asked his students, "If you had one million dollars and a time machine, could you go back to 2008 and make a profit?" The class replied that they couldn't.  Not one student believed he or she could have turned a profit from the financial crisis. He was troubled by that, so he asked his other classes the same question and no one indicated that they understood what happened well enough to do so. Finally, he asked his colleagues, and even they were stumped.  A few of them had vague ideas or suggested they would just buy stock in Google or Amazon while it was low. Still, none had a firm enough grasp on the events of that autumn to confidently explain how they could have made money. 

There are financial lessons to be learned from many movies and figures in popular culture, and The Big Short is no exception. Obviously, we haven't seen the film, but the Michael Lewis book from which it is based, provides the single best explanation of how the financial system crashed. Like Lewis' other books, including The Blind Side, Moneyball, Boomerang, and Liar's Poker, it's an immensely readable book because Lewis is a gifted writer who can explain difficult concepts because Lewis starts with people rather than statistics.  The people in The Big Short are some of the most interesting characters he could have chosen: He profiles the people who made an enormous profit from the financial crisis, even though they didn't have a time machine.

Here are a few of the lessons the book (and hopefully the movie) has to offer:

Don't avoid risk, particularly with your home.  While a generation of would-be homeowners let the financial crisis scare them away from homeownership - a surprising number of Millennials say they'd prefer not to own a home, even if they had the money. The real lesson of the financial crisis is that it's better to be in a home than not.  It's scary to see people lose their homes; evictions are terrible and it's easy to see why young people who saw the wave of Americans losing their largest investments, jobs and nest eggs would be spooked.  However, the people who had taken out loans that they could afford didn't lose their homes.  That was incredibly important, because ... 

If you own your home, it's a lot easier to lose money on paper. Lewis reports that, during October 2008, Americans lost a combined one trillion dollars.  The thing about that trillion dollars is that it was everywhere we looked: The federal government had a shortfall, so it passed it to the states, which passed it to the locals, so it cut back all government services. Look no further than spending on higher education and tuition costs.  People stopped retiring at the rate they had been, which was rough for Boomers, and it also meant that they weren't opening up spots for Millennials in the workforce.  Even the divorce rate plummeted because people couldn't afford to split up a household.

In the end, that trillion dollars became three trillion in government spending to start the economy back up. That is an insanely large amount of money.

But, and this is the key, most individuals who kept their jobs and homes didn't actually lose money. In a lot of cases, they lost future income and they lost some value in their homes, but unless they cashed out of the stock market or sold their homes for less than they put in, they didn't lose actual money; they lost money on paper.  It's not like losing money on paper is fun, but in the worst financial crisis in nearly a century, owning a home was still the best way to keep safe.  If you lost some of the value of your home, but waited the recession out, you're probably back to where you were before 2008, if not ahead. That's as safe as it gets.

Something that's equally as secure is saving your dollars at Destinations Credit Union.  We're insured by the NCUA, so there's very little risk and your money isn't being invested in high-risk/high-reward propositions like mortgage-backed annuities, which brought down the economy in 2008. 

One trillion dollars is a lot of money. If you'd like to imagine that, think of a heist movie where the protagonist walks off with one million dollars in a duffel bag.  Now, imagine there are one million duffel bags, each with one million dollars in them.  Or, if you'd prefer, think of the Dallas Cowboys, who were valued at $1.7 billion in 2009, one of the few NFL franchises to gain value during the year after the financial crisis.  That same year, Cowboys Stadium, now known as AT&T Stadium, opened with a price tag of $1.2 billion.  As the most valuable NFL franchise playing in the most expensive stadium in the country, both could be had for just shy of $3 billion.  So, America lost as much money that month as it would take to purchase the entire NFL 10 times. 

Sometimes, it takes a psycho. One of the most striking things about the profiles in The Big Short is that the people involved all made big bets against the entire rest of the world.  They refused to accept common wisdom, they didn't listen to their colleagues and investors who thought they were crazy, and they bet on an event which had never happened before and required an orchestrated failure at virtually every level of the American economy.  



The kind of person who can make a bet like that is a little bit crazy. Sometimes, that's what it takes. As we think about The Big Short, it makes sense that all of those professors and students don't know how they could make money in the recession, because making that money would require major antisocial and counter-intuitive behaviors. That's why it's important to believe in oneself, but even more important to look at the cost of being right: No one involved actually seemed to be both happy and well-adjusted. And we have to wonder: what's the point of making a profit without that?

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Monday, December 21, 2015

Three Questions, Then Three Questions


As 2015 draws to a close, it's time to figure out if you're in your best possible financial shape.  While performing a self-audit can seem a daunting task, we've created a simple way to get started. Below, we ask three questions about where you are now compared to where you were a year ago. Your answers should help you understand if you made the right choices in 2015.  After that, we've got three more questions to help guide your 2016. 

2015:  Do you have less debt than a year ago?

2016:  Could you pay off your credit cards this year if you had to do so? 

December can be a rough month for our credit card statements, so you might already be dreading the daily arrival of the mail just as much as your kids eagerly anticipate it.  But debt is part of life, and the kids can't unwrap a copy of the family credit score, so you grit your teeth and swipe.  Don't let the fact that you have credit card debt be a source of guilt or shame, and definitely don't assume that burden even if you are carrying some credit card debt into 2016. Instead, take a look at where you are now, then compare it to where you were a year ago.  Have you reduced your debt in 2015?  If not, why not?  Maybe you had an emergency you needed to cover.  Maybe this was the year you installed the home theater you've been wanting.  The important thing to ask yourself is whether you've reduced your credit card debt, and if not, is what you bought with that debt worth it to you now?

With other forms of debt, the questions can be more complicated. While you'd like to have a smaller outstanding balance on your mortgage or car note, reducing the amount you owe might not be the best idea.  After all, mortgage rates are incredibly low right now, so turning your credit card debt into a home equity loan is a smart move (provided you don't rack up new credit card debt!). You might have a new debt balance that you didn't have at this time last year if you bought a new car, upgraded the kitchen, or went back to school. 

If it's time to clear up your debt, try one of our home equity or personal loans. Or, if you have higher rate credit cards, transfer the balances to a lower rate Destinations Credit Union MasterCard Credit Card.  If you reduce your rate and make the same payments, your debt will dwindle more quickly. 

2015:  Do you have more money saved than you did a year ago?

2016:  What would happen if you didn't get paid next month? 

Again, the best way to determine your financial position today is to compare it to where you were a year ago, and savings is important.  If you have more saved this year than you did last year, it means your budget is working and you're headed in the right direction.  If you have less saved than you did a year ago, try to determine why that is.  Did you have to dip into savings to pay the down payment on a long-term purchase?  Did you have to cover a gap in employment?  Just like with debt, figure out how much less you saved, compare it to what you bought, and determine whether or not the purchase was worth it.

Just like with debt, however, simply looking at the bottom line probably isn't enough to tell you if you're making the right moves.  Having an emergency fund that represents six months of your income is incredibly important for easing your family's mind and protecting them if something unfortunate happens. But having an emergency fund much larger than that isn't necessarily better.  You don't want to be a dragon, sleeping on a hoard of gold simply because it's pretty. Instead, put that savings to work for you in the form of a retirement fund, college savings or even the down payment on a second home to use as a rental property.

If you're looking to add to your savings, check out our savings plans (hint: if you want to earn a really high rate, attach a Kasasa Saver to a Kasasa Rewards Checking and earn more every month you qualify!). To save for a child's education, take a look at our Coverdell IRA Plan. 

2015:  Is your credit score higher than it was a year ago?

2016:  What will you do this year to improve your life? 

These questions might not look like they go together, but they do.  This is the section where you take a big-picture look at your financial world. If your credit score is improving, then you're probably making the right choices overall.  If not, it would be good to find out why that is the case.  Make sure all of the charges on your credit report are accurate, work to tackle your debt, and try to bring in more income.  If you work to improve your credit score, you'll almost certainly have to improve your overall financial standing. Destinations Credit Union Members can get unlimited free financial counseling to help you with this through our partnership with Accel.

But your credit score isn't your life.  What are you going to do this year?  Are you going to take a trip to Europe?  Get started in a new career?  Buy a vacation home on the lake?  Learn a new language? What is it you'd like to actually do?

Once you know what you want to do this year, figure out what it'll take to make it happen.  Can you save for it?  Will you need a loan?  Is your credit score too low for a second mortgage?  Whatever is in your way, make that your next financial goal.  Get your savings and debt into good positions, and then try to live your life.  After all, that's what the money is for.  

Saturday, December 19, 2015

Rogue Access Points


We've all been there.  It's been a long day of shopping at the mall, or waiting in an airport, or driving across the country, and we finally get a chance to pull out our phones or laptops and look for WiFi. Good news: You've found one that doesn't require a password!  Free WiFi saves the day. You click accept and head to your favorite place to watch videos of kittens, or whatever people normally do on the Internet ... we mostly watch kittens.

There's just one problem: what if that free WiFi was a trap?  One of the cleverest phishing scams out there right now is built on the lure of free WiFi using rogue access points, and it has enough variations to stay ahead of the security teams at Apple, Samsung, Microsoft and our own security for one simple reason: The soft spot in your security is you. 

Here's how phishing on rogue access points works:  The scammer will set up a wireless router offering free Internet, often marked "Free WiFi," "ATT WiFi," or "Starbucks."  Would you be suspicious of those networks?  Many people just look for the strongest "free" network, while most of the rest of us look for a name we trust.  How paranoid do you have to be to not connect to Starbucks WiFi at the mall?  Once you connect, though, they have a variety of ways to get any information they want off your phone or laptop. 

Even scarier, some scammers are using programs that tell your phone that the name of the free wireless available from the scammer's router is whatever name your phone is looking for, so it can even connect automatically while in your pocket.  You can get phished over your phone just by walking in the wrong area. 

Once you're on their network, they have a variety of ways to steal your info, from just grabbing your session cookies to using keystroke monitors to get logins and passwords, to the traditional phishing technique of creating dummy sites that look like Facebook or major credit card websites to prompt you for your info. 

Here's what you can do to stay safe: 
  1. Turn off your WiFi unless you're at home or work.  I know, I know. The only thing worse than mobile network data speed is mobile data network pricing.  Well, maybe mobile network customer service. Unfortunately, all that WiFi you grab every day can be dangerous.  Even if you're not running into rogue access points, you've still got to hope that the coffee shop or burger joint actually pays attention to the security of their wireless router, which few even think to do.  Even those businesses that do think about security rarely spend money on it - rarely are they bringing in a professional. No, they're asking a minimum wage employee to "take care of it" because "you're young and good at computers."  On a related note, isn't it odd that coffee shops don't spend more time thinking about their WiFi?  Isn't that a core business at this point? 
  2. Even then, make sure your home and work WiFi are safe. Endpoint security, like Norton antivirus, is not as effective as it once was, simply because there are so many more points of vulnerability than there were a few years back.  We'll have an extended look at securing your WiFi network in a future installment, but for today, set up your password with WPA2 Enterprise encryption.  If your router does not support it, it's time for a new router. 
  3. Rename your home network something like "This Public WiFi is UNSAFE."  It might sound weird, but if a scammer tries to use software to tell your phone the name of his network is the same as your home network, your phone will tell you it's connected to "This Public WiFi is UNSAFE" and you can get off of it. 
  4. Apps are your friend.  Most apps, including ours, use HTTPs security, rather than HTTP. This can actually stop some of the tactics many scammers use.  Remember, they don't want to beat the best security; they want to do as little work as possible and beat those unwary souls who rely on the worst security.  A simple step up is enough to keep many scammers at bay. 
  5. Get an app that prevents rogue access.  Depending on your operating system (OS), you have different options, but search your app store.  It's worth the trouble and $4.99. 


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