Questions & Answers

Bio | Notes from the Author

What do you think is the biggest problem with Americans and their finances?

As we say around the water cooler, people are broke at every income level. The average American is more of a spender than a saver. Whether you make $500,000 or $25,000, most people choose to live beyond their means. Let’s face it; the simple cost of daily living has become very expensive. Food, utilities, medical costs, and housing have all gone up exponentially over the last decade. We cannot keep up with the cost of our basic needs. Add in the car lease (that anybody can get), the 52” flat panel TV (that you can get with 0% interest payments for 6 months), and the house (that you can buy with a 3.5% down mortgage), and the consumer is teetering on bankruptcy right out of the gate. As we have seen, spending more than you earn became the norm, and spending more than you have is characteristic for all income levels. Americans have not been able to save a dime.

How do you think the country got into this current financial mess?

Unfortunately we live in a world of here and now—let’s do it, get it, buy it, and worry about it later. I’ve got news for you: later is now here. Things that should be classified as luxuries are now thought of as necessities. “Borrowed money” became too easily accessible, so consumers were able to take advantage of the situation to the point of abuse. Corporate America grew in leaps and bounds just to keep up with the demand for products and services. What we did not know was that businesses were living on huge credit lines. When demand died, the businesses had too much supply built up, and the cash flow came to screeching halt—almost overnight. Only now, are lenders realizing what they helped create and pulling back the reins. It has become terribly difficult to get credit (as it should have been 10 years ago when the problem began). Unfortunately, this pulling in of the reins took away credit from businesses and people that really needed it to survive on a day-to-day basis. When things are great, nobody considers the consequences; when things become bad, people begin to point fingers and say, “Never again.”

How do you feel about consumer education?

All Americans should study the depression era. My grandparents were products of the depression and lived modest lives because of it. My grandfather worked hard, but he and my grandmother lived in a comfortable house and had a happy and fulfilling life. I do not recall stories of them going without food; however, the children did not have cars in high school, nor did they take lavish vacations during college break. They were average Americans as most of us are, but, now, no one is satisfied with just being average.

Perhaps my grandparents went to the school of “hard-knocks,” but certainly there is enough information out there now so people can understand how to save better and spend less. We watch Jean Chatzky on NBC and read books by Suze Orman, but then we discuss Jim Kramer’s stock tips over a $200 dinner. That is like bringing your eco-friendly shopping bags to the food store and then driving home your Lincoln Navigator. People just don’t get the reality of it until it hits them in the face.

Seriously, I think all high schools and colleges should have a mandatory personal finance class. Kids do not know what a 401-K is, and they certainly do not understand the need for good credit. If their parents do not practice healthy financial habits, then who will teach them? It is up to us to teach the next generation how to be financially responsible, and it is imperative that it is done now.

Do you believe that if there were more government regulation and control over the real estate industry, this would have never happened?

I believe if there were proper self-regulation and self-control, we would not have gotten into this mess. Remember, FNMA and Freddie Mac were spin-offs of the government, and they got right into the game alongside Wall Street. The mortgage was no longer a vehicle for the American Dream of homeownership; it was an investment vehicle for global financial markets. The mortgage was no longer attached to Mr. Smith’s home but was part of an investment pool in the Baltics. Wall Street likes to blame David X. Li for being the catalyst of the implosion of mortgage pools everywhere. Mr. Li created a mathematical formula to rate bonds which was then used by Wall Streeter to price them. Come on! Blaming Mr. Li for the mortgage crisis is like blaming the alphabet for swear words.

As we see, there is a team of so many players who can be blamed: from Wall Street, who sold the toxic mortgages for profit; to the realtors, who created an insane real estate market; to the appraisers, who found increased value in the color of house paint; all the way to the consumers, who bought the house and took the mortgage that they knew they could not afford. Oh, and the loan officers all over the world who were untrained and uneducated on mortgage products and went around selling mortgages like used cars also deserve their share of the blame.

There needs to be regulation and transparency in all industries affiliated with residential real estate and consumer mortgages from Wall Street to realtors. However, there also needs to be some sort of professional responsibility as well as self-control on the consumers’ part. My gripe was just because they told you that you can get a mortgage, did that mean you should have taken it?

You are a world traveler and spend many weeks away from home and business. What have you done to prepare and set yourself up for this lifestyle?

Ah, it is all about technology! When I began traveling, I used to have my staff fax me (to my hotel) a list of questions and messages at the end of their day. I would then reply and fax it back for them to have answers the next morning. With the invention of the internet café, I was able to communicate by email several days a week. In 2004, I went to Italy for two weeks with my nephew and purchased my first Blackberry® for the trip. The fact that we could be emailing my brother from the top of the Leaning Tower of Pisa opened the world for me in an entirely new way. I now travel about six times a year for pleasure from 5 to 20 days at a time. No matter where I am in the world, I will usually get Blackberry (T-Mobile®) and cell phone (AT&T®) service. So, I can be reached mostly anywhere and can email clients in real time just as if I am sitting at my desk. The fact is, I mostly communicate with people via email anyway, so no one is the wiser whether I am at my desk or downtown Beijing, and, truly, what does it matter? Technology affords me the opportunity to do what I love while maintaining a business and a strong responsibility to my clients. In today’s age, the response time must be instantaneous. I am aiming for the invisible lifestyle: being everywhere and somewhere else at the same time.

What was your earliest memory of what you wanted to be when you grew up?

I always wanted to be in the movie business, but at the backend, perhaps a producer or agent. When I graduated law school, I tried to get a job as an agent only to find that the beginner positions were non-paying. Needing to eat, I landed a job as a real estate lawyer doing bank closings instead. This brought me down the road to where I am today. Regrettably, I still think I would have made a good talent agent, but I am quite satisfied with my current affairs.

How has working in the consumer finance industry changed the way you treat your own finances?

I have reviewed so many mortgage applications over the years, and people’s financial illnesses still astound me. People that make a very decent living might have no savings, and people that make a very modest living might own the biggest home and have an $800 a month car lease. As I said, people are broke at every level. It is all about priorities and asking yourself if you really need that. Once you have the basics, everything else is just a comfort or a luxury item.

I am careful and thoughtful about my purchases and will do the research before buying that big ticket item. I buy my cars, rather than lease, so I can keep them for as long as I want. I save before I spend and have a good mix of safe investments. I have an investment advisor but am very active in what is going on in the account. I am shocked when people say they do not even open their brokerage statements when the market is going down. They say they don’t want to see it because it is depressing, but I think it is more depressing that they aren’t pro-active in maintaining their investments. I have always felt that I am frugal in that I have one house, one car, and just enough pairs of shoes. I went through the stages of the $200 dinner and the overspending on clothes and toys. The fact is, I got over it, and many people never do. At this point in my life, I feel that I have enough and do not need more. In fact, I want less as time goes by. When I said people should study the depression era, we can joke around, but I have been brown bagging my lunch forever. I admit, my greatest vice is travel, and I do it well.

What advice can you give people to save money on a permanent basis?

Buy a car instead of leasing it and keep it until it starts to cost you money, bring your lunch to work and eat breakfast before you leave in the morning, keep the electronics a few extra years rather than buy the next generation when it comes out, cook dinner at home at least one more night each week, and say no to your kids when they ask for that unreasonable item that their friends have (If all the parents begin to say no, it would not be an issue, would it?). In short, stop wanting to keep up with the Joneses. You will sleep better at night.

Where will you be in five years?

Somewhere other than where people think I am.

Describe yourself in three words.

Honest, hard-working, kind.