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Money Monday with Brian James · Brian Thomas

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Speaker 1: I want to know what's happening.
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Speaker 2: I know what's going on around town.
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Speaker 1: Around the country.
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Speaker 2: I don't even know. I need to know the weather
0:05
Speaker 2: in traffic. Listen and you'll know. On fifty five KRZ
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Speaker 2: the talkstation Shabato sick here if if you have kr
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Speaker 2: CEED talk station, it's Monday. It's that time. All our financials.
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Speaker 2: Brian James giving us another edition of Money Monday, and
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Speaker 2: of course it's appointment listening for that secret group of
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Speaker 2: women out there that Brian and I learned about. You
0:28
Speaker 2: tune in regularly just to cling to Brian James words
0:31
Speaker 2: on investment strategies and today about Tariff's being up, the
0:35
Speaker 2: interest on our national death Doge apparently didn't accomplish much,
0:38
Speaker 2: Social Security and the topic we've been waiting for credit
0:42
Speaker 2: unions versus banks. A lot to pile in for a
0:44
Speaker 2: few segments. Brian James, Welcome back and Happy Monday in
0:47
Speaker 2: spite of the Bengals loss.
0:48
Speaker 1: Happy Monday, and go Mariners, including all the former Reds
0:52
Speaker 1: who are still playing. That's all we have to cling
0:55
Speaker 1: to at this point. Hey, you got something there, Brian,
0:58
Speaker 1: Go Luis Castillo and a Heniosuarez and handful of other ones, right,
1:02
Speaker 1: it's something that's better than nothing. Will hang on to that.
1:05
Speaker 2: It is something and something that is tariffs I know
1:08
Speaker 2: so far, you know, I mean draw your conclusions whether
1:11
Speaker 2: we have been collectively scathed in our economy. But apparently
1:15
Speaker 2: at some point they say they were going to catch
1:17
Speaker 2: up to us, and it looks like they may be
1:19
Speaker 2: catching up. And I know China has just put some huge,
1:22
Speaker 2: huge prohibitions on the trading of the rare earth minerals
1:26
Speaker 2: that we rely on them almost exclusively for. So what's
1:29
Speaker 2: going on with the tariff ran.
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Speaker 1: Well, the tariffs have had their impact, so interestingly, our
1:34
Speaker 1: deficit is basically flat at one point eight trillion. Now
1:37
Speaker 1: that would be a fantastic headline in any other environment. However,
1:41
Speaker 1: what's happening is it's just the surge from the tariffs.
1:44
Speaker 1: So the cash that's coming in from that that's keeping
1:47
Speaker 1: the deficit from running up. So on one hand, anytime
1:51
Speaker 1: the deficit doesn't increase, that would be I can't remember
1:53
Speaker 1: the last time that was a headline. But all it
1:56
Speaker 1: is is the cash that's coming from these tariffs, which
1:58
Speaker 1: is probably somewhat temporary as the market continues to settle
2:02
Speaker 1: itself out as countries decide whether they're willing to continue
2:05
Speaker 1: or if they fight back, or if they find different
2:08
Speaker 1: markets entirely to sell to. So customs duties had almost
2:12
Speaker 1: two hundred billion dollars, that's more than double last year,
2:15
Speaker 1: and it's still only three point seven percent of federal revenue.
2:18
Speaker 1: So Trump had the President Trump had this big goal
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Speaker 1: of We're going to reduce income taxes, reliance on income taxes,
2:26
Speaker 1: and increase reliance on external taxes, meaning these tariffs. That's
2:29
Speaker 1: how we're going to run the country. So these tariffs,
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Speaker 1: even now at two hundred billion from these duties, is
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Speaker 1: still only three point seven percent of federal revenue. Individual
2:38
Speaker 1: income taxes still make up fifty one percent of it.
2:41
Speaker 1: So we got a long way to go. If these
2:43
Speaker 1: tariffs are going to truly remove our income taxes, which
2:46
Speaker 1: I have bad news. They are not.
2:48
Speaker 2: Fair enough on that. I guess tariffs, by all arguments,
2:53
Speaker 2: can raise the price of goods here in the United States,
2:56
Speaker 2: So one could argue if your income tax does stay down,
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Speaker 2: the money still has to be collected some way. This way,
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Speaker 2: at least, anybody who buys something is kind of sharing
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Speaker 2: in the responsibility. It's kind of like a increase in
3:08
Speaker 2: sales tax that deal with fewer tax dollars coming in
3:10
Speaker 2: by way of income tax.
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Speaker 1: It's quite literally that. I mean, there's nothing that says
3:15
Speaker 1: that any company or country that is selling into the
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Speaker 1: United States has to eat these tariffs. There are no
3:21
Speaker 1: rules that say that they must keep their prices the
3:24
Speaker 1: same and just eat the tariffs. There's really no way
3:27
Speaker 1: to put that in place. They can simply decide to
3:28
Speaker 1: walk away from the market, or they can raise their prices.
3:31
Speaker 1: It's really no different than you know, if you're renting
3:33
Speaker 1: an apartment and you feel like the landlord is going
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Speaker 1: to bear the brunt of the property tax increases, that
3:40
Speaker 1: is not the case. They're simply going to raise the rent.
3:42
Speaker 1: The renter is the one who ultimately pays everything. That's
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Speaker 1: why they call us consumers. We're at the bottom of
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Speaker 1: the at the bottom of the chain, and we are
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Speaker 1: the ones who consume all the goods and services that
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Speaker 1: are out there, and that means we have to eat
3:54
Speaker 1: whatever price is. The only way you can avoid these
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Speaker 1: price increases is to truly change your lifestyle and not
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Speaker 1: need these things any and that's simply not an option
4:01
Speaker 1: for most of the stuff we have to deal with now.
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Speaker 2: For most of the stuff, there are a lot of
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Speaker 2: things on I think our collective budget margins that if
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Speaker 2: we really gave it long hard thought, we know we
4:09
Speaker 2: could do without them. So that's up to an individual
4:12
Speaker 2: families choices, and people are going to be forced to
4:14
Speaker 2: make those kind of choices. Interest revealing that the interest
4:18
Speaker 2: rate on our debt is now over one trillion dollars,
4:21
Speaker 2: meaning that is I guess more than even defense spending
4:24
Speaker 2: usually coming into like number one. But that's because we
4:27
Speaker 2: have a spending problem in government. I know Donald Trump's
4:29
Speaker 2: done some took some steps with the OMB on Friday
4:33
Speaker 2: to start firing people. But when they fire people that
4:36
Speaker 2: whether it impacts you and me in our day to
4:39
Speaker 2: day lives, it's certainly not going to be a sizable
4:41
Speaker 2: enough chunk of government cuts to actually accomplish something. So
4:44
Speaker 2: let's talk about that. But also, we had huge hopes
4:47
Speaker 2: for the Doge Department and that apparently has kind of
4:50
Speaker 2: fizzled out. So where are we with this debt and
4:53
Speaker 2: of course the DOGE cuts, So yeah, the.
4:56
Speaker 1: Big concern there with the size of debt, So debt
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Speaker 1: is it's just like anything else you have a mortgage
5:02
Speaker 1: out there, you're a bunch of credit card debts, then
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Speaker 1: you are impacted directly by interest rates. And now that
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Speaker 1: we're literally writing checks for a trillion dollars as a country,
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Speaker 1: that's just for the interest. Remember some if we're writing
5:13
Speaker 1: a check for a trillion dollars, somebody might go, oh, great,
5:16
Speaker 1: we're paying down a principle. No we're not. We're simply
5:18
Speaker 1: maintaining what we already have. We are treading water. So
5:21
Speaker 1: that net interest of a trillion dollars is now bigger
5:24
Speaker 1: than medicare or defense. Based on some calculations, roughly about
5:28
Speaker 1: a dollar of every five dollars in revenue. And again
5:31
Speaker 1: remember half of that comes from our own income taxes.
5:33
Speaker 1: A dollar out of every five dollars goes to these
5:36
Speaker 1: interest payments. This is coming from the higher rates and
5:38
Speaker 1: the fact that we have just more debt than we've
5:40
Speaker 1: ever had before. Of course, so the issue here, the
5:44
Speaker 1: concern is that we were likely going to head into
5:46
Speaker 1: a higher for longer type of a situation with regard
5:50
Speaker 1: to interest rates staying where they are. Remember, we're not
5:53
Speaker 1: always only talking about the Federal Reserve and what it
5:55
Speaker 1: wants to do with interest rates. We're often talking about
5:58
Speaker 1: what the market. The market has an impact on rates too.
6:01
Speaker 1: Whatever it's sensitive to. Whatever the market thinks of the
6:05
Speaker 1: credit quality of the United States, can it continue to
6:07
Speaker 1: pay its debts and so forth, that will also have
6:09
Speaker 1: an impact on interest rates. That means Washington is going
6:13
Speaker 1: to be super sensitive to interest rate moves, even if
6:15
Speaker 1: the Fed makes gradual cuts, Brian, the rolling over debt
6:19
Speaker 1: that's still out there is going to keep these average
6:21
Speaker 1: interest costs elevated. And that means we need to make
6:24
Speaker 1: some cautious mortgage and refi assumptions, and we need to
6:26
Speaker 1: be stress testing our budgets for these higher rates. For
6:29
Speaker 1: those of you what that means out there, For those
6:31
Speaker 1: of you perhaps on an adjustable rate mortgage, you need
6:34
Speaker 1: to take a look at what that might be if
6:36
Speaker 1: you did it five years ago at a really low rate. Well,
6:38
Speaker 1: that's going to be sneaking up on you very soon.
6:40
Speaker 1: You need to make sure you can handle whatever the
6:43
Speaker 1: increased payment is going to be when that adjustable rate
6:45
Speaker 1: mortgage adjusts.
6:46
Speaker 2: Well, doesn't the interest rate that repair, I mean, doesn't
6:48
Speaker 2: the debt interest which we have to pay more than
6:51
Speaker 2: a trillion year, and that keeps growing. Doesn't that necessarily
6:54
Speaker 2: have a restrictive force on the growth of government. I mean,
6:58
Speaker 2: if they're not bringing in any additional tax, you run
7:00
Speaker 2: the risk of digging us further into a deficit hole
7:02
Speaker 2: which increases that trillion dollars to something north of it.
7:06
Speaker 2: Or you have to say, listen, we got all this
7:08
Speaker 2: debt service we've got to pay. We no longer can
7:10
Speaker 2: afford to fill in the blank. Maybe we need to
7:13
Speaker 2: reduce the size of that department. Maybe we just say
7:15
Speaker 2: no to something new by way of you know, oh,
7:17
Speaker 2: I don't know, expanding health care for illegal immigrants or something.
7:20
Speaker 2: But something's got to give.
7:21
Speaker 1: Brian, Yeah, that's that's true for any household as well
7:25
Speaker 1: as it's true for the for our country as a whole.
7:27
Speaker 1: And that's that's what DOGE was intended to do. Yeah,
7:30
Speaker 1: that didn't really quite you know, the little segue into
7:32
Speaker 1: that topic since you mentioned it. When DOZE was originally
7:35
Speaker 1: set up, remember this is the Department of Governmental Efficiency
7:39
Speaker 1: run by Elon Musk briefly that was going to come
7:41
Speaker 1: in and just clean house and figure out exactly where
7:44
Speaker 1: all the waste is and get rid of it all.
7:46
Speaker 1: And they were going to achieve two trillion dollars in savings.
7:49
Speaker 1: That was the brochure that we all read, but so
7:52
Speaker 1: far that hasn't been the case. Not to mention, Elon
7:54
Speaker 1: Musk stepped down a few months ago, and we really
7:56
Speaker 1: haven't heard much ever since. So total spending excluding interests
7:59
Speaker 1: rose about two hundred and twenty billion dollars, or four
8:02
Speaker 1: percent for that entire year. That would have been bigger
8:05
Speaker 1: except for in September twenty five when the Trump administration
8:09
Speaker 1: put in a non cash spending reduction based on modifications
8:12
Speaker 1: to student loans. That knocked it down a little bit.
8:14
Speaker 2: But other than.
8:15
Speaker 1: Student loans, the only the only major categories where the
8:18
Speaker 1: Congressional Budget Office said spending actually declined was the FDIC, which,
8:22
Speaker 1: if you think about this, all that means is we
8:24
Speaker 1: didn't have scary headlines about banks failure, which is that's
8:27
Speaker 1: a good thing. But we can't count it as a
8:29
Speaker 1: victory small Business administration because we had a similar situation
8:32
Speaker 1: where we didn't have to lay out the kind of
8:34
Speaker 1: money that we normally do for disaster related loans that
8:37
Speaker 1: do come out of the Small Business Administration. So so
8:40
Speaker 1: far we can't really say that DOJ has had all
8:42
Speaker 1: that much of an impact despite the blusters coming out
8:45
Speaker 1: of that department.
8:46
Speaker 2: Yeah, I really had some hope for that department up right.
8:48
Speaker 1: It made sense, right, didn't it. It sounds like something
8:51
Speaker 1: responsible countries do.
8:52
Speaker 2: It still does. I guess the question mark is why
8:56
Speaker 2: isn't it accomplishing what we had expected? It just seems
8:59
Speaker 2: so strange.
9:00
Speaker 1: But I'll give you my opinion, and I think my
9:02
Speaker 1: opinion is because anything that's truly going to fix anything
9:06
Speaker 1: involves necessarily someone telling us as a society that we
9:09
Speaker 1: must sacrifice. I don't think that our current political leadership
9:13
Speaker 1: believes that we have that in us, and I definitely
9:15
Speaker 1: don't believe that anybody who is in that position to
9:18
Speaker 1: make those types of changes thinks that they can win
9:20
Speaker 1: a reelection the next time around.
9:22
Speaker 2: Social Security, Medicare, Medicaid, the third rails of politics will
9:27
Speaker 2: continue with Brian James fro while Worth Financial. We'll talk
9:29
Speaker 2: about an update on social is security, speaking of which
9:32
Speaker 2: as well as credit unions versus bank topic by demand
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Speaker 2: here fifty five KRCD talk station doing that money. Monday
10:18
Speaker 2: Fame with all of financials Brian James, all Right, I
10:22
Speaker 2: mentioned one of the third rails of politics, something that
10:24
Speaker 2: could probably stand to use some reform in the name
10:26
Speaker 2: of saving our financial future here in the United States
10:29
Speaker 2: of America, the third rail social Security. And people always
10:32
Speaker 2: argue I paid into it, I paid in when I'm entitled.
10:34
Speaker 2: I'm entitled. But the structure of social Security doesn't really
10:37
Speaker 2: work out in the taxpayer's favor because people now live
10:40
Speaker 2: a hell a lot longer than they used to. You
10:43
Speaker 2: retire at say sixty two or sixty five. You're around
10:46
Speaker 2: until like eighty five. Now, when its Social Security started,
10:49
Speaker 2: most people didn't live past like late sixties, so you
10:52
Speaker 2: were only on it for a few years. They're also
10:54
Speaker 2: fifteen I think workers to every one person receiving it.
10:58
Speaker 2: That number has dropped precipitously, So the money that's going
11:01
Speaker 2: into the program is a lot less than it used to.
11:03
Speaker 2: It sounds like it needs some sort of reform. Brian James.
11:06
Speaker 2: Where are we on social Security? So where we.
11:09
Speaker 1: Are on Social Security? There is a hole in the bucket.
11:12
Speaker 1: Brian Thomas. The math doesn't quite math very well. And
11:15
Speaker 1: this has everything to do with what you had mentioned.
11:18
Speaker 1: Of course, with people living longer and so forth. It
11:20
Speaker 1: used to be you'd live maybe three five years and
11:23
Speaker 1: get Social Security payments. Now there's thirty years worth of that.
11:26
Speaker 1: Along the way, we have added enhanced benefits for spouses,
11:29
Speaker 1: which I don't think is a bad thing, because you
11:31
Speaker 1: can't ice your spouse out or your ex spouse or whatever.
11:36
Speaker 1: We have to have some kind of safety net for
11:39
Speaker 1: those folks who maybe didn't have their own earnings record
11:42
Speaker 1: because they were home raising kids and then a divorce happened,
11:44
Speaker 1: all that kind of stuff, those kinds of things, as
11:46
Speaker 1: well as the eight percent increase in delayed retirement credits,
11:49
Speaker 1: which simply means if you don't file for it, you
11:52
Speaker 1: get an eight percent increase. Before nineteen seventy seven, that
11:55
Speaker 1: was one percent per year, and then in nineteen seventy
11:59
Speaker 1: seven through nineteen three they basically locked in an eight
12:02
Speaker 1: percent increase for anyone who was born in nineteen forty
12:05
Speaker 1: three or later, which is essentially everybody who's thinking about
12:07
Speaker 1: this right now. So basically, by two thousand and eight,
12:10
Speaker 1: everybody reaching seventy aged seventy had access to that full
12:13
Speaker 1: eight percent annual delayed retirement increase. Remember this is if
12:17
Speaker 1: I'm sixty two and I choose not to file for it,
12:19
Speaker 1: my payment's going to go up by a full eight percent.
12:21
Speaker 1: That has nothing to do with inflation, nothing to do
12:23
Speaker 1: with interest rates. It's just a codified, concrete, eight percent
12:27
Speaker 1: mathematical increase. So those are the reasons that the math
12:30
Speaker 1: don't math. But let's talk about where we are right now.
12:33
Speaker 1: So we've had a we get every so often we
12:35
Speaker 1: get a new trustees report, and earlier this year of
12:38
Speaker 1: the twenty twenty five report showed that the full benefits
12:41
Speaker 1: are projected to be payable only for about nine more
12:44
Speaker 1: years without adjustments, trust funds expected to be depleted by
12:47
Speaker 1: twenty thirty four. Now I want to unpack that because
12:50
Speaker 1: somebody just heard me say that Social Security is going
12:53
Speaker 1: away in twenty thirty four. It is not.
12:55
Speaker 2: No, they didn't hear that. They weren't listening to the
12:57
Speaker 2: words you use, Brian James. Exactly.
12:59
Speaker 1: Words are important, aren't they, Brian Thomas. So what this means, though,
13:03
Speaker 1: is the trust fund reserves. What that means is that
13:06
Speaker 1: we're simply bringing in more than more than we're paying
13:08
Speaker 1: out currently, and that situation is going to last for
13:10
Speaker 1: nine more years. I will be sitting in this chair
13:13
Speaker 1: in twenty thirty four, and my paycheck at that time
13:16
Speaker 1: will have a FIKA entry on it, which is how
13:18
Speaker 1: taxes are extracted from my paycheck and sent directly to beneficiaries.
13:22
Speaker 1: The point of all that is that fight A taxes
13:24
Speaker 1: right now are more than what is actually being paid
13:26
Speaker 1: out to beneficiaries. But that amount that surplus goes down
13:29
Speaker 1: every year. It's got nine years left, so is it
13:32
Speaker 1: going to zero? No? But if they change nothing, then
13:35
Speaker 1: the current estimate is that Social Security is incoming revenue
13:38
Speaker 1: from those fight A taxes otherwise known as payroll taxes.
13:41
Speaker 1: That's going to cover only about eighty one percent of
13:43
Speaker 1: scheduled benefits. Meaning if you go to SSA dot gov
13:47
Speaker 1: and set up your my Social Security profile, then you
13:51
Speaker 1: should knock off, say twenty percent of whatever that report
13:54
Speaker 1: tells you, if you want to adjust your plan.
13:56
Speaker 2: I would do it both ways.
13:57
Speaker 1: Run your plan with the original numbers and then run
13:59
Speaker 1: it again with a twenty percent reduction in your Social
14:01
Speaker 1: Security just so you can see what the impact might be.
14:04
Speaker 2: Well, and a financial planner will do those number crunches
14:07
Speaker 2: for you, right, I mean you can put any scenario
14:09
Speaker 2: into your like thousand point you know what the future
14:11
Speaker 2: might look like program? Correct?
14:13
Speaker 1: Oh absolutely, this is just one topic. You know. We
14:16
Speaker 1: might even rephrase this and just say, hey, look look
14:18
Speaker 1: what if you spend twenty percent more than you think
14:20
Speaker 1: you're spending. This is just the math part, the things
14:22
Speaker 1: that the little stories and anecdotes that trigger the math
14:25
Speaker 1: is what gets our attention. But the math is still
14:27
Speaker 1: just math.
14:28
Speaker 2: Well, and we've all been warned about this, that that
14:31
Speaker 2: sheet you get annually from Social Security telling you what
14:34
Speaker 2: your expected payment will be given when you retire, whether
14:38
Speaker 2: it's sixty two, sixty five, or you hold off till later.
14:41
Speaker 2: It always it says right there on the front. This
14:43
Speaker 2: is not a guarantee you're going to get the money.
14:45
Speaker 2: I mean, you know, hey, here's a flag. You might
14:48
Speaker 2: not want to count on this because our elected officials
14:50
Speaker 2: don't do anything to try to salvage the program.
14:52
Speaker 1: That's right, So let's let's talk about that a little bit.
14:55
Speaker 1: So it's it's not that we don't try to fix it.
14:58
Speaker 1: It's that it's that we've just are not in a
15:00
Speaker 1: political mood and I don't see it coming anytime soon
15:02
Speaker 1: where we are willing to make the sacrifices that are necessary.
15:05
Speaker 1: So we did this a study of just a few
15:09
Speaker 1: weeks ago, and there have been one hundred and forty
15:12
Speaker 1: three different attempts that have hit the floor of Congress
15:15
Speaker 1: to hopefully fix this problem. But every last one of
15:18
Speaker 1: them is some flavor of either reducing benefits on current
15:21
Speaker 1: retirees or increasing taxes on workers. There's a million ways
15:25
Speaker 1: you can do that, but that's all we're all we're
15:27
Speaker 1: doing here. You have to trust adjust the inflows or
15:29
Speaker 1: the outflows period, end of story. We are not at
15:31
Speaker 1: a place where we're willing to allow either side to win.
15:35
Speaker 1: It's very easy to shoot this stuff out of the sky.
15:37
Speaker 1: Democrats come with, let's raise taxes on workers. Republicans say
15:40
Speaker 1: you can't do that. These people work too hard. Republicans
15:43
Speaker 1: come with, let's lower the benefits. And Democrats say, you
15:45
Speaker 1: can't do that. These people work for these dollars. And
15:47
Speaker 1: it gets shot down instantaneously. That's the cycle that we're in,
15:51
Speaker 1: and I'm going to predict we're going to be in
15:52
Speaker 1: it for most of the next decade, until our backs
15:54
Speaker 1: are against the wall, Bryan, and we have no choice
15:56
Speaker 1: except to elect somebody who will actually speak to us
15:59
Speaker 1: like adult. We're not ready to do that.
16:01
Speaker 2: We're not ready to do that. Eight twenty four. Right now,
16:03
Speaker 2: take a minute, early break, because we're going to get
16:05
Speaker 2: two credit unions versus bank by request. Topic will continue
16:08
Speaker 2: with Brian James after these brief words. Fifty five krc
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Speaker 1: Five KRCD talk station.
16:18
Speaker 2: Eight twenty eight to fifty five KRCD talk station buy
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Speaker 2: request topics. You can do those and a lot of
16:25
Speaker 2: folks wanted to know what the difference is between a
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Speaker 2: credit union and a bank, and Brian James from all
16:29
Speaker 2: Worth Financial is going to dive on into the details
16:31
Speaker 2: on that. I've always enjoyed banking with Emery now share
16:34
Speaker 2: facts over the years, Brian, most notably the wonderful experience
16:37
Speaker 2: of being able to refinance my house by just signing
16:40
Speaker 2: a single sheet of paper, not going through the whole
16:42
Speaker 2: process of refinancing, not having to pay a dime. The
16:44
Speaker 2: rates dropped. They had a paper that said, okay, you
16:47
Speaker 2: went from what four down to three? My signature, boom,
16:50
Speaker 2: my rate was down to three. They keep the paper
16:53
Speaker 2: in house at least at Emory and share Fax and
16:56
Speaker 2: I like that. That's one thing that I know from
16:57
Speaker 2: personal experience.
16:59
Speaker 1: Yeah, simplify processes, those kinds of things. There's pros and
17:02
Speaker 1: cons to each one of them, of course, But I
17:05
Speaker 1: do want to shout out a quick thanks to our
17:07
Speaker 1: our mysterious listener group of females who are interested in
17:11
Speaker 1: financial topics and apparently have been listening to us for
17:13
Speaker 1: a long time. And Lady Pacific question, thank you again
17:17
Speaker 1: for listening and let's dive into this. So, okay, banks
17:20
Speaker 1: versus credit unions At the end of the day, if
17:22
Speaker 1: you need loans, checking accounts, savings depository, you're not going
17:25
Speaker 1: to notice much difference. Functionally, they are pretty much the same.
17:29
Speaker 1: So the differences between them. So, a bank is a
17:31
Speaker 1: for profit entity. They're owned by the shareholders and the goal,
17:34
Speaker 1: like any other business, as a generator return for those owners.
17:37
Speaker 1: Having spent two fifteen years in the banking industry, I
17:40
Speaker 1: can assure you that the customers come third, shareholders first,
17:44
Speaker 1: regulator second, and then we'll get around to worrying for
17:46
Speaker 1: the customers. This isn't I'm not painting the banks and
17:49
Speaker 1: a bad bad light. It's just reality. If you've got
17:52
Speaker 1: shareholders out there, they come first because we are the
17:54
Speaker 1: United States of profit profit margin. Credit unions, on the
17:58
Speaker 1: other hand, are nonprofit financial co operatives. They are owned
18:01
Speaker 1: by their members. The members do want their profits, but
18:03
Speaker 1: they come in the form of the dividends. That's why
18:06
Speaker 1: if you if for those of you who have a
18:07
Speaker 1: credit union account and a bank account, the way that
18:10
Speaker 1: they label those interest payments is a little bit different. Yeah,
18:13
Speaker 1: the banks will call it a you know, an interest payment.
18:16
Speaker 1: Credit unions will call it like a share or something
18:18
Speaker 1: like that because they are the owner of it. As
18:20
Speaker 1: an account holder. So that's why the difference. Now, if
18:23
Speaker 1: any one of them was mathematically, you know, identifiably calculably
18:27
Speaker 1: more beneficial than the other in terms of really low
18:30
Speaker 1: interest rates and really high depository rates, then the other
18:32
Speaker 1: would not exist. It doesn't work that way, So don't
18:34
Speaker 1: look for massive opportunities one direction or the other. So,
18:38
Speaker 1: but let's talk about what is the difference here. So
18:41
Speaker 1: first and foremost, safety first, If you've got a pile
18:44
Speaker 1: of money somewhere, you want to know it's going to
18:45
Speaker 1: be there. If you're holding money in a bank, that's
18:47
Speaker 1: of course ensured by the FDIC. But at a credit
18:51
Speaker 1: union there is a similar organization that most people aren't
18:53
Speaker 1: familiar with. It's called the NCUA, the National Credit Union Association,
18:58
Speaker 1: and it pretty much serves the same per is the FDI. See,
19:01
Speaker 1: even those coverage limits are pretty much the same. It's
19:04
Speaker 1: two hundred and fifty thousand dollars per institution, per account category. Right,
19:08
Speaker 1: there's lots of games you can play with that on
19:10
Speaker 1: both sides. You can have an individual account, you can
19:12
Speaker 1: have a joint account with your spouse. You can have
19:14
Speaker 1: accounts that are have your kids listened as beneficiaries. Each
19:17
Speaker 1: of those has its own two hundred and fifty thousand
19:19
Speaker 1: dollars coverage. But the point is your money is largely
19:22
Speaker 1: no more safe in one versus the other. It's just
19:25
Speaker 1: different organizations that are backing that up well.
19:29
Speaker 2: And I know the credit union you're considered an owner
19:32
Speaker 2: a shareholder. Going back to your point about shares, that
19:35
Speaker 2: that's your slice of the part. That's how like for example,
19:39
Speaker 2: in my refinancing situation, yes, the credit union collective is
19:43
Speaker 2: making less money and interest payment on the loan, but
19:47
Speaker 2: everybody benefits from the lower interest rate, which is why
19:51
Speaker 2: you're making less of a profit. So you're getting three
19:53
Speaker 2: percent when you used to get four or five. The
19:55
Speaker 2: mortgage would have required you to continue to pay that
19:58
Speaker 2: higher interest rate, which of course in youwers ti the
20:00
Speaker 2: bank's benefit, which is why I guess they charge you
20:02
Speaker 2: to go through the refinancing process. But it's just a
20:05
Speaker 2: nice little perk being a quote unquote shareholder or owner. Yeah.
20:09
Speaker 1: Absolutely, And if if you're truly about the if you
20:12
Speaker 1: want to know where the money is flowing, you got me,
20:17
Speaker 1: Mike died there.
20:17
Speaker 2: Yes, you said flowing. I got all that. Where the
20:19
Speaker 2: money is flowing?
20:20
Speaker 1: Go ahead, where the money's going, and you can literally
20:23
Speaker 1: participate if you if you want, you can run to
20:25
Speaker 1: be a trustee of the of the credit union and
20:27
Speaker 1: you could really get into the into the dirt of
20:29
Speaker 1: how this stuff works. You can't really do that with
20:31
Speaker 1: with your big publicly traded banks.
20:32
Speaker 2: Unless you buy shares.
20:34
Speaker 1: Yes, but you've got to buy an awful lot of
20:36
Speaker 1: shares you're going to get invited to that table.
20:39
Speaker 2: So so and this isn't.
20:40
Speaker 1: You know, I feel like we're leaning toward the credit
20:41
Speaker 1: union side pretty strongly there and that those are the
20:44
Speaker 1: good reasons. A little more transparency and you can be
20:47
Speaker 1: you can be a little lot more comfortable that the
20:49
Speaker 1: decisions that are being made are really for your benefit
20:51
Speaker 1: because they're being made by other members just like you,
20:54
Speaker 1: versus a board of directors who is really only focused
20:57
Speaker 1: on the on the shareholders. Now, so what's the downs
21:00
Speaker 1: side of a credit Ye, Well, in a lot of cases,
21:02
Speaker 1: you're going to be giving up some on say technology.
21:04
Speaker 1: They're not going to have the flashiest internet interfaces and
21:08
Speaker 1: mobile apps out there, and that's I do enjoy that
21:10
Speaker 1: I use. I use my mobile banking apps all the
21:12
Speaker 1: time because I don't want to see the inside of
21:14
Speaker 1: a bank branch. Ever, again, bigger banks, of course will
21:17
Speaker 1: have wider branch and ATM networks where credit unions often
21:22
Speaker 1: will will participate in some kind of shared arrangement with
21:24
Speaker 1: some other network that you might not be familiar with.
21:26
Speaker 1: Don't let that rule it out. Do the research if
21:28
Speaker 1: you if it's a little tiny credit union that you're
21:31
Speaker 1: not all that familiar with, understand what that ATM network
21:34
Speaker 1: looks like, and you can figure out. You know, a
21:35
Speaker 1: lot of them will have places in random store chains
21:39
Speaker 1: like UDF or.
21:41
Speaker 2: Or that's P and C.
21:42
Speaker 1: But but some of the gas station chains will have
21:45
Speaker 1: some financial organization you've never heard of, and your local, tiny,
21:48
Speaker 1: little credit union may be a member of that. So
21:50
Speaker 1: you don't necessarily have to rely on all they've only
21:52
Speaker 1: got three branches, so therefore I only have free ATMs.
21:55
Speaker 1: That's not how that works. But on the other hand,
21:58
Speaker 1: you're not gonna have as much flexibility on promotional bonuses,
22:03
Speaker 1: right because banks are publicly traded entities. They want to
22:05
Speaker 1: be able to show they're bringing on new customers all
22:07
Speaker 1: the time. You'll get better bonuses for opening new accounts.
22:10
Speaker 1: We talked about the more sophisticated online stuff you're never
22:13
Speaker 1: going to see, for example, a fantastic credit card reward
22:18
Speaker 1: program coming out of a credit union. You won't get
22:20
Speaker 1: that that's going to come out of your publicly traded
22:22
Speaker 1: banks who have a lot more resources to do things
22:24
Speaker 1: like that to drive business, and they have different incentives
22:27
Speaker 1: to go drive new business and bring in new customers
22:30
Speaker 1: than a credit union does. So the different things that
22:32
Speaker 1: there are differences in the things that they will do
22:34
Speaker 1: to attract you in the first place.
22:35
Speaker 2: Great, So you've given out a list of items, do
22:37
Speaker 2: your work, do your homework, do the math, and figure
22:39
Speaker 2: out what is in your best interest because it could
22:42
Speaker 2: be a big bank, but it also could be a
22:43
Speaker 2: federal credit union depending upon you know where your desires
22:47
Speaker 2: lie and you know the interest rates that you're paying
22:49
Speaker 2: in that kind of thing. Appreciate the breakdown Brian James
22:51
Speaker 2: is very helpful exercise, and of course I appreciate the
22:54
Speaker 2: conversation we have every week, and salute to the ladies
22:57
Speaker 2: group that listens every Monday and Monday. Intent lead to
23:00
Speaker 2: Brian James. You do great work. Brian will have you
23:02
Speaker 2: on next Monday. Have a great week, my friend.
23:04
Speaker 1: I appreciate it. Thanks for the time, and thank you ladies.
23:06
Speaker 2: Don't go away, Eric Trump of the book Under Siege,
23:09
Speaker 2: you'll be on next.
23:11
Speaker 1: This is fifty five KRC and iHeartRadio.