Thursday, August 26, 2010

Government Statistics

We watch the news and some government politico (including Pres. Obama) talks about the 'recovery' and how many jobs have been created and saved and restored and . . .   Usually the one speaking has no direct knowledge what he's talking about but relies on someone else for the data and frequently the speech being given.

This reminds me of when I kibbitzed on a speech 30 years ago. 

My then wife was working - as administrator - with a Federally funded jobs program for the City of Roanoke; there was a 'consortium' which managed similar programs not including the City's. All workers in the program worked for local governments in some capacity as they were 'trained' with new skills.

Ex's program was managed properly - office staff minimally sized to do the job but no empire; the bulk of the funds actually went to the hired workers. The Consortium was not so well managed and ended up collapsing under its own fiscal mismanagement; the City of Roanoke (i.e. the Director of Finance and Ex) had to take over management, shut it down, and 150 workers in the area faced loss of their jobs .

Ex and I are at home, and she's got to prepare a speech for the DOF and press release about all the workers and where they would end up with the closing down. The good news is that a lot of the workers were picked up by their local government employer.  Another bunch were able to use the skills learned to get a job in the 'private sector'.  There were 'hard numbers' for the government hires; there was reasonable - but not exact - data for the private hires. Ex was pleased to show me her draft that had all 150 workers 'taken care of', and admitted some numbers came off the top of her head although based on her experience.

My response was that the report was not realistic.  A couple of poor slobs wouldn't find anything - they'd be SOL (Straight Outta Luck).  Ex agreed, but asked "well, how many".  My response was that, politically, if you went over six percent it'd look bad, but under three percent would look phony. (Yeah, I was BS'ing at my best here, too).  I think we settled on four percent.

Of course you can't write in a press release that four percent of the workers were SOL. So we went to the standby "other opportunities".

On TV news the next night, the City's Director of Finance (and acting administrator of the Consortium) was shown reading the press release Ex had written, and the media was eating it up.  "55 percent were hired by the government they were assigned to in the program; 35 percent found private sector jobs,  6 percent resumed education courses (another discussion ex and I had) and 4 percent will pursue other opportunities".

I've never looked at government statistics the same way since. 

Tuesday, August 17, 2010

REAL Financial Freedom

I'm guardian for a young man who had a stroke;  he lives with his dad "Mr. B" (his mother passed away several years ago). I get the young man's social security disability and pay his bills, including a stipend to Mr. B for taking care of him.

Dad called the office today and happened to mention that he was getting a reverse mortgage.  Donna knows my thoughts on them and alerted me;  I got him in immediately and reviewed the loan.  Basic financial picture:  monthly income 1830, monthly expenses less than 800 (not counting groceries). But Mr. B can't last the month without invading savings. No Budget (his wife handled the household finances before she died) No mortgage - house is paid for. Mr. B is over 80.

The loan was going to net $100,000 - after almost $7000 in fees and expenses. Plus there was going to be a monthly service charge added (but not prominently disclosed in the application documents).

Mr. B just wanted to have the money available. NO plan on what to spend it on, just some vague ideas. "But that Winkler fella (Henry Winkler, a/k/a Happy Days the Fonz) and Robert Wagner (It Takes a Thief, Hart to Hart, etc) say on TV how good it is".  They're paid to say that!

I told Mr. B that there are a dozen different ways to accomplish what he needed, and will help him meet them. The way he didn't need was this loan, or Financial Freedom servicing it.   With his signed consent we called it off.

Guess that won't get me back on FF's Christmas Card list, huh?

Seriously, in my opinion reverse mortgages are dangerous;  if you, your parents, or any elder person you care for is thinking of one, get an independent review from a professional before you do it. A Fee-Only financial planner (one who doesn't sell you something), a lawyer who's practice emphasizes ElderLaw (find one at etc.   In some cases it's an appropriate tool, but -- in my opinion -- it's oversold, wastes the estate and creates a lot of hardship on families.