The Credit Union Perspective
By: John Normandeau, President/CEO
BestSource Credit Union
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What Are Your Financial Goals?
Establishing financial goals is just as important as
making them happen. You have to know what your
goals are before you can set up an action plan to
achieve them.
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What Have We Learned?
W
e have learned
some les-
sons from the
Financial Crisis, the Great
Recession and the Real
Estate Meltdown — or
whatever name you give
it. We've seen resiliency
among the American busi-
ness community.
Companies responded by
trimming costs and finding
a way to profit. I've seen the
same among people. Many
entrepreneurs had to endure the pain
and hardship of closing or losing their
business in 2009. Here are the new rules:
For the most part, 2010 has been
the year of adapting. Those who have
started new ventures have learned
how to do it without bank financing
and with limited available capital. In
the past two years,
I've encountered
numerous real
estate developers,
builders, mort-
gage brokers and
construction trade
providers (electri-
cians, plumbers,
suppliers) who
have told me they
were put out of
business by the recession, particularly
the Real Estate Meltdown.
Today, when I see them — they are
all back in some form of business — it
is not the same. The rules have changed
and the opportunities, while more lim-
ited in many respects, still exist.
Rule 1— Adapt or Die.
to building a bank account.
When the recession
came, banks cut available
credit, leaving many people
with no available credit and
no cash reserves.
Rule 2 — You Need Cash
in the Bank Always.
Our government has also
taught us. We're at the end
of 2010 and the government
gets a shiny star for inept-
ness in addressing the real
estate problem. Its Home Affordable
Modification Program (HAMP) to
modify mortgages is an overwhelm-
ing failure; and its effort to provide
liquidity to the banks so they will loan
money to small business has backfired.
HAMP's stated goal is to modify 4
million mortgages; but only 398,000
modifications have been completed
and many of them
are going into
default. Worse,
these modifications
are without princi-
pal reduction; this
carries the negative
consequence that
homeowners will
never have equity
in their real estate.
Unfortunately,
but consistent with this outcome, is
the problem that small businesses are
unable to borrow the money that our
government has made so available.
The reason — banks require collateral
such as equity in real estate in order to
approve a loan; and there is no equity
in real estate. Without the growth of
small businesses, we know employ-
ment will not rebound; but without
equity in real estate, there will be no
growth for small business.
Our government has staked our future
on programs that it cannot administer
— and even if it could, one program
flies directly in the face of the other.
Rule 3 — You Need to Help Yourself.
Our government has
staked our future
on programs that it
cannot administer.
We can thank the banking industry
as well. The lesson is: You can borrow
money when it's easy, but when you're
in a bind, don't look to your banker
for help.
Through the 1980s and until 2008,
many people made the mistake of
allowing their available credit and
borrowing capacity to be their bank
account instead of having a solid cash
reserve on hand. During this period, if
a tuition bill came due or the furnace
needed replacing, it was commonplace
to charge it and pay for it later. In fact,
for many, this was the rule of the day
because their month-to-month cash
flow went to servicing debt and out-of-
pocket cash requirements rather than
Think long term. The future dollars
you spend must be earmarked to cre-
ate equity in savings or real estate. 1-1
E
John Normande;m. CEO
These steps will help you get started with your goals.
Determine your short-term goals. Think about what you'd like to achieve in the
next 3 years (buy a house, pay off credit cards, save $100 a month).
Determine your long-term goals. Decide what you'd like to achieve in ten years or
more (pay off mortgage, retire at age 50, buy a second home).
Make your goals specific. They should be concrete and measurable. For example,
"I want to be rich when I retire" could become, "I want to be able to spend $5,000 a
year for travel after I retire at age 65."
Make your goals actionable. What specific steps will you take to achieve your
goal? Perhaps contributing more to your 401(k) plan or bringing your lunch instead
of buying it. Whatever your goal may be, it needs an action plan.
Take action immediately. Even by making a phone call or looking up information
your goals will feel more real and attainable.
Make a list of your goals, review it often and share it with family. Constant
reinforcement and support are valuable to achieving your goals.
Don't give up. If things don't happen as you originally planned, simply redefine
your goal and action plan.
At BestSource Credit Union our mission is to improve our members' financial lives.
Stop by a branch or give us a call at 800.666.4500 to see how we can help you
achieve your goals. For more information, visit www.bestsourcecu.org.
BEST SOURCE
CREDIT
hriproving Members' Financial
t1 N I 0 NI
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December 9 • 2010
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