It’s that time of the month where I sit down to pay the bills and track my budget and figure out financially where I am going in the coming year. Before my divorce, I was very frugal. No credit card balances to speak of. No outstanding debts except a mortgage. It was save, save, save. Emergency fund. Savings for college for the kids. Check. Savings for a beach house. Yep, it’s what the family wanted. Savings for retirement. Planned to work to age 52. Everything was on track.
Then it came all crashing down. I managed to keep my retirement account untouched in our amicable, negotiated settlement. But I managed to pick up massive debt. Rent became a new mortgage. Child support became half of my paycheck and yet I had the kids half of the time. A personal loan to cover expenses incurred during my divorce. Lost significant savings. My doldrums that I encountered during the divorce were handled by some extravagant spending on trips, on stuff, on junk. No control. No problem, just charge it. New furniture for a house. Buy whatever the kids wanted. LEGO’s and horse things, fish and birds and guinea pigs. Exercise equipment to better myself. Books to read, learn to play the guitar, eat better food, drink better wine. Bourbon and scotch. Hobbies. I literally found myself in debt.
Now, as I stand on the precipice of retirement, I find myself still digging myself our of that debt. Granted, I am probably better off than most Americans. A good paying job. A 401k and pension for retirement. A roof over my head. Not living paycheck to paycheck. Yet there it is. DEBT.
So here I am this Sunday morning after Thanksgiving, paying my bills. No, I am not thankful for that debt. I am thankful that I can manage it. Started looking at the interest rates that are charged for monthly balances. My Chase Freedom Card carries an interest rate of 13.99%. They calculate it by taking the prime rate and then add their costs on top. The Wall Street Journal carries the prime rate, which is currently listed at 5.25%. From the internet, I learned that the prime interest rate, or prime lending rate, is largely determined by the federal funds rate, which is the overnight rate that banks use to lend to one another. Also, it is stated that the FOMC (Federal Open Market Committee, which is comprised of the 12 Federal Reserve Banks) has voted to lower the. target range for the fed funds rate to 2.00% – 2.25%.
So JP Morgan Chase charges me 8.74% to use their money when I charge something to my credit card and then carry a balance. Wow! My local bank pays me 0.10% for what I save in my savings account, and less for my checking account. It’s much worse when I look at my American Express Delta SkyMiles card. There the rate is 21.99%. A whopping 16.74% to use their money. It was my Amex card that just started me on this rant this morning. My annual fee was being increased to $99 a year. That’s $99 just to carry the card, get some frequent flyer miles if I use it. All of this for the luxury to not pay to travel with one bag on an airline. Not really sure if it is worth. I think that I can leave home without it.
Why so much for using their money? Well, the are a business. They need to make a profit. They have millions of credit cards in use. They get paid every time I use their card. And if I carry a balance, they get paid again by charging me interest. By my math, that is between 8 and 16%. Sweet if you can get it for your savings account. Some people pay them off every month. Some do not. Some incur large debts and then just don’t pay them. Guess that means that those of us who honor our debts are also paying for theirs. Why should I pay for someone else? I have my family to keep.
As a business, they have shareholders, including myself. I like my stock price to go up, my dividends to increase. After all, I need my 401k to cover me when I retire. They have employees who have families just like me. They have CEO’s who make ridiculously large salaries. I am not picking on Jamie Dimon; he certainly works hard for his money and has added value to his company. JP Morgan made $31,500,000,000 profit in 2018. Jamie Dimon got a 5% raise in 2018, and made a salary of $31,000,000. Now if you were like me, my raise was less than 2%. No bonus, no stocks, no performance-based variable incentive compensation. Jamie’s salary was a base salary of $1.5 million and a “performance-based variable incentive compensation” of $29.5 million, split as $5 million of that in cash, and $24.5 million in the form of “performance share units”, a fancy word for extra shares of stock. I could not find how much Jamie personally donated to charity in 2018, but I know JP Morgan Chase donated millions.
I don’t necessarily begrudge Mr Dimon for his money. There are others who do, like Elizabeth Warren. She is running for President. She has a plan, and as near as I can tell, a tax for everything. She wants to expand government into everything. In 2018, Warren made about $325,000 from book sales in addition to her $175,000 salary from the Senate. Her husband was paid about $400,000 from Harvard. Explains why it is so expensive to go to college. The couple paid about $46,000 last year for a solar energy installation on their home in Massachusetts, and received about $15,000 in tax credits, and they donated more than $50,000 to charity. All told, the Warren’s paid more than $200,000 in taxes on about $900,000 in income last year, based on their tax returns. By my math, they made about $100,000 on investment income. Don’t worry, Joe Biden did better. Can’t say that about Donald Trump. Yet we know that he took no salary and did not release his tax returns.
So as it is now 24 shopping days before Christmas, it’s time to go shopping. No iPhone 11 for me or the kids, the iPhone 6 works just fine. No trip to someplace warm for the holidays. It’s currently 22 and with snow on the ground. No Black Friday. No Cyber Monday for me. Just gather up my kids lists and then off we go. Soon we will have another Star Wars movie in the theaters. Then it will be tax time and another election.