Ask Dr. Per Cap

Ask Dr. Per Cap is a program funded by First Nations Development Institute with assistance from the FINRA Investor Education Foundation. Nimiipuu Community Development is happy to share this column as partner with Native Financial Learning Network funded by Northwest Area Foundation.

Break the Funk

 Dear Dr. Per Cap: 

I’ve been having a hard time focusing on my financial goals lately.  I just can’t seem to stay motivated to save for a down payment on a house.  My kids are really looking forward to having a place of their own too.  How can I break this funk?

Signed, Loosing Focus

Dear Loosing Focus

I can totally relate.  I think many of us are struggling to stay on point during these troubling times.  Much of what you’re feeling is stress.  Fortunately mental health experts have developed techniques and strategies for how to manage it.

For starters it’s possible you’re feeling overwhelmed because of challenges you’re facing right now.  So grab two sheets of paper and make two lists.  On the first sheet write down things that bother you that are beyond your control such as economic turmoil, remote schooling for the kiddos, or unforeseen health risks.

Next make another list of things you can control.  Your list might include activities you do with family, exercising, eating healthy, and social distancing.

Now take the first list, tear it in half, and throw it in the trash.  You can’t control the things on that list so don’t stress thinking about them.  Then take the second list and post it somewhere where you will be reminded of it daily – the refrigerator door, bathroom mirror, or better yet snap a photo of it with your phone and use it as a home screen.

Hopefully this will help you focus on manageable issues and maintain self-control.  Self-control is extremely important right now especially with so many of our daily routines with work and family turned upside down.  I speak from personal experience when I say sometimes it’s actually harder to get stuff done when we have too much time on our hands than not enough.  I know it sounds crazy but it is true – says the guy who has only worn flops for the past  six months.  Just kidding, well kind of.

Here’s another technique.  Pretend you have a crystal ball and can peer into the future.  While doing so imagine seeing yourself financially secure and living comfortably in your new home.  Picture your family next to you and the health and happiness you all deserve.  Think about upcoming birthdays and other fun gatherings.  Visualize the life you want to have.

Finally identify the obstacles or roadblocks that can prevent that life.  This will help you realize that you can achieve your goals but only if you focus and maintain self-control.  You won’t get there by worrying endlessly about the future, staying up late watching eighties music videos on YouTube, or making poor financial decisions.  Ok, eighties music on YouTube isn’t a total waste of time, but watch out for what we like to call time bandits.  They’ll bleed you dry – even worse than a power ballad by Poison.

Good luck and be strong.  I’m pulling for you!

Paper Towel Worries

Dear Dr. Per Cap:

Do you think it’s smart to stock up on paper towels and toilet tissue in case we have another shortage like when Covid-19 hit this spring?

Signed, Thinking Ahead

Dear Thinking,

That depends on if we see a second wave of coronavirus this fall and how serious it gets. But first let’s talk about what caused the shortages that cleared the bulky paper product aisle at Walmart faster than the family restroom after grandpa takes a double dose of Ex-Lax. Moreover, why
are so many stores still understocked, unable to catch up after last spring’s paper towel shortages?

It starts with how most businesses operate today using a strategy called “just-in-time inventory” which allows them to produce or stock only enough goods to sell quickly. Rather than producing and storing surplus goods for future sales, just-in-time inventory allows businesses to run lean thus saving money and increasing profits. However, there’s a downside to this approach that gave us a rude awakening earlier this year when stores ordered between five and ten times their normal weekly amount of paper
towels. During an emergency when people stockpile there are shortages.
The good news is that toilet tissue supplies are pretty much back to normal so you can probably ease up on your quest to find a modern alternative to that old Sears catalog grandma kept in the outhouse.

Ughh…I’m showing my age. However, paper towels are still running low with people cleaning more during these health and safety conscious times.
Unfortunately, fixing the shortage isn’t as easy as telling paper towel companies, like Proctor and Gamble, to crank up production. Just-in-time means factories today aren’t even designed to produce and package surplus goods. Factor in distribution centers that are quickly overrun plus stores with small loading docks that can’t fit extra truck deliveries, and we’re talking about an entire supply chain overwhelmed. Alleviating these challenges requires manufacturers and stores to radically redesign
equipment and infrastructure along with longstanding ideas about how to run businesses.

So get used to living with limited supplies of paper towels on store shelves for a while. And if coronavirus comes roaring back I think we’ll see a repeat of last spring. But let me pose a crazy question. Do we really need disposable paper towels in the first place? Back in the day we all got along just fine with dish clothes, sponges, mops and other non-disposable cleaning products. Yeah, yeah I know the Sears catalog wasn’t non-disposable but you know what I mean. In the grand scheme having enough paper towel should be one less issue to stress over.

When in Doubt, Save

 Dear Dr. Per Cap:

We’re about six months into the coronavirus pandemic and times are still tough.  I’ve been furloughed from the casino and unemployment insurance only goes so far.  Any idea when the economy is going to come back?

Signed, Doubling Down

Dear Doubling

I’ll give it to you straight.  I think we’re in for a long haul with the coronavirus, at least through the end of 2020; especially in parts of Indian Country where communities have been hit hard by the pandemic.

A huge factor in how well the economy holds up depends on how quickly we’ll have a vaccine for COVID-19.  Some experts warn it could take at least a year while others are more optimistic.  At this point it’s probably anybody’s guess but fortunately we have some of the brightest minds from all over the world working round the clock on the challenge.

In the meantime folks who have been laid off or furloughed definitely need to keep hunkering down financially.  Avoid large purchases if possible, pricey vacations, and other luxuries.  I realize you might not have much choice.  Every pow wow and Native summer event I know of has been canceled and many popular vacation destinations are either closed or only open to a limited number of visitors.  I’ve always sworn by the saying “When in doubt, save your money.”   I think that holds true now more than ever.

Obviously we’ve never lived through something like COVID-19 before but let’s also not forget that many of our grandparents and great grandparents did.  We all know how small pox ravaged our ancestors but we don’t even need to go that far back.  I recently asked my aunt, who is in her eighties, if she remembered her parents ever talking about the Spanish Flu of 1918.  She told me a couple of heart wrenching stories of what life was like at the pueblos during that awful time.  We can draw strength from what those old folks had to overcome so we could be here today.

Let’s also remember to pace ourselves – financially as well as emotionally.  Back in March when the lock downs started there was a ton of information going out with resources for coping; how to access benefits, where to get tested, what to do if you’re feeling lonely or depressed, etc.  But since then I feel like there isn’t as much focus on support.  This concerns me because I think we need encouragement now more than ever.  Were almost six months in and still have a ways to go.  Like most challenges in life, this is a marathon not a sprint.  Stay well.

Ask Dr. Per Cap is a program funded by First Nations Development Institute with assistance from the FINRA Investor Education Foundation. For more information, visit www.firstnations.org. To send a question to Dr. Per Cap, email askdrpercap@firstnations.org.

Extended Warranties

Dear Dr. Per Cap:

Last week my boyfriend and I purchased a new washing machine online.  At checkout we were offered an extended warranty that my boyfriend insisted we purchase.  Was that a smart add on?

Signed, Always Amazon

Dear Always

I’m not a huge fan of extended warranties.  In my experience the benefit doesn’t usually justify the cost.  I’m also leery of how aggressively manufacturers and retailers push them on consumers.  Almost every product nowadays that costs more than $15 offers an extended warranty.  In many cases you’re better off just buying a new one if it breaks.

Most extended warranties also provide a lot of wiggle room for the seller to get out of having to warranty a product.  Looks like normal wear and tear – sorry, not covered.  You dropped it on the kitchen floor? Oops, not covered.  No receipt or you failed to register the product when you bought it – too bad.  Or the classic – we’ll fix it but you pay the shipping costs.

I think many people purchase extended warranties with a false sense of security. I also know people who look at the price of a product and think it makes sense to purchase an extended warranty for big ticket items like a used car or an appliance where repair costs could be really pricey.  But I’m still not convinced.

An extended warranty is basically a cheap insurance policy.  The company knows how good its products are and how long they will last on average.  Then it prices the warranties to more than offset the costs for any repairs and replacements.  The extended warranty is just another product they want to sell you because they’ll make more money.

The only time I think it might make sense to purchase an extended warranty is if you are more than an average user of a product.  For example, say you have a passion for woodworking and you buy a new table saw.  You plan on using the heck out of that saw as opposed to a typical weekend warrior who might only work on one or two projects a year.  In that case I can see the value in paying for an extended warranty to protect your investment, but again – buyer beware.

If you do choose to buy an extended warranty read the fine print and make sure you register the product immediately after purchase.  And in the unfortunate event you have to use the warranty, keep a paper trail and don’t be surprised if you have to get a little tough with the company to honor that warranty.  Now that we’ve covered that – have fun putting the suds to your duds!

Ask Dr. Per Cap is a program funded by First Nations Development Institute with assistance from the FINRA Investor Education Foundation. For more information, visit www.firstnations.org. To send a question to Dr. Per Cap, email askdrpercap@firstnations.org.

Minor’s Trust Dip

Dear Dr. Per Cap:

My daughter is a high school senior set to receive a minor’s trust payment in a few months. I’m worried it will be a lot less than she expected since the coronavirus sent the stock market reeling. Is it fair for her to receive less than kids in previous years?

Signed, Doubting Dad

Dear Doubting Dad:

I’m afraid many beneficiaries of minor’s trusts are feeling a pinch in their account balances thanks to a one-two punch from the coronavirus. Investment losses you mention are one blow. Smaller per capita payments from shuddered tribal casinos and other lost revenues are another.

Is it fair? Anytime we invest money there is a risk we’ll lose a portion or all of it. A dose of tough love says it’s not a question of fair. It’s a fact of life. However, every minor’s trust has a trustee whose job is to manage investment risk wisely on behalf of the trust’s beneficiaries – young Native people like your daughter. But risk can never be completely eliminated. The only time investment losses aren’t fair is if a trustee really screws up and manages the trust irresponsibly.

Sadly this has happened in Indian Country, but hopefully your tribe has a good handle on financial management. Before you sound any alarms, check with your tribal finance department for the current balance in your daughter’s minor’s trust account. You might be pleasantly surprised to learn her balance hasn’t dropped as much as you think. That’s because many minor’s trusts are designed to reduce risk by dividing the trust into different categories called tranches.

Depending on a child’s age, funds representing his or her portion of the trust are placed into a one of the tranches. Generally, the younger age tranche is invested for growth. Meaning it’s heavily invested in stocks because as an asset class, stocks of publicly traded companies offer a higher potential return than fixed income investments like bonds or cash.

However, stocks are riskier than fixed income, as the coronavirus has reminded us. So the idea is that younger kids can assume the risk because they have more years to make up for any investment losses. As children get older their funds are moved into less risky tranches with portfolios that hold larger portions of fixed income investments and fewer stocks. Then when they near eighteen their money is placed into a very low risk tranche, just in case a shock like the coronavirus sends the stock market swirling.

Since the stock market was trading at record highs as recently as mid-February it’s quite possible your daughter’s minor’s trust monies were placed into a low risk tranche before the crisis hit. But we’ve seen the apprehension before. When the stock market dropped 38% in 2008 many minor’s trusts in Indian Country took a hit. But by 2009 a steady recovery began that created the longest period of growth in stock market history and many minor’s trusts increased in value by leaps and bounds. Hopefully, the economic damage from coronavirus will be short term so my advice right now to all minor’s trust beneficiaries and their families is to be patient and not panic.

Ask Dr. Per Cap is a program funded by First Nations Development Institute with assistance from the FINRA Investor Education Foundation. For more information, visit www.firstnations.org. To send a question to Dr. Per Cap, email askdrpercap@firstnations.org.