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.

Costly HVAC Repair

Dear Dr. Per Cap: 

Last week our home’s old air conditioner finally died.  It’s going to cost $10,000 to replace which means no family vacation and a bunch of other sacrifices.  The hub suggested we just buy a few cheap AC window units and hold off fixing the main AC until next year.  Do you think that makes sense?


Needing Cool Air

Dear Needing Cool Air:

I know what you’re up against.  I have an older home and every summer I cross my fingers that the AC will hang in there another year.  Heating, Ventilation, and Air Conditioning (HVAC) systems are insanely expensive, so much that an older system can significantly lower a home’s value.

Your hub’s idea is one way to go.  For less than $1,000 you could buy three or four window AC units and have them installed and running in an afternoon.  However, that’s a cheap quick fix you’ll want to avoid if possible.   For starters there’s no comparison between how window units cool and the original AC system your home was built with.

Window units are loud, breezy, not very energy efficient, and don’t come close to central air in terms of performance.  The best you can do is cool specific rooms intermittently while lacking smooth, quiet, consistent cooling of your whole home.

I get it though.  No one wants to spend ten grand on a home repair.  However, that’s part of being a responsible homeowner.  Sure you can hold off a year but, if you do, come up with a rock solid plan for how you will save enough to buy a new air conditioner.  The risk is that you make it through summer and come fall you’ll forget all about the AC and raid the piggy bank.

The bottom line is sooner or later you’re going to have to fix that AC so may as well do it now.   If you need some extra motivation, please remember that unlike many other home repairs a brand new AC system is considered a home improvement which adds value to your home.

City and off rez homeowners might also qualify for state or local tax breaks when replacing an older unit with a newer more energy efficient one.

Now let’s think about that $10,000 repair bill.  Most HVAC companies offer financing which is usually just a home improvement loan with a two to seven year term.  Like any loan, they’ll run a credit check and any issues can raise your annual percentage rate (APR).

Rather than borrow from the HVAC folks, I’d check with a tribal or local housing program or a community development financial institution for a home repair or improvement loan with a more affordable APR.   You might also be eligible for a federal home repair loan.

Going forward it also pays to keep a savings fund just for home repairs.  Expect to spend about 1% of your home’s value on repairs and maintenance in an average year.  Most years you shouldn’t have to spend a whole lot but every so often you’ll get hit with a big bill like a new roof or the HVAC.

A little planning and saving makes for a prepared homeowner.

Economic Catch-22

Dear Dr. Per Cap: 

The markets are in a nose dive and my 401k is getting hammered.  I’m freaking out and keep hearing it’s only gonna get worse.  What can the big shots in Washington do to save the sinking economy?


Worried Investor

Dear Worried Investor,

What’s been touted as the longest bull market in history is hanging on by a pretty thin thread.  The S&P 500, the most commonly used benchmark to measure the stock market, is down about 20% from an all-time record high set on the first trading day of 2022.

You, me, my Uncle Joe, and anyone else who owns a mutual fund or a few shares of their favorite tech stock is feeling the pinch.  And unfortunately the Federal Reserve, the nation’s central bank which investors look to in times of market turbulence and crisis, can’t offer much to folks clamoring for the lifeboats.

Ordinarily during times of a steep market decline the Fed can divert a free fall by tweaking the federal funds rate.  That’s a short term interest rate that banks charge each other to loan their excess reserves, financial shorthand for the extra money that banks hold beyond what’s required in case of a bank run.

By lowering the federal funds rate money is pumped into the economy at favorable terms which encourages individuals and businesses to spend.  In theory this blast of fresh money is enough to win investors’ confidence and prevent a broad market sell off.

But here’s the problem.  We’re in the midst of some of the worst inflation since the days of colored toilet paper.  Remember those lovely pink and blue rolls of Charmin?

This means the Fed can’t lower interest rates anymore because flooding the economy with cash will only make the inflation worse.  Not feeling $4.50 for a gallon of gas?  Try paying $6 or $7 a gallon.

Instead the Fed is in the really uncomfortable position of having one option to fight two very different beasts.  It can’t lower rates, but if it raises rates instead to slow inflation the chances of an economic recession increase.  Well, the Fed has chosen the latter option and has begun to raise rates.  This leaves investors hoping they don’t raise them too much or too quickly.

One of my favorite books is a World War 2 novel called Catch-22.  It describes a complicated dilemma in which the only fix creates an even bigger dilemma and a self-defeating solution.   The Federal Reserve, aka your big shots in Washington, is stuck in a Catch-22.

So unfortunately, we’re probably going to see things get worse before they improve.  But like I’ve said before – if you’re a buy and hold, long term investor which anyone reading should be – don’t  get caught up in short term drama.

High School Athletes and NIL Deals

Dear Dr. Per Cap: 

Last year college athletes got the greenlight to profit from their name, image, and likeness.  Does this also apply to high school athletes?  We’ve got some great young basketball players in our community who I think local businesses would be happy to compensate for advertising or promotional appearances.


Plays by the Rules

Dear Plays by the Rules:

Name, Image, and Likeness (NIL) deals have forever changed the landscape of college sports.  While it’s still not ok for college athletes to be paid for playing their chosen sport, they can indeed now profit by creating and selling an individual brand based on their athletic fame and reputation.

Many college athletes, both women and men, are cashing in big time.  Some high profile football players, basketball players, gymnasts, and others have inked million dollar NIL deals pitching everything from sports betting websites, apparel, restaurants, and beverages.  There’s also no shortage of opinions on whether or not it’s good for college sports but I won’t debate that here.

However, when it comes to high school athletes it’s a very different situation.  Currently there are only three states with confirmed permission for high school athletes to make NIL deals and all of them have substantial Native populations: California, Illinois, and North Dakota. 

There are three more states (Maine, Utah, and Vermont) in which permission is perceived but not confirmed.  Perceived permission means that the high school athletic association by-laws in those states do not explicitly prohibit NIL.  Translation – it’s not clear so proceed at your own risk.

But pay attention.  If you’re a high school athlete slow down before rushing out to pitch your services to the local hardware store or tribal casino.  High school NIL athletes can earn only a fraction of their collegiate counterparts.

In North Dakota for example, NIL compensation cannot exceed $300, enough to treat a large family to a nice dinner in Bismarck.  In Illinois maximum NIL compensation is only $75.  Who’s up for a trip to Culver’s for Chocolate Concrete Mixers?

There are also rules in some states that prohibit high school athletes from wearing school uniforms or logos while making NIL appearances or mentioning a school’s name.  So best to keep that jersey tucked away in your backpack or gym locker.

In some cases a business might also choose to compensate an athlete with clothing or meals instead of cash.  That’s fine as long as the merchandise or food items aren’t valued at more than the compensation maximum.

For more details and to make sure you’re in full compliance with your state’s NIL by-laws, check with your state high school athletic association.  It’d be a shame to forfeit one’s athletic eligibility all for a hoodie and a sack of cheeseburgers.

Medical Debt Releif

Dear Dr. Per Cap: 

What’s the status on medical debts and credit bureaus?  I heard all medical debts will soon be deleted from credit reports.


Can’t Wait

Dear Can’t Wait:

What you’ve heard is partially true.  The three credit bureaus Equifax, Experian, and Transunion will begin removing about 70% of medical debts currently listed on their consumer credit reports beginning in summer 2022.

This follows a trend over the last few years of the bureaus and lenders taking a more lenient view towards medical debt.  Due in part to large numbers of Americans who’ve been unfairly saddled with debts due to medical billing and insurance hang ups beyond their control.  The situation has been even worse in some parts of Indian Country where bills from referrals and hospital visits to non-Indian Health Service providers have had a less than stellar track record of prompt payment.

The Covid-19 pandemic further underscored many of these problems and the bureaus have all finally agreed to make sweeping changes.  However, not all medical debts will be deleted.  Instead we’re mostly talking about medical debts that went into collections but were eventually paid off.  In the past those paid collection accounts stayed on a person’s credit report for up to seven years and did damage to credit scores.

This is good news for many folks.  However, if you’ve got current medical debts (in collections or held by another party) on your credit report that haven’t been paid off, chances are they aren’t going anywhere until that happens.

So if those debts are the responsibility of a third party, like an insurance company, Indian Health Service, or a tribal health provider, make sure to contact those organizations to get them paid off as soon as possible. 

Another change relates to when unpaid medical collections are first listed on a credit report.  That time frame will now be one year from when those accounts are sent to collections.  This is six months longer than the previous policy which will hopefully give consumers more time to work through red tape.

Remember collection companies buy old debts from creditors for a fraction of their original outstanding balance.  Whatever they manage to collect from the consumer above that amount is money in their pockets.

Also on the horizon will be the handling of small dollar medical collection debts.  Those less than $500 won’t be listed on credit reports.  I can’t tell you how many people I’ve worked with over the years that have been denied credit due to unpaid bills for x-rays, lab tests, and other medical costs under $500 that show up on credit reports.

Here’s to good health in the years to come – both physical and financial!

Multi-Level Marketing

Dear Dr. Per Cap: 

The other day a friend sent me a Zoom invite for a meeting that was advertised as a “financial opportunity”.  What unfolded was something that appeared to be a pitch to get me to sign on as a financial services agent.  Everyone in the meeting was Native and many said they’ve made a lot of money helping other Native people realize their financial dreams using indexed accounts.  It all felt really sketch.  Is this a scam?


Tired of Zoom

I don’t know off hand but it sounds shady as an oak tree.  What you experienced was most likely a solicitation from a multi-level marketing business aka MLM.

Dear Tired of Zoom:

MLM’s have been around for years.  You’re probably familiar with companies like Avon, Mary Kay, Amway, Scentsy, and Herbalife that sell their products directly to consumers through sales agents or associates.  Usually the associate relies on a personal network of friends, relatives, and acquaintances as customers.  Often the products are legit but nothing special.  Like cosmetics, household products, and vitamins that you can just as easily buy in a store or online, often at a lower price too.

However, what makes an MLM very different from a traditional distributor or retail business is the sales model.  MLM’s make most of their profits by recruiting as many sales associates as possible.

So there’s always a push for MLM associates to not only sell products but also sign other people up to become associates too.  That’s why MLM’s have a reputation for being pushy to the point of predatory. For every new associate that signs up, the associate who signed them up and everyone else up the chain gets a cut of the newbie’s sales.

Think of a pyramid with a bunch of sales people at different levels.  Those on top can make money, but sadly many people who join an MLM don’t make much money for the amount of work required.  Or worse yet they lose money on all of the products they might have to buy upfront as well as fees and expenses.

Financial services are sometimes sold using an MLM model. One product they might offer is something called a variable life annuity which can be referred to as an indexed account.  What they are is a type of life insurance that can also be used as a way to save for retirement.  Unfortunately, how variable annuities actually work is often difficult to understand.   They can also be very expensive and not well suited for an average person’s insurance or investing needs.

Adding to the confusion is the fact that it’s very easy in many states to become licensed to sell life insurance.  In New Mexico for example, a person just needs to pass a test, submit fingerprints, and pay some pretty light fees.  That’s it – no actual experience working with insurance required.