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.

Native Yard Art

Dear Dr. Per Cap: 

I come from a family with a lot of women, but our dad made sure we learned some “guy skills”.  However one skill we’re lacking is how to price used vehicles.  My father walked on a few years ago and left a 1999 International Ryder truck that he bought for our family business. 

We’re thinking of selling it now. The rebuilt motor has only 3,000 miles. The truck also has a custom welded storage cabinet with locking doors. However, the truck hasn’t been driven in three years and has become Native yard art.  We have no idea how to price it.  Can you help us know how to make a small profit while being fair? 

Signed, 

Ryder Truck Family

Dear Ryder Truck Family:

My condolences – It sounds like your father was a very good man and a wonderful parent.

Commercial grade trucks, even older models like yours, are usually pretty valuable as long as they are in decent condition.  There are always small businesses needing solid trucks to haul equipment, freight, and supplies.  Often they don’t want to spend extra money buying brand new.

Ryder is a large corporate transit company that’s famous for its large fleet of commercial rental trucks.  They also have a sales division that sells many of its light and medium duty rental trucks once they reach a certain mileage.  I’m guessing that’s how your dad purchased the International.

I took a quick peak at Ryder’s website and their current inventory of Navistar International 4300’s which I’m thinking are pretty similar in size to your truck.  You can’t touch one newer than five years old for less than $80,000.  And almost all of them have odometers showing well over 200,000 miles.  But, remember higher mileage isn’t as big a deal for a commercial truck as it would be for a personal vehicle.  

Obviously, this isn’t an apples-to-apples comparison but it does help you gain some perspective.  Next try typing your truck’s exact model and year into a Google search and see what comes up.  That will give you a better idea of how much similar trucks are selling for.  The rebuilt engine and custom fabrication work should also fetch a premium, although exactly how much is tough to say.

If possible you also want to get the truck running if it isn’t already.  A buyer who needs to tow a truck has a lot room to negotiate because of the inconvenience.  Remember it doesn’t have to run super cherry either, just well enough to get the buyer down the road without any drama.  And don’t worry about washing or detailing the vehicle because that only matters to folks shopping at CarMax. 

Once you have a general idea of what the truck might be worth it’s time to advertise.  I recommend picking a reputable online classified marketplace or just go old school and stick a for-sale sign in the window while parked in a highly visible location.  But here’s the kicker, since pricing the vehicle is your biggest challenge don’t lock yourselves into a sale price.  Just list a high ball number along with “or best offer” and see what happens.  If the truck is solid buyers will show up and set the price.  Then just pick the best one.

As a final precaution take care when the time comes to actually sell the truck because fraud is not uncommon with private vehicle sales.  In fact some private sellers only accept cash to avoid check scams, but an envelope full of Benjamins is not always practical.  I recommend meeting the buyer at their bank and have them authorize a direct transfer into your bank account.  Then wait to sign over the vehicle title until you’ve confirmed the payment.

Hope your Native yard art makes a fair profit!

Baby Budgets

Dear Dr. Per Cap: 

Our first child is due soon and we went shopping the other day.  Cribs, strollers, and diaper bags aren’t cheap.  Any tips so our baby doesn’t break the bank?

Signed, 

Expecting Parents

Dear Expecting Parents,

Congratulations!! Here’s to lots of health, wealth, and happiness.

Now let’s get to business. Yeah, baby supplies are insanely expensive.  In fact here’s something many parents don’t know. New or expecting parents are gold mines to stores and retailers. A survey conducted about ten years ago revealed the average parent spends almost $7,000 on baby items before a child turns one-year-old.

Businesses are also keen to the fact that major life changes are a great time to win new customers. A little lifestyle disruption allows people to be more easily influenced by advertising and marketing. Of all life changes bringing a cute little bundle of joy into the world is the biggest one for most of us.

That’s why businesses spend tons of money and resources tracking purchase histories and other shopper data to identify and market to pregnant consumers. For example, Target knows if a person starts loading up on vitamins like calcium and zinc, unscented soap, cotton swaps, and hand towels – there’s a really good chance someone is either pregnant or a corner man for an upcoming Logan Paul fight. For real they’ve got it down to a science.

Well before your due date sit down and create a detailed budget for all of your baby’s upcoming expenses. Just like any budget create two categories for fixed  expenses that don’t change, like child care or higher health insurance premiums, and flexible costs you can control – lotion, blankets, toys, etc.

Also, don’t forget to set aside a little extra cash for mom and dad. An occasional massage, take out meal, or new streaming service can be a nice stress reliever for an overworked parent.

Often a big extended Native family will want to pitch in which is great. However, you might want to politely offer suggestions for what types of purchases you need so you don’t wind up with a closet full of diapers but no wipes or baby powder to freshen up a sore bottom. Yep, been there.

Also pace yourself. For example, strollers are really useful and every family wants a cool one but you won’t need one until the baby is a few months old. Save money by holding off on those items you won’t need right away.

Then there’s some stuff you just don’t really need no matter how many ads mysteriously pop up on your phone – like changing tables. When our daughter was born we got a fancy cabinet with a built on changing table, but turns out a bed or couch was a lot more practical and easier to use. Those little plastic baby bathtubs are a non-essential item too. We found the regular tub worked just fine as long as the caregiver was attentive.

Bottom line – don’t be afraid to economize on your newborn or feel pressured to overspend. Parenthood is a marathon not a sprint.

Is FICO Fair?

Dear Dr. Per Cap: 

I made some mistakes a while back that appear on my credit report as collection accounts.  Since then I’ve been careful managing credit but my low FICO score makes it hard to borrow.  How can I prove to lenders I’m better than my credit score?

Signed, 

FICO Failure

Dear FICO,

Don’t be too hard on yourself.  Contrary to how banks and lenders might make you feel there is much more to life than having a great credit score.  Please don’t give a number on a credit report the power to define who you are.

If it makes you feel better many consumers are in the same boat – stuck with bad credit scores from old missteps even though their recent credit history is clean.  I always tell people that a FICO score, which ranges from 300 to 850, is not a perfect measure of one’s financial character and people can be unfairly burdened by a low score. For example, delinquent accounts can be factored into a credit score for up to seven years making them really tough to live down, even though a person can make a lot of positive changes during that time.  

Some good news is that banks and creditors are beginning to rely less on FICO scores when making lending decisions because they’re learning FICO isn’t always the best measure of creditworthiness.  More are turning to in-house credit scoring models which factor in stuff FICO doesn’t consider like bank balances, overdrafts, and a borrower’s lending history with their specific bank.  They argue their methods are more accurate than FICO.

Moreover regulators are asking banks to rely less on FICO scores so fewer folks turn to payday loans.  Even Fannie Mae and Freddie Mac, the federally backed home mortgage companies, are looking into allowing lenders to use credit scores other than FICO, such as VantageScore which was created by the credit bureaus as an alternative to FICO.

Meanwhile the Office of the Comptroller of the Currency, a federal bank regulator, recently determined that its own credit score guidance to banks was negatively impacting minorities and people of color.

So hopefully we’re in the beginning stages of a major shift that will enable more consumers to access affordable credit.

In the meantime I recommend shopping around the next time you need credit by asking different lenders what types of credit scoring models they use and if they consider information not factored into a traditional FICO score.

A good place to start is a Native led community development financial institution.  I’ve written about CDFI’s in this column before.  They’re non-profit lenders with a social mission geared toward underserved communities.  Many tribal communities have locally managed CDFI’s but if your community doesn’t have one, there are regional Native CDFI’s that might be able to work with you.

For more info check out the Native CDFI Network website at www.nativecdfi.net.

Investing Apps for Newbies

Dear Dr. Per Cap: 

Are investing apps like Robinhood and Acorns the best way for a first time investor to buy stocks?

Signed, 

Eager Beaver

Dear Eager

There’s no denying investing apps are taking the world by storm.  New investors are pouring into the market in record numbers and their influence is felt in meme stocks, cryptocurrencies, and other fast paced trends.

Let me say I’m a fan of any movement that encourages people to invest.  Moreover, many financial technology or fintech apps make it very easy for a novice investor to get started with little or no money upfront.  Consider this.

  • Individual investors in the U.S. now own more stocks than any time in history.
  • Millions of new brokerage accounts were created during the pandemic.
  • The stock market has hit more than 50 record closing highs this year alone.
  • Lockdowns and stimulus provided people with time and money to invest.

This all sounds great but I worry some apps are oversimplifying the investing process by turning it into more of a video game and entertainment experience than an investing mindset.  Spend a few minutes scrolling the investing apps mentioned above and you’ll know exactly what I mean.

Another trend we’re not hearing about as much is the fact that margin debt to buy stocks is also at record levels.  This means many new investors are speculating using borrowed money and that’s had bad consequences for more than a few.

The first step before investing any money is always to take time to learn what you’re doing.   I know you’re raring to go but really – slow down.  Set some goals, identify an investing time frame, and establish your risk tolerance.   Unfortunately some investing apps are a little light on this part.  For example, I’ve used Robinhood and it has educational tools, but you have to search for them.

So before making any trades please do some homework and check out other investing apps and websites before picking one.  There are some older, more established online brokerages that offer similar features while also providing more resources to help you make investing decisions.  I’m not saying one is better than another.  Just that different apps approach investing differently and each has pros and cons.  Pick the one that best suits your needs.

To learn more check out this video I made with Sequoyah Fund, a really cool tribally led financial services provider.   It explores the investing app craze and some alarming trends.

Wills Made Easy

Dear Dr. Per Cap: 

Is there a cheap way to write a will?  I don’t want to hassle with an attorney.

Signed, 

Need a Will

Dear Need

Depending on your situation writing a will doesn’t have to be a major undertaking.  In fact it can be pretty straight forward.  However, as a Native person there are questions to consider.  For starters do you live on the rez or are you an urban dweller?  Do you have individual ownership in any trust land?  If so, does your tribe have a probate code?

I’m told the only tribe with its own probate code is Sisseton Wahpeton Oyate so unless you’re rocking that Santee Dakota blood, your tribe is subject to the American Indian Probate Reform Act of 2004.  AIPRA supersedes state laws when determining how trust lands on reservations pass from one generation to the next.

I reached out to a colleague for timely advice on this topic who explained that many people don’t realize a written will is only effective upon a person’s passing.   So you can change or edit a will any time before then.  Major life changes like marriage, divorce, birth of a child, or a death in the family are common situations when a person might rewrite a will.

You also don’t need an attorney to write a will and it doesn’t have to be fancy. Heck, you can write one on the back of an envelope with a purple Sharpie as long as you are 18-years-old and the will is witnessed by at least 2 disinterested parties of sound legal mind.  That’s legal speak for a level headed person who isn’t a close relation who might benefit from your estate; so no children, grandkids, husbands, wives, significant other, or anyone else who stands to inherit any of your assets.

Next step is to safeguard your will.  Nope, a coffee can under the bed doesn’t cut it.  And the BIA isn’t in the business of storing wills so don’t hotfoot it to your local agency office.  Better to buy a small home safe or open a safe deposit box at a bank so your will can’t be stolen or altered without your knowledge.  Then make sure a trusted person can access the document if necessary.

I’m glad you’re looking ahead and taking ownership because there’s more to personal finance than bank accounts, budgets, and credit reports.  Life in Indian Country would also run a whole lot smoother if more folks paid attention to estate planning.

For more info about wills and AIPRA, check out this handy guide created by Montana State University Extension and its tribal partners.