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Personal Finance column: Perennial applications for vintage financial wisdom

“Too many people spend money they haven’t earned, to buy things they don’t want, to impress people that they don’t like.”

— Will Rogers

“Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.”

— Charles Dickens

“Budget: a mathematical confirmation of your suspicions.”

— A.A. Latimer

Replace your budget with an intentional spending plan. Tell your money where to go instead of asking where it went. Connect with your core values on what is important in your life and direct the financial flow. You won’t be swayed by media or the perceived “fear of missing out.” Spending with joyful intention within safe boundaries is a powerful combination.

“Everyday is a bank account, and time is our currency. No one is rich, no one is poor; we’ve got 24 hours each.”

— Christopher Rice

Consider that return on life is just as if not more important than return on investment. Money is very necessary up to a point. There is a diminishing rate of return on happiness as it pertains to income. Each person has their unique narrative to live a life on purpose and in their potential. Put forth effort and energy toward people, activities and causes that make you come alive. Using your financial means to pave this path is where you create true wealth.

“A nickel ain’t worth a dime anymore.”

— Yogi Berra

Inflation is an integral part of life. Flash back to 1970 prices: a home, $26,600; a first-class stamp, 6 cents; a gallon of gas, 36 cents; a gallon of milk, $1.15. You can either seek to outpace the cost of living — save and invest in broad-based, diversified, tax efficient portfolios (such as real estate and the stock market) for long-term goals. Or you can reduce your lifestyle and choices down the road.

“The Stock Market is designed to transfer money from the active to the patient.”

— Warren Buffett

Investing is different from speculating. Investing requires vision and a long-term focus, goal setting, good habits and mindsets. It is necessary to keep emotions in check and where wisdom undergirds and directs knowledge alongside application.

“Happiness is not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort.”

— Franklin D. Roosevelt

“If money is your hope for independence you will never have it. The only real security that a man will have in this world is a reserve of knowledge, experience, and ability.”

— Henry Ford

These two both speak to the importance of character assets. Too often financial assets are the singular measure of “wealth.” Your net worth does not define your self-worth. When you focus on building and enhancing positive, productive character traits, the financial pieces will stay in their proper place to serve you and society.

“We make a living by what we get, but we make a life by what we give.”

— Winston Churchill

Generosity is the secret sauce in creating true wealth. It is foundational for financial health as giving breaks the bind of consumerism. It is a profoundly personal journey and worth taking steps on the path.

With over 2,000 references in the Bible about money, this one is the most misquoted and misinterpreted: 1 Timothy 6:10 – For the love of money is a root of all kinds of evil. Money is not in itself evil, but when it becomes the focal point of life either because of unsatiable desires or life-sustaining scarcity, immorality can bloom. The garden of your financial life needs to be well tended to keep this weed from taking hold.

“Money is a terrible master but an excellent servant.”

— P.T. Barnum

“Master Card” – the irony is palpable. If used wisely, it is a tool of convenience and safety. For many, consumer debt has been normalized and expected, yet holds them hostage from attaining financial freedom.

“Do what you can, with what you have, where you are.”

— Theodore Roosevelt

To me, this speaks to financial efficacy. We are not victims of financial circumstances. We get to choose — whether it is regarding the financial means you have or the mindsets you embrace. We can plan. We can save and invest. We can work hard. We can choose an attitude of gratitude and a mindset of sufficiency. We can recalibrate and pivot when things don’t go the way we had hoped. Where do you have wins and how do you want to build on them?

Danielle Howard is a CFP® and CKA® with Wealth By Design LLC in Basalt. Check out her retirement podcasts and blogs at daniellehoward4u.com.

Bankers’ Hours column: Banking changed in 1985

I recently read of the woes of Credit Suisse, the Swiss banking behemoth with a planetwide presence, which recently received a devastating one-two punch. The bank took a loss of $1.5 billion as a result of the failure of Greensill, a non-institutional lender with operations on four continents. And then, in just weeks, Archregoss Capital Management, a very big borrower from Credit Suiess, imploded, and the bank is now facing another $5 billion hit to capital.

So Credit Suisse is going broke, right? Nope, they’ll be fine, because of the profit they post from other divisions of their rather extensive platform; net income for 2020 was $2.7 billion.Things are going quite well for banking as the industry emerges from the bunkers into the post-pandemic landscape. Oh, the bank will have regulators from at least two countries on their case, and a lot of top execs will get fired or take early retirement.

But I was struck by the details of the two problems, and it came to me I’ve seen this movie twice before. I realized that there have been three great systemic bank failures of the last 100 years — the collapse of the Great Depression, the S&L Crisis of the 1980s, and the Great Recession of 2008 — and that I’d been a witness and on the front line of the last two. Those events have a remarkable similarity, and an epiphany of sorts struck me: We bankers are no different than anybody else. We all fail to heed the famous quote of George Santayana, the American philosopher and writer: “Those who cannot remember the past are doomed to repeat it.”

So in the next several columns, let’s take a look at 1985 and 2008, and, just for fun, throw in some real life anecdotes to spice up the story. And speculate, can it, will it, happen again? If one were to venture a premature response, “yes” to the first question and “who knows?” to the second.

Ronald Reagan was elected president in 1980, and the administration was committed to deregulation in all federal venues, and particularly in banking. Savings and loans, (thrifts) became the poster child for rewriting bank regs, primarily because they were arguably the most regulated business in the country. These institutions made only real estate loans, and most of those were single-family residences. They were stodgy relics from the 19th century, and thrift execs tended to adhere to the 3/3/3 rule: Pay 3% for your savings accounts, mark up the money by 3%, make home loans, and be on the golf course by 3 p.m. They were dull in the extreme. And they seldom went broke.

That changed with Reagan. Thrifts could make more types of loans, and S&L presidents could act like what they’d always wanted to be: bankers.

And then there was the direct investment concept, a radical reworking of those old Victorian-age thrift rules. Through a so-called service corporation, of which the S&L had to own at least 51%, thrifts could step out of the role of lender into a new suit of clothes labeled “entrepreneur.” They could get directly into land development and construction projects as developers and builders and make a lot more than a 3% spread on deposit money.

It was common for a thrift to take on a builder as a partner for the other 49% of the enterprise. For their part, builders thought they’d died and gone to heaven. “You mean I don’t have to borrow from a bank, I can partner up with one? Yahoo!”

It didn’t take long for entrepreneurs on the cutting edge to wonder, “Hmm. … Why be a partner with a bank? Why not, well, be a bank?”

You smart ones in class probably know where this is going. Stay tuned for the next episode. …

“Cowboys and daisies.”

Pat Dalrymple is a western Colorado native and has spent more than 50 years in mortgage lending and banking in the Roaring Fork Valley. He’ll be happy to answer your questions or hear your comments. His email is pdalrymple59@gmail.com.

 

Bankers’ Hours column: What a personal guarantee on debt really means

As the pandemic passed its one year anniversary observance, a lot of entrepreneurs and business owners are learning firsthand what a personal guarantee on debt really means.

Most likely, it means that someone is demanding that you pay them money that you don’t have the means to pay. You personally promised to repay a loan to your business. But your enterprise has been either shuttered for months or operating at 50% of capacity or less; thus, there isn’t enough revenue to service the debt.

Doesn’t matter, says the lender: When you signed the docs, you affixed your signature agreeing that you’re on the hook, no matter what happens to your business.

Personal guarantees are common when borrowing money or leasing property to operate a business. We’ll focus on borrowing in this space today.

Unless your name is, say, Microsoft, Facebook or Apple, a condition of your business loan will almost certainly be your personal guarantee. For a small business operator, that can be devastating, because often no money has been taken out of the operation as the owner desperately tries to keep the ship afloat; the personal checking account may be as depleted as the store operating bank balance.

Banks, credit unions and thrifts (savings and loans) routinely require the personal signature, no exceptions. They want “skin in the game,” and bank examiners expect it. These lenders require it even from very good deposit and loan customers. Maybe, rarely, they’ll waive the contingency if a borrower puts up additional collateral for the loan, and cash is often the only option. If the bank backs away from spreading ink on the promissory note, it could demand, say, 75% of the loan amount in cash in, maybe a pledged CD that would immediately be applied to the loan on default by the borrower.

Which, of course, prompts the borrower to say, “What? Why would I want the loan if I have to tie up all of my cash!” Whereupon the loan officer smiles sweetly, responding, “Exactly, Mr. Smith. So just sign here on the note, and you can continue to keep your cash right here at the Second National Bank of Downriver Montana and withdraw it anytime you like.”

What about hard money lenders? They look at the collateral’s value, so they can forgo the guarantee with a conservative loan to value ratio, right? Generally, the answer is no. They too want that skin in the game. I’ve had discussions with some HMLs and heard some posit the possibility of redundant over-collateralization, such as, say, 20% LTVR on a piece of buildable land, maybe 45% on a free and clear rental property and possibly a lien against debt free equipment, but I’ve not seen such a scenario becoming reality.

In fact, at times, the hard money people can seem downright conservative, especially in a hot real estate market, like we’re currently experiencing. Many of these private lenders remember too well 2008, when 50% loan-to-value deals virtually overnight became 90% loans, and then, shockingly, deals that were way below water at 110%. So a lot of HMLs are hedging their bets, especially on super-jumbo residential properties that investors might be purchasing to flip. Some hard-headed capital sources are wondering if the Greater Fool Theory is not morphing into the Law of the Greater Fool: You know, “I’m a fool to pay this much, but I’ll find a Greater Fool to pay more.”

So one of these lenders might get a request for flash cash to buy a luxury home in Vail, with three contracts waiting to step up if the first buyer can’t meet some clause in the contract. That lender may decide not to rely on the contract price, or even a current appraisal. Rather, there may be an underwriting decision to ratchet down the value, maybe by checking the county assessor’s last “actual value” estimate, which most likely is quite a bit below the current hot market sales price.

We laugh at the joke that lenders want your first born as additional collateral.

But they would if they could.

Pat Dalrymple is a western Colorado native and has spent more than 50 years in mortgage lending and banking in the Roaring Fork Valley. He’ll be happy to answer your questions or hear your comments. His email is pdalrymple59@gmail.com.

ANB Bank downtown Glenwood construction on track to wrap up in November

Crews continue work on the new ANB Bank in downtown Glenwood.
Chelsea Self / Post Independent

After some initial delays, the new ANB Bank site on Grand Avenue in downtown Glenwood Springs is set to open at the end of 2021, according to Glenwood Springs Community Bank President Randy Diers.

“We had some initial delays due to soil issues. By the end of November the building should be delivered to the bank from Neumann Construction,” Diers said. “Then it takes about a month to equip it properly.”

Until then, the Glenwood Springs ANB Bank branch will continue operating out of its location at 2624 Grand Ave. on the south end of town. The Glenwood Springs Planning and Zoning Commission voted to approve ANB Bank’s construction plans in December of 2019.

In May of 2019, ANB Bank purchased the properties at 910 and 918 Grand Avenue with the intent of demolishing two circa-1915 buildings in order to construct a 9,706 square foot, two-story bank and office building.

That was met with opposition from some community members and existing business owners located in the two buildings. ANB provided financial assistance and helped the businesses find new locations to ease the transition.

Diers said he’s excited to get started in the new downtown location.

“We’re going to have better visibility, better access closer to the core and to the heart of Glenwood Springs,” Diers said. “We will close this location (at 2624 Grand Ave.) and have the new location with convenient parking.”

Diers said ANB Bank is a full service community bank offering full consumer financing and account packages, as well as commercial business services.

“Right now we have a lot of loan activity due to urban flight,” Diers said. “We continue to see people buying loans for new houses and home construction. It’s been very, very busy.”

With the new location, Diers anticipates keeping the staffing numbers the same and will add staff if there’s a need to do so.

Reporter Shannon Marvel can be reached at 605-350-8355 or smarvel@postindependent.com.

Stoneyard Distillery opens tasting room in Glenwood Springs

Max Vogelman, Katie Durham and Jim Benson stand behind the bar at Stoneyard Distillery’s tasting room in Glenwood Springs. Shannon Marvel/Post Independent

Fans of Stoneyard Distillery’s beet sugar spirits will be able to taste the businesses products in their new tasting room in Glenwood Springs.

Stoneyard Distillery’s new tasting room had a soft opening Thursday. The plan is to have a grand opening May 15, distillery co-owner Jim Benson said.

Stoneyard’s master distiller and co-owner, Max Vogelman, said he’s always wanted to open a tasting room in Glenwood Springs.

Benson and Vogelman first opened the distillery in nearby Dotsero.

The new Stoneyard Distillery tasting room in downtown Glenwood.
Chelsea Self / Post Independent

“We wanted to be here because there’s a whole lot more people here than Dotsero, not a lot going on out there,” Vogelman said. “We started thinking about doing a site tasting room before COVID, then COVID hit so we just decided to table it. Then the writings on the wall came eventually that we’d get back to normal.”

“Luckily for us, this space opened up around the same time. This location opened up really as we started looking seriously. We wanted to be in Glenwood Springs because it’s closed.”

Vogelman grew up in the Roaring Fork Valley and always enjoyed being a patron of downtown Glenwood Springs.

“It just seemed like a really good place and we’ve always done really well in Glenwood with our products.The liquor stores around here and restaurants, at events like Strawberry Days, we’ve always done really well in general and figured we’d give it a shot down here,” Vogelman said.

A few examples of products available at the new Stoneyard Distilling tasting room in downtown Glenwood.
Chelsea Self / Post Independent

Benson said the pair began leasing the space in December 2020 and got a building permit to renovate it in January.

The products made at the distillery and sold at the tasting room are what Vogelman calls beet sugar spirits.

“We make everything from sugar beet sugar which is all grown in eastern Colorado. We take that to Dotsero and ferment and distill that sugar into something that doesn’t have a category so we just call it a beet sugar spirit,” Vogelman said.

“Then we make all of our products from that. We call it B.S. spirits.”

Right now the tasting room Wednesday through Saturday from 2-8 p.m.

“We could pretty quickly expand that out, we just want to be sure we know what we’re doing,” Vogelman said.

One of Stoneyard Distillery’s longtime customers and owner of Rhino Liquors in Glenwood Springs, Gabriel Rosalias, was there to support Benson and Vogelman during the soft opening on Thursday.

“I like it. I’m glad there’s one here because we don’t always get to go over to the other side of the canyon,” Rosalias said.”And It’s really nice to be able to try out their product, and convenient that it’s right on the main street. I love it. The horchata cocktail is one of my favorite things they have and one of the things that sell the most in our store.”

Stoneyard Distillery Tasting Room in Glenwood Springs

823 Grand Ave. Suite 100, Glenwood Springs, CO

Open Wednesday through Saturday, 2-8 p.m.

Reporter Shannon Marvel can be reached at 605-350-8355 or smarvel@postindependent.com.

Grocery wars? Not so much in Basalt and Carbondale

The new City Market in Carbondale opened in August 2020.
John Stroud/Post Independent file photo

When the new, larger City Market in Carbondale opened in late August, there was speculation it would eat into Basalt’s sales tax revenues, but early returns indicate grocery stores in both towns continue to flourish.

For the four full months since the Carbondale’s 62,000-square-foot City Market opened, Basalt has experienced growing rather than stagnating retail food sales. Cumulative sales tax collections from retail food sales for those four months were $890,544 — up $44,194, or 5%, from the same period in 2019.

Sales tax reports don’t identify taxes paid by individual businesses, so information isn’t available on sales by the El Jebel City Market or Whole Foods.

Basalt Mayor Bill Kane said his gut feeling is both Basalt grocers are on solid ground despite the addition of a large, new store in Carbondale. There was already a City Market in Carbondale, so it’s not like the new store is breaking ground, he noted. While some Carbondale shoppers might be more inclined to shop in their hometown now that there is a greater selection, City Market and Whole Foods in Basalt are rooted with shoppers, Kane said.

Midvalley residents are unlikely to head to Carbondale to shop when two stores are so close in Basalt and upper valley residents are in the habit of going to Whole Foods for specialty products and El Jebel City Market for staples, he said. He doesn’t see that changing.

“I think the upper valley shoppers are somewhat adverse to driving beyond the El Jebel City Market,” Kane said.

Kane and Basalt Town Manager Ryan Mahoney said more time is needed to see how the new City Market in Carbondale affects shopping patterns.

Mahoney pointed out the COVID-19 has decreased the amount of time people are eating at restaurants, out of personal choice or mandatory capacity limits. That’s driven up grocery sales because people are cooking more at home and buying prepared foods. Clear patterns of spending might not emerge until after the pandemic.

However, like Kane, Mahoney said the Basalt stores would continue to draw from Aspen and Snowmass Village.

“Upvalley folks aren’t going to defect,” he said.

Where people buy their groceries is more than a trivial point. Retail food sales tax generates a major portion of Basalt town government’s budget.

In 2019, Basalt collected a record $6.67 million in sales tax revenue. Of that, $2.34 million, or about 35%, came from retail food sales, which primarily reflects sales by the two grocery stores.

Preliminary figures show Basalt topped $7 million in total sales tax revenues in 2020. Of that amount, $2.54 million was from retail food sales.

While Carbondale might not be eating into Basalt’s grocery sales, its retail food sales tax collections are growing. The town collected nearly $1.3 million in retail food sales tax revenues in 2020, an increase of 15% over 2019, according to the year-end sales tax report. Retail food accounted for 25% of total sales tax revenues.

Carbondale Mayor Dan Richardson said none of the current council members were on the board when City Market was approved, so he couldn’t speak first hand about exact expectations for increased sales tax revenues.

“It’s always packed. Clearly it’s been successful,” he said. “Everybody I’ve talked to is giving this City Market a try.”

The town government’s 2021 budget anticipates a 3% to 5% increase in sales tax revenues, according to Richardson. A relatively new tax on online sales is fueling growth for many Colorado governments. The larger City Market also is expected to boost sales compared with the old store, he said.

Richardson said a segment of Carbondale residents will continue shopping at Whole Foods in Basalt for organic food and specialty products. How shopping patterns shake out remains to be seen.

“I’m not hanging my hat on any data yet,” Richardson said.

scondon@aspentimes.com