July 24, 2024
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Money Lessons From Yosef

A few weeks ago we read about Pharaoh’s dream and Yosef’s interpretation. We all remember the seven good cows swallowed up by the seven weak cows, and the seven ears of corn and the primary message: Save during the good times so you have what you need during the bad times.

Since that famine, which impacted the Middle East some 3,500 years ago, there have been quite a few times of plenty followed by famines, recessions and depressions. One would think humanity has learned this basic lesson: save during good times.

During COVID we learned it’s possible to have meaningful lives without the spending we had become accustomed to. We learned that weddings with just family and close friends could also be meaningful, that Pesach could be enjoyed at home and that we could live rewarding and fun lives without traveling around the world. In fact, thanks in part to this reduction in spending, Americans in general were saving at an exceptional rate. Americans are well positioned financially as the economy starts to come back to normal.

However, there is also another way to view the current situation. Pre-COVID, the personal savings rate, according to The U.S. Bureau of Economic Analysis, stood at approximately 7.5%. It rose as high as 26.6% in March of 2021, but has dropped back to 7.5% in September of 2021. So much for saving.

In addition, according to the Federal Reserve Bank of NY, credit card bills increased by 17 billion dollars in the second quarter. That was the first uptick after four straight quarters of declines.

The world is coming out of its cocoon with dollars in hand and ready to spend. Ask yourself, are you being a little carefree with your spending plans for the coming year? Pesach, yeshiva week, summer trips, summer camp, weddings, bar/bat mitzvah, 40-year-old birthday parties, etc. Perhaps now is a time for us to reflect on how we managed these last 20 months by simplifying our lives and not spending so freely.

I’ve served a few roles in my career. I started as a bankruptcy lawyer, became a financial adviser and pivoted to the mortgage business. As a mortgage lender, I am seeing requests for cash-out mortgages and HELOCs to finance expansions, to pay off debts and, yes, to pay for weddings. While it’s certainly true that paying 3% on a mortgage makes much more sense than 10% on a credit card, it’s important to remember it is still debt. By all means, use the HELOC to get out of debt but be careful not to then just start using the cards again without restraint.

I’ve been around long enough to have lived through the internet bubble of 2000 and the recession of 2008. I’ve worked with wealthy people and insolvent people and, unfortunately, at times people who began as the former became the latter. Many were well off but lived beyond their means, expecting incomes to continue to rise and using debt while they waited for their income to catch up with their spending. Others used their homes as piggy banks to fund a lifestyle their incomes didn’t support. Why worry, they figured. My income and real estate values only increase.

I won’t claim that bad times are coming. How could I? We are finally looking forward to the world returning to normalcy. However, because we don’t have the benefit of prophecy it’s important to pay attention to the current news. Inflation is back, prices are rising, interest rates have started moving higher, the Fed is less accommodative, real estate is at all-time highs, the Dow Jones is climbing higher. Is this constant climb sustainable?

I am only suggesting we learn from the past. Good times don’t last forever. The Roaring ‘20s led to the Depression, the growth of the early 2000s led to the recession and the high times of the good seven years led to the famine. Those people with cash in 2008 benefitted with opportunities that became available. Egypt became a much stronger entity because they had a surplus of grain. Cash and grain are king.

I am writing this as good times are upon most of us financially. Even those businesses hurt by the pandemic are now beginning to do well. I simply urge you to be like Yosef. He was fortunate to have the ability of prophecy and knew exactly when the bad times would start. We don’t have that certainty. Are we in the second year, the sixth or the last days of year seven? That’s for you to decide and to choose if you will be like Yosef, or the rest of the world who spent freely—but were forced to go down to Egypt begging for help when the famine finally did come.


David Siegel can be reached at [email protected].

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