Money Monday with Brian James

Episode Transcript

Speaker 1 (00:00):
I want to know what's happening.

Speaker 2 (00:01):
I know what's going on around town.

Speaker 3 (00:02):
Around the country. Do I need to know the weather
in traffic?

Speaker 2 (00:06):
Listen and you'll know.

Speaker 3 (00:08):
On fifty five KRZ the talkstation, Shabato sick here if
you have kr C the talk station, It's Monday. It's
that time all our financials. Brian James giving us another
edition of Money Monday. And of course it's appointment listening
for that secret group of women out there that Brian
and I learned about. You tune in regularly just to

(00:29):
cling to Brian James words on investment strategies and today
about Tariff's being up, the interest on our national death
Doge apparently didn't accomplish much, Social security and the topic
we've been waiting for credit unions versus banks. A lot
to pile in for a few segments. Brian James, Welcome
back and Happy Monday in spite of the Bengals loss.

Speaker 1 (00:48):
Happy Monday, and go Mariners including all the former Reds
who are still playing. That's all we have to cling
to at this point. Hey, you got something there, Brian,
Go Luis Castillo and he Haniosuarez and handful of other ones,
right it's something that's better than nothing.

Speaker 2 (01:04):
Will hang on to that.

Speaker 3 (01:05):
It is something, and something that is tariffs. I know
so far, you know, I mean draw your conclusions whether
we have been collectively scathed in our economy. But apparently
at some point they say they were going to catch
up to us, and it looks like they may be
catching up. And I know China has just put some huge,
huge prohibitions on the trading of the rare earth minerals

(01:26):
that we rely on them almost exclusively for. So what's
going on with the tariff right.

Speaker 1 (01:31):
Well, the tariffs have had their impact, so interestingly, our
deficit is basically flat at one point eight trillion. Now
that would be a fantastic headline in any other environment. However,
what's happening is it's just the surge from the tariffs.
So the cash that's coming in from that that's keeping
the deficit from running up.

Speaker 2 (01:49):
So on one hand.

Speaker 1 (01:51):
Anytime the deficit doesn't increase, that would be I can't
remember the last time that was a headline. But all
it is is the cash that's coming from these tariffs,
which is probably somewhat temporary as the market continues to
settle itself out as countries decide whether they're willing to
continue or if they fight back, or if they find
different markets entirely to sell to. So customs duties hit

(02:11):
almost two hundred billion dollars, that's more than double last year,
and it's still only three point seven percent of federal revenue.
So Trump had the President Trump had this big goal
of We're going to reduce income taxes, reliance on income taxes,
and increase reliance on external taxes, meaning these tariffs. That's
how we're going to run the country. So these tariffs,

(02:32):
even now at two hundred billion from these duties, is
still only three point seven percent of federal revenue. Individual
income taxes still make up fifty one percent of it.
So we got a long way to go if these
tariffs are going to truly remove our income taxes, which
I have bad news.

Speaker 3 (02:47):
They are not fair enough on that. I guess tariffs,
by all arguments, can raise the price of goods here
in the United States, So one could argue if your
income tax does stay down, the money still has to
be collected some way. This way, at least, anybody who
buys something is kind of sharing in the responsibility. It's
kind of like a increase in sales tax that deal

(03:09):
with fewer tax dollars coming in by way of income tax.

Speaker 2 (03:11):
It's quite literally that.

Speaker 1 (03:12):
I mean, there's nothing that says that any company or
country that is selling into the United States has to
eat these tariffs. There are no rules that say that
they must keep their prices the same and just eat
the tariffs. There's really no way to put that in place.
They can simply decide to walk away from the market,
or they can raise their prices. It's really no different
than you know, if you're renting an apartment and you

(03:35):
feel like the landlord is going to bear the brunts
of the property tax increases, that is not the case.
They're simply going to raise the rent. The renter is
the one who ultimately pays everything. That's why they call
us consumers. We're at the bottom of the at the
bottom of the chain, and we are the ones who
consume all the goods and services that are out there,
and that means we have to eat whatever price is.
The only way you can avoid these price increases is

(03:57):
to truly change your lifestyle and not need these things
any more. And that's simply not an option for most
of the stuff we have to deal with now.

Speaker 3 (04:03):
For most of the stuff, there are a lot of
things on I think our collective budget margins that if
we really gave a long, hard thought, we know we
could do without them. So that's up to an individual
families choices, and people are going to be forced to
make those kind of choices. Interest revealing that the interest
rate on our debt is now over one trillion dollars,
meaning that is I guess more than even defense spending

(04:24):
usually coming into like number one. But that's because we
have a spending problem in government. I know Donald Trump's
done some took some steps with the OMB on Friday
to start firing people. But when they fire people that
whether it impacts you and me in our day to
day lives, it's certainly not going to be a sizable
enough chunk of government cuts to actually accomplish something. So
let's talk about that. But also, we had huge hopes

(04:47):
for the Doge Department and that apparently has kind of
fizzled out. So where are we with this debt and
of course the DOGE cuts.

Speaker 1 (04:54):
So yeah, the big concern there with the size of debt,
So debt is it's just like anything else, you have
a mortgage out there, you're a bunch of credit card debts.
Then you are impacted directly by interest rates. And now
that we're literally writing checks for a trillion dollars as
a country, that's just for the interest. Remember some if
we're writing a check for a trillion dollars, somebody might go, oh, great,

(05:16):
we're paying down a principle.

Speaker 2 (05:17):
No we're not. We're simply maintaining what we already have.
We are treading water.

Speaker 1 (05:21):
So that net interest of a trillion dollars is now
bigger than medicare or defense. Based on some calculations, roughly
about a dollar of every five dollars in revenue. And
again remember half of that comes from our own income taxes.
A dollar out of every five dollars goes to these
interest payments. This is coming from the higher rates and
the fact that we have just more debt than we've
ever had before. Of course, so the issue here, the

(05:44):
concern is that we were likely going to head into
a higher for longer type of a situation with regard
to interest rates staying where they are. Remember, we're not
always only talking about the Federal Reserve and what it
wants to do with interest rates. We're often talking about
what the market. The market has an impact on rates too.
Whatever it's sensitive to. Whatever the market thinks of the

(06:05):
credit quality of the United States, can it continue to
pay its debts and so forth, that will also have
an impact on interest rates. That means Washington is going
to be super sensitive to interest rate moves, even if
the Fed makes gradual cuts, Brian, the rolling over debt
that's still out there is going to keep these average
interest costs elevated. And that means we need to make
some cautious mortgage and refi assumptions, and we need to

(06:26):
be stress testing our budgets for these higher rates. For
those of you what that means out there, For those
of you perhaps on an adjustable rate mortgage, you need
to take a look at what that might be if
you did it five years ago at a really low rate. Well,
that's going to be sneaking up on you very soon.
You need to make sure you can handle whatever the
increased payment is going to be when that adjustable rate
mortgage adjusts.

Speaker 3 (06:46):
Well, doesn't the interest rate to repair, I mean, doesn't
the debt interest which we have to pay more than
a trillion year and that keeps growing doesn't that necessarily
have a restrictive force on the growth of government. I mean,
if they're not bringing in any additional tax, you run
the risk of digging us further into a deficit hole
which increases that trillion dollars to something north of it.
Or you have to say, listen, we got all this

(07:08):
debt service we've got to pay. We no longer can
afford to fill in the blank. Maybe we need to
reduce the size of that department. Maybe we just say
no to something new by way of you know, oh,
I don't know, expanding health care for illegal immigrants or something.
But something's got to give. Brian.

Speaker 1 (07:22):
Yeah, that's true for any household as well as it's
true for the for our country as a whole. And
that's that's what DOGE was intended to do. Yeah, that
didn't really quite you know, the little segue into that
topic since you mentioned it. When DOZE was originally set up,
remember this is the Department of Governmental Efficiency run by
Elon Musk briefly that was going to come in and
just clean house and figure out exactly where all the

(07:44):
waste is and get rid of it all. And they
were going to achieve two trillion dollars in savings. That
was the brochure that we all read, but so far
that hasn't been the case. Not to mention, Elon Musk
stepped down a few months ago and we really haven't
heard much ever since. So total spending excluding interest rose
about two hundred and twenty billion dollars or four percent
for that entire year. That would have been bigger except

(08:05):
for in September twenty five when the Trump administration put
in a non cash spending reduction based on modifications to
student loans.

Speaker 2 (08:13):
That knocked it down a little bit.

Speaker 1 (08:14):
But other than student loans on the only major categories
where the Congressional Budget Office said spending actually declined was
the FDIC, which, if you think about this, all that
means is we didn't have scary headlines about banks failure,
which is.

Speaker 2 (08:27):
That's a good thing.

Speaker 1 (08:28):
But we can't count it as a victory small Business
administration because we had a similar situation where we didn't
have to lay out the kind of money that we
normally do for disaster related loans that do come out
of the Small Business Administration. So so far, we can't
really say that DOJ has had all that much of
an impact, despite the blusters coming out of that department.

Speaker 3 (08:46):
Yeah, I really had some hope for that department up right.

Speaker 2 (08:48):
It made sense, right, didn't it. It sounds like something
responsible countries do.

Speaker 3 (08:52):
It still does. I guess the question mark is why
isn't it accomplishing what we had expected? It just seems
so strange.

Speaker 2 (09:00):
But I'll give you my opinion.

Speaker 1 (09:01):
I think my opinion is because anything that's truly going
to fix anything involves necessarily someone telling us as a
society that we must sacrifice. I don't think that our
current political leadership believes that we have that in us,
and I definitely don't believe that anybody who is in
that position to make those types of changes thinks that
they can win a reelection the next time around.

Speaker 3 (09:22):
Social Security, Medicare, Medicaid, the third rails of politics will
continue with Brian James, while worth Financial we'll talk about
an update on soci is security, speaking to which as
well as credit unions versus bank topic by demand more
with Brian James. After I mentioned Cullen Electric family in
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(10:05):
or online go to Cullen c U l E and
Cullenelectriccincinnati dot Com. Fifty five krc It's AD eighteen here
fifty five KRCD talk station doing that money. Monday Fame
with all of financials Brian James. All Right, I mentioned
one of the third rails of politics, something that could
probably stand to use some reform in the name of

(10:26):
saving our financial future. Here in the United States of America,
the third rail social Security. And people always argue I
paid into it, I paid in when I'm entitled. I'm entitled.
But the structure of social security doesn't really work out
in the taxpayer's favor because people now live a hell
a lot longer than they used to. You retire at
say sixty two or sixty five, you're around until like

(10:47):
eighty five. Now, when its Social Security started, most people
didn't live past like late sixties, so you were only
on it for a few years. They're also fifteen I
think workers to every one person receiving it. That number
has dropped precipitously, So the money that's going into the
program is a lot less than it used to. It
sounds like it needs some sort of reform. Brian James.
Where are we on social Security?

Speaker 2 (11:09):
So where we are on Social Security? There is a
hole in the bucket. Brian Thomas.

Speaker 1 (11:13):
The math doesn't quite math very well. And this has
everything to do with what you had mentioned. Of course,
with people living longer and so forth. It used to
be you'd live maybe three five years and get soci
Security payments. Now there's thirty years worth of that. Along
the way, we have added enhanced benefits for spouses, which
I don't think is a bad thing, because you can't
ice your spouse out or your ex spouse or whatever.

(11:36):
We have to have some kind of safety net for
those folks who maybe didn't have their own earnings record
because they were home raising kids and then a divorce happened,
all that kind of stuff. Those kinds of things, as
well as the eight percent increase in delayed retirement credits,
which simply means if you don't file for it, you
get an eight percent increase. Before nineteen seventy seven, that
was one percent per year, and then in nineteen seventy

(11:59):
seven through nineteen eighty three they basically locked in an
eight percent increase for anyone who was born in nineteen
forty three or later, which is essentially everybody who's thinking
about this right now. So basically, by two thousand and eight,
everybody reaching seventy aged seventy had access to that full
eight percent annual delayed retirement increase. Remember this is if
I'm sixty two and I choose not to file for it,

(12:19):
my payment's going to go up by a full eight percent.
That has nothing to do with inflation, nothing to do
with interest rates. It's just a codified, concrete, eight percent
mathematical increase. So those are the reasons that the math
don't math. But let's talk about where we are right now.
So we've had a we get every so often we
get a new Trustees reports, and earlier this year of
the twenty twenty five report showed that the full benefits

(12:41):
are projected to be payable only for about nine more
years without adjustments. Trust funds expected to be depleted by
twenty thirty four. Now I want to unpack that because
somebody just heard me say that Social Security is going
away in twenty thirty four.

Speaker 2 (12:54):
It is not.

Speaker 3 (12:55):
No, they didn't hear that. They weren't listening to the
words you use, Brian James, Exactly.

Speaker 1 (12:59):
Words are important, aren't they, Brian Thomas. So what this means, though,
is the trust fund reserves. What that means is that
we're simply bringing in more than more than we're paying
out currently, and that situation is going to last for
nine more years. I will be sitting in this chair
in twenty thirty four and my paycheck at that time
will have a FIKA entry on it, which is how
taxes are extracted from my paycheck and sent directly to beneficiaries.

(13:22):
The point of all that is that fight A taxes
right now are more than what is actually being paid
out to beneficiaries. But that amount that surplus goes down
every year. It's got nine years left, So is it
going to zero?

Speaker 2 (13:33):
No? But if they change.

Speaker 1 (13:34):
Nothing, then the current estimate is that Social Security is
incoming revenue from those FIGHTA taxes or otherwise known as
payroll taxes. That's going to cover only about eighty one
percent of scheduled benefits.

Speaker 2 (13:44):
Meaning if you go to SSA dot gov and set
up your.

Speaker 1 (13:48):
My Social Security profile, then you should knock off, say
twenty percent of whatever that report tells you, if you
want to adjust your plan.

Speaker 2 (13:56):
I would do it both ways.

Speaker 1 (13:57):
Run your plan with the original numbers and then run
it again with a twenty percent reduction in your Social
Security just so you can see what the impact might be.

Speaker 3 (14:04):
Well, and a financial planner will do those number crunches
for you, right, I mean you can put any scenario
into your like thousand point you know what the future
might look like program correct? Oh?

Speaker 2 (14:13):
Absolutely mean, this is just one topic. You know.

Speaker 1 (14:15):
We might even rephrase this and just say, hey, look
look what if you spend twenty percent more than you
think you're spending. This is just the math part, the
things that the little stories and anecdotes that trigger the
math is what gets our attention. But the math is
still just math.

Speaker 3 (14:28):
Well, and we've all been warned about this, that that
sheet you get annually from Social Security telling you what
your expected payment will be given when you retire, whether
it's sixty two, sixty five, or you hold off till later.
It always it says right there on the front, this
is not a guarantee you're going to get the money.
I mean, you know, hey, here's a flag. You might

(14:48):
not want to count on this because our elected officials
don't do anything to try to salvage the program.

Speaker 1 (14:52):
That's right, So let's let's talk about that a little bit.
So it's it's not that we don't try to fix it.
It's that it's that we've just are not in a
political mood and I don't see it coming anytime soon
where we are willing to make the sacrifices that are necessary.

Speaker 2 (15:05):
So we did this a.

Speaker 1 (15:08):
Study of just a few weeks ago, and there have
been one hundred and forty three different attempts that have
hit the floor of Congress to hopefully fix this problem.
But every last one of them is some flavor of
either reducing benefits on current retirees or increasing taxes on workers.
There's a million ways you can do that, but that's
all we're all we're doing here. You have to trust
adjust the inflows or the outflows.

Speaker 2 (15:30):
Period.

Speaker 3 (15:30):
End of story.

Speaker 1 (15:31):
We are not at a place where we're willing to
allow either side to win. It's very easy to shoot
this stuff out of the sky. Democrats come with, let's
raise taxes on workers. Republicans say, you can't do that.
These people work too hard. Republicans come with let's lower
the benefits. And Democrats say, you can't do that. These
people work for these dollars. And it gets shot down instantaneously.
That's the cycle that we're in and I'm going to

(15:51):
predict we're going to be in it for most of
the next decade, until our backs are against the wall. Brian,
and we have no choice except to elect somebody who
will actually speak to us like adult.

Speaker 2 (16:00):
We're not ready to do that.

Speaker 3 (16:01):
We're not ready to do that. Eight twenty four Right now,
take a minute, early break, because we're going to get
two credit unions versus bank by request. Topic will continue
with Brian James after these brief words. Fifty five krc
the simply my five KRCD talk station eight twenty eight
to fifty five KRCD talk station buy request topics. You

(16:23):
can do those and a lot of folks wanted to
know what the difference is between a credit Union and
a bank, and Brian James from all Worth Financial is
going to dive on into the details on that I've
always enjoyed banking with Emery now share facts over the years, Brian,
most notably the wonderful experience of being able to refinance
my house by just signing a single sheet of paper,
not going through the whole process of refinancing, not having

(16:43):
to pay a dime. The rates dropped. They had a
paper that said, okay, you went from what four down
to three? My signature boom, my rate was down to three.
They keep the paper in house at least at Emery
and share Fax and I like that. That's one thing
that I know from personal experience.

Speaker 2 (16:59):
Yeah, simplify processes, those kinds of things.

Speaker 1 (17:01):
There's pros and cons to each one of them, of course,
But I do want to shout out a quick thanks
to our our mysterious listener group of females who are
interested in financial topics and apparently have been listening to
us for a long time. And Lady Pacific question, thank
you again for listening and let's dive into this. So, okay,
banks versus credit unions. At the end of the day,

(17:22):
if you need loans, checking accounts, savings, depositor. You're not
going to notice much difference. Functionally, they are pretty much
the same. So the difference is between them. So a
bank is a for profit entity. They're owned by the
shareholders and the goal, like any other business, as a
generator return for those owners. Having spent two fifteen years
in the banking industry, I can assure you that the
customers come third, shareholders first, regulator second, and then we'll

(17:46):
get around to worrying for the customers.

Speaker 2 (17:47):
This isn't I'm not painting the banks and a bad
bed light. It's just reality.

Speaker 1 (17:52):
If you've got shareholders out there, they come first because
we are the United States of profit profit margin. Credit unions,
on the other hand, are nonprofit financial co operatives. They
are owned by their members. The members do want their profits,
but they come in the form of the dividends. That's
why if you if for those of you who have
a credit union account and a bank account, the way
that they label those interest payments is a little bit different. Yeah,

(18:13):
the banks will call it a you know, an interest payment.
Credit unions will call it like a share or something
like that. Eat are the owner of it as an
account holder. So that's why the difference. Now, if any
one of them was mathematically, you know, identifiably calculably more
beneficial than the other in terms of really low interest
rates and really high depository rates, then the other would
not exist.

Speaker 2 (18:33):
It doesn't work that way, So.

Speaker 1 (18:34):
Don't look for massive opportunities one direction or the other. So,
but let's talk about what is the difference here. So
first and foremost, safety first. If you've got a pile
of money somewhere, you want to know it's going to
be there. If you're holding money in a bank, that's
of course ensured by the FDI C. But at a
credit union there is a similar organization that most people
aren't familiar with. It's called the NCUA, the National Credit

(18:57):
Union Association, and it pretty much serves the same per
is the FDI. See, even those coverage limits are pretty
much the same. It's two hundred and fifty thousand dollars
per institution, per account category. Right, there's lots of games
you can play with that on both sides. You can
have an individual account, you can have a joint account
with your spouse. You can have accounts that are have
your kids listened as beneficiaries. Each of those has its

(19:18):
own two hundred and fifty thousand dollars coverage. But the
point is your money is largely no more safe in
one versus the other. It's just different organizations that are
backing that up.

Speaker 3 (19:29):
Well. And I know the credit union you're considered an
owner a shareholder. Going back to your point about shares,
that that's your slice of the part. That's how like
for example, in my refinancing situation, yes, the credit union
collective is making less money and interest payment on the loan,
but everybody benefits from the lower interest rate, which is

(19:50):
why you're making less of a profit. So you're getting
three percent when you used to get four or five.
The mortgage would have required you to continue to pay
that higher interest rate, which of course in yours the
bank's benefit, which is why I guess they charge you
to go through the refinancing process. But it's just a
nice little perk being a quote unquote shareholder or owner.

Speaker 2 (20:09):
Yeah.

Speaker 1 (20:09):
Absolutely, And if if you're truly about the if you
want to know where the money is flowing, you got me,
Mike died there.

Speaker 3 (20:17):
Yes, you said flowing. I got all that. Where the
money is flowing?

Speaker 1 (20:20):
Go ahead, where the money's going and you can literally
participate if you if you want, you can run to
be a trustee of the of the credit union and
you could really get into the into the dirt of
how this stuff works.

Speaker 2 (20:30):
You can't really do that with with your big publicly traded.

Speaker 3 (20:32):
Banks unless you buy shares.

Speaker 2 (20:34):
Yes, but you've got to buy an awful lot of shares.
You're going to get invited to that table.

Speaker 1 (20:39):
So so and this isn't you know, I feel like
we're leaning toward the credit union side pretty strongly there
and that those are the good reasons. A little more
transparency and you can be you can be a little
lot more comfortable that the decisions that are being made
are really for your benefit because they're being made by
other members just like you, versus a board of directors
who is really only focused on the on the shareholders. Now,
so what's the downs side of a credit US, Well,

(21:01):
in a lot of cases, you're going to be giving
up some on say technology. They're not going to have
the flashiest internet interfaces and mobile apps out there, and
that's I do enjoy that use. I'll use my mobile
banking apps all the time because I don't want to
see the inside of a bank branch. Ever, again, bigger banks,
of course will have wider branch and ATM networks where
credit unions often will will participate in some kind of

(21:23):
shared arrangement with some other network that you might not
be familiar with. Don't let that rule it out. Do
the research if you if it's a little tiny credit
union that you're not all that familiar with, understand what
that ATM network looks like, and you can figure out.
You know, a lot of them will have places in
random store chains like UDF or.

Speaker 2 (21:41):
Or that's P and C.

Speaker 1 (21:42):
But but some of the gas station chains will have
some financial organization you've never heard of, and your local tiny,
little credit union may be a member of that, So
you don't necessarily have to rely on all They've only got.

Speaker 2 (21:53):
Three branches, so therefore I only have three ATMs. That's
not how that works.

Speaker 1 (21:56):
But on the other hand, you're not gonna have as
much flexibility on promotional bonuses, right because banks are publicly
traded entities. They want to be able to show they're
bringing on new customers all the time. You'll get better
bonuses for opening new accounts. We talked about the more
sophisticated online stuff you're never going to see, for example,
a fantastic credit card reward program coming out of a

(22:19):
credit union. You won't get that that's going to come
out of your publicly traded banks who have a lot
more resources to do things like that to drive business,
and they have different incentives to go drive new business
and bring in new customers than a credit union does.
So the different things that there are differences in the
things that they will do to attract you in.

Speaker 3 (22:34):
The first place. Great, So you've given out a list
of items, do your work, do your homework, do the math,
and figure out what is in your best interest because
it could be a big bank, but it also could
be a federal credit union, depending upon you know where
your desires lie and you know the interest rates that
you're paying in that kind of thing. Appreciate the breakdown
Brian James is very helpful exercise, and of course I
appreciate the conversation we have every week, and salute to

(22:56):
the ladies group that listens every Monday and Monday intent
lead to Brian James. You do great work. Brian will
have you on next money. Have a great week, my friend.

Speaker 2 (23:04):
I appreciate it. Thanks for the time and thank you ladies.

Speaker 3 (23:06):
Don't go away, Eric Trump of the book Under Siege,
you'll be on next. This is fifty five KRC and iHeartRadio.