I Want Money Now!!!!

The exercise routine in the mornings is a good source of gossip and information which, at times, can be translated into these posts. Although in age I am not much removed from many of the folks who come to the gym at that hour, I think that mentally there is a major gap… and this is good, I believe, at least for me.

This morning as I was pounding the treadmill, one of those screaming commercials came on the TV screen(background noise for me, mostly). I am sure many of you have seen this commercial or one like it; it expounds the incredible necessity and urgency to convert any type of structured, over time, payments into cash now.  In covering any possible connection to be made with the viewer, even the dog is seen cashing in his bone, so he can pay the "mortgage" on his doghouse.

What caught my attention was not he commercial, I had seen it many times already, but the two ladies who were treading along with me; they were actually paying attention to this message and seemed to be interested.

Retirement should be a happy time

-“What do you think, Ellen?” – “You know we want to take a trip to visit the kids in Nevada and this would give us the money”

-“Well”, said Ellen (I suppose it was Ellen answering) –“it looks like it may be a way to get money quickly” She thought for a moment and asked –“What would you cash in?”

-“There is this money we are getting from Fred’s disability claim” –“You know, the one we use to supplement our retirement income”

As they continued to talk about this, it was difficult for me not to listen in. Having worked on the internal fringes of the financial world for a few years, it is very clear to me when to take a short sale on a future income, and when not to. Huh?? 

Well, let’s look at another, better known instance of a structured settlement: when someone wins a state lottery, there is an amount shown in the winning entry column… –“You have won 20 Million dollars!!!!” Wow! But when it is time to collect, there is an added little detail which complements the previous phrase: “over the next 20 years”. Please understand… I will be extremely happy to be guaranteed one million a year over the next twenty years… Don’t get me wrong for a minute… The option to this structured windfall is to receive the present value of your money which, usually, translates to somewhere around 55-65% of the eventual income earnings.  So, instead of 20 Million, you get around 12-13 million… Not bad, not bad… After all, you had none of this before.

Structured income has a place

However, most of the folks to whom these structured income ads are directed, usually depend on this income as a significant part of their overall intake, and the amounts are usually of a far, far lesser value than the lotto winnings. Be it because of disability, retirement or a combination of both. After all, these are the primary types of structured settlements. So, what does it mean for someone to go ahead and “cash in his/her money NOW!!?”

First of all, the lump sum money that will be received will be substantially less (although received now, as the ad conveys) than what would be received over a period of years. If there is sufficient additional guaranteed income that will continue to come in from other sources, it may not have a major negative impact; the casher-in will have an increased usable immediate fund and will be able to take care of whatever emergency or desire exists… a trip to Hawaii, for example. This would be Ok, as long as he/she understands that monthly income, from this point on, will be reduced by the amount that was cashed in.

Always ask before deciding

But, what happens when the gullible and short-of-immediate-cash TV watcher (that is, most of us) relies on this monthly income to subsist? He/she calls in to the number on the screen and a very understanding and convincing agent will go through the steps to make sure that the individual makes the decision to go ahead and purchase the settlement. Does anyone talk to that person about future reduced income? About the fact that the lump sum will be far less than what would be received over the years? That, without additional guaranteed income coming in his/her future monthly earnings may not be enough to handle continuing needs?  Most likely, the answer is a resounding NO. What is discussed, in a prepared presentation, is the fact that “you will have the money you deserve to have now”, “you will be able to take the trip or vacation now”, “you will be able to exchange your car now”… You get the drift.

As a society, we have become a desperately wanting society. Marketing and commercials are designed to make us want everything NOW, without giving any importance to the possibility that we may not have the means to get it NOW; the concept of having a little patience and working through to getting what you want/need when you can get it, has disappeared with the waning of the older generation(s). We, as individuals, are in debt up to our eyeballs (but then, we only follow the lead of our government on that one!) and only look for means to extend our debt capacity so we can have that little new whatever that must be bought. You know, the one our neighbors just got…

As the two ladies next to me this morning were getting on with their conversation, and actually coming closer to have the first lady (later learned she is called Anna) actually make a call to the number on the TV screen, they noticed I was next to them and asked me what I thought about this idea, “isn’t it great to be able to get your money now?”

As you can imagine, after reading the rest of the stuff above, my answer was “Not necessarily”, to which Anna responded –“Why… I mean, just as they say, I should have access to my money” I said “you are right but, answer a couple of questions for me”

–“What will happen after you spend the found money and your monthly expenses keep coming in?”

-“Will you have the continuing income to pay them and have some extra funds left over, so as to be able to do the little things which make your days easier?”

She took a long look at me and, simply said 

Maybe they can't think, but definitely show more sense

-“Thank you, one sometimes gets foolish in her older age”.

As Carrie Fisher (better known as Princess Leah, of "Star Wars" fame) once said: “Instant gratification is not fast enough for me”… Unfortunately, this line of thinking is what we have been driven to and the end result, as a society, has implications which are not the best. 

Don’t just react, think it through; check the facts and don’t just rush ahead because a convincing someone said so… 

After all, it’s your life, not theirs…

Love that exercise time!!

Be Well… Be Back!!