Showing posts with label Finance. Show all posts
Showing posts with label Finance. Show all posts

Friday, April 15, 2016

The Wall Street Area: A Change of Scene in (almost) One Decade

Finally, it seems like the cold and chilly days are over for now.  On a sunny and warm Friday, I decided to take a walk during lunch. 

I have been working in this area for quite some time now - long enough that I almost lost track of how many years I have been here. I still remember on my first day of work in NYC after spending a few years in CT, it was also a bright and sunny day, except that it was in the summertime.  I was full of enthusiasm and energy, and was ready to build my career in the world renowned financial center. 

On that day, I got off onto the old and narrow platform on Wall Street station during the morning rush hour traffic, marching out of the station along with a crowd of professionals, until I couldn’t keep up with them anymore because I had to stop to pull out my phone and check the address and the map of the new office building.  In this concrete jungle full of skyscrapers, there was no way to determine directions by looking at the shadows. I got to the office, had a warm welcome and an informative orientation, and met everyone on my team in the morning. During lunch on that day, I took the same walk outside, got lost in a quiet alley, and had to pull out the map app on the phone again in order to find my way back to the office. I told my cheerful and welcoming coworkers about my incident, and they were kind enough to print a nice little map of the downtown area for me. Soon a few coworkers and I formed a lunch group to try different lunch spots together, sometimes even spending over an hour taking walks, going to Chinatown for authentic noodle soups/rice bowls, or even checking out nearby events and bargain deals.  Back in the office, during days when we were not too busy, in some afternoons we would take breaks to get the humongous 4" Crumbs cupcake for snacks, join the neighboring department for monthly birthday celebrations, or attend happy hour at a nearby Irish pub.

The local businesses were quite unique in the Wall Street area, it was entirely catered to the nearby companies, and professionals working in the area during the day, or residing in one of the high rise condos during weekdays. At that time there were shoe repair and tailor shops for the busy folks who needed some quick fixes on their outfits; there were floral shops delivering beautiful bouquets to building lobbies and floors, or to company sponsored events; there were some full service authentic restaurants for business guests to grab a decent lunch; there was a famous burger shop that sold special burgers with Kobe beef patty, sliced black truffle, foie gras sauce, and topped with gold leaves, for an outrageous $275 price tag.

Those.Days.Were.Long.Gone.

After a financial crisis that crippled the industry and almost the entire world economy, a superstorm Sandy to add insult to injury, and the steep growth in real estate prices, the scene on Wall Street has changed rapidly, drastically and permanently. Companies began to downsize and offshore jobs to less costly areas or countries in order to reduce expenses and exposures to the flood-prone area; some even packed up and relocated headquarters or back-office departments to suburbs, leaving many offices and retail spaces 
vacant, and causing some office buildings to remodeled as apartment rentals; most if not all companies heavily monitored and controlled discretionary expenses; and more professionals are working more hours than ever. This was a trend in the beginning, and after a few years people have gradually adapted to and accepted the new norm.

Fast forward to today, less people are eating out during lunch now, either because the area has lower headcount, or people are just too busy to eat out. People opt for more quick options – promoting growth in fast food Chipotle-like restaurants and cheap option food trucks; people are working longer hours, so restaurants that offer late night food delivery flourish, and apartment rentals are highly sought after; companies are promoting fitness by offering discounted price to local gym memberships (in order to save on health insurance premium), so Pure Barre, Soul Cycle, and CrossFit xxx are popping up next to office buildings, and salad only/vegan restaurants and juiceries are the hottest trends; floral bouquets and business lunch are considered discretionary expenses, so the 3 remaining floral shops and a few full service restaurants are now closed.

Since I don't go out often during lunch, and my new location is pretty far from everything, these changes don't have any real impact on me.  When I strolled to the quadrilateral area with 5 company-owned/leased buildings, where I used to walk from one building to another, it was a little sad that I didn't run into any familiar faces and businesses anymore.  I couldn't help but thought of the old days for a moment, where I walked by during my commute; hailed a cab to get to the airport to start my weekday travels; rushed in between buildings for meetings, and weathered snowstorms to deliver projects. Yup, those footprints were made with many laughters and frustrations. 

I picked the old go-to casual lunch spot to grab a quick bite. The restaurant has also relocated - from a few blocks away from the exchange, to a less expensive location near the neighborhood border.  As I sat down to eat, the stereo started playing a cheerful song that I listened to a lot during my first days working in this area  - it really gave me a nostalgia. I carried on with my thoughts, until I got disturbed with fire-drill requests and meeting buzzes on my phone. 


As I walked back to my office, I realized that the streets are just too familiar to me to get lost in and I can even find the way back with my eyes closed; I know all the stops and exits for all of the subway lines in the area; I still have passion and enthusiasm in my work and in this industry, although on a different level in comparison to the minty me.  I came to a stop at the traffic light, and saw a group of tourists looking bewildered by the scene across the street - it was a group of union workers on strike outside of their employer. I guess the only surprise to me was that things like this wasn't even enough to catch my attention anymore. 

The Wall Street area seems like a dreamy place on movies, but it might not a place to pursue a perfect dream. 


"If it's not the like movies, that's how it should be."

Friday, April 13, 2012

Should Student Loan debt be wiped out during bankruptcy?

Article below from Chicago Tribune:
Massive student loan debt weighs heavily on young couple

Danielle Jokela, who graduated in 2007 with a bachelor's degree in interior design from Harrington College of Design in Chicago, still hasn't found a job in her field. She and her husband fear losing their condo, she said, because she owes more than $98,000 on 16 government and private student loans.
The 32-year-old Rogers Park resident was among those testifying at a Senate hearing in support of legislation that would allow students who borrowed from private lenders for their education to wipe out that debt in bankruptcy proceedings, just as credit card borrowers and many other unsecured debtors may now do.
_____________________________
Basically the situation is that, this lady is in an unfortunate scenario where she took on a huge loan in order to attend school, and the school arranged government and private institution student loans for her.  The private educational loans have variable interest rate, and upon the time of borrowing, the school did not discuss interest rates, total loan amounts, and expected payment with her.  Now she is in a bad spot that the payment is high, along with her mortgage, car loan and credit card loan, and being underemployed, it is too hard to keep making payments. 
It sounds easy to simply change the rule out of sympathy, but it would be a seriously reckless decision in a logical standpoint.  Here's why:
1 - It encourages the irresponsible borrowing behavior - students will borrow without looking at the amount, calculating the true cost of borrowing and expected payments
2 - It's unethical for people who bear the burden. Who's paying for this? Debt holders, Shareholders, Insiders and many others when these students stop paying. It's a losing battle for the private lenders. 
3 - It's unfair - why should someone else pay hefty prices for others' lack of common sense?
4 - It promotes 'walking away from debt/liability', If you owe $100K and you have to pay $170K with interest, why not just declare bankruptcy and come back 7 years later clean?
5 - It lacks common sense - if someone is intelligent enough to pursue higher education, he/she should read the terms and conditions on the loan contract before signing it. 




Monday, March 26, 2012

The Truth About Student Loan Interest Deduction

It's Tax season! Considering deducting Student Loan Interest from your income? Please read this!
In recent years, about 80% of the college students graduated with a student loan (http://www.asa.org/policy/resources/stats/default.aspx), with the average loan amount at about $25K.  With the average amount owe by students trending upward and the average income for college graduates staying relatively flat, young individuals are carrying bigger baggage than ever.

When you consolidate your loans, the lenders give you all the benefits of deducting the interests you'll pay when you do your taxes, so that your "real interest" is much lower than 4.93% (assumptions) and you should pay interest as long as possible. Sounds about right?  Here are some facts that you might find interesting from a conversation I had with a friend who went through this, the truth is probably surprising to some people.

Let's call my friend John Doe.


John is similar to every regular college graduates, spent 4-yr in college, got some scholarships and took out some loans (about $35K).  After college, he was fortunate enough to land his feet on a decent job and company. He consolidated his student loan at 4.25% for 20 years, which made the payment only a little over $200 per month.  With a "fact" given by the loan associate that "you can deduct loan interest when you file your tax" and "after 3 years of on time payments we will award 1% deduction from the interest rates", and also with a "tip" from his friend - "20 yrs? With inflation $200 is NOTHING after few years! You should save those money and invest in the stock market", he thought it was great and took the deal.  With a stable job and decent pay, the monthly payment was rather affordable. John is also a responsible debtor - he had never missed a payment, in fact he set up automatic deduction from his checking account each month.  At the end of each year, he received a 1098-E form from the creditor for deductible interest.  It was not too bad for John - even though he was mostly paying interests in the first few years, he was getting some money back.



That might sound just about normal,  as John continues to work and made more money, $200 is more affordable than before. Until recently, when he was checking his tax returns prepared by the accountant, he noticed that the line for Student Loan Interest Deduction didn't look right - it was ZERO.  He then called his accountant to see if the guy forgot to fill it in.  "Nope," the accountant replied, "Your income is over $75K and you're not eligible to deduct your student loan interest. In fact when you were above $60K the interest deduction had started to phase out."

That was news. John was a little upset about this, but after some research he found what qualifies him to be eligible for Student Loan Interest Deduction (IRS Topic 456):
  • You paid interest on a qualified student loan in tax year 2011
  • You are legally obligated to pay interest on a qualified student loan
  • Your filing status is not married filing separately
  • Your modified adjusted gross income is less than a specified amount which is set annually, and
  • You and your spouse, if filing jointly, cannot be claimed as dependents on someone else's return

John qualifies for everything except bullet point #4, for the modified adjusted gross income  (MAGI), the limit for full deduction is $60,000, with $2,500 maximum deduction allowance.
For MAGI of $60,000 - $75,000, the deduction is phasing out or modified, the formula is as follows for single:
Reduced Student Loan Interest Deduction = Interest - Interest * (MAGI - 60,000)/15,000

and MAGI $120,000 - $150,000 for married couple filing jointly:
Reduced Student Loan Interest Deduction = Interest - Interest * (Combined MAGI - 120,000)/30,000

John looked at his remaining balance, he had probably paid 20% of the principal after all, and still has years of payments to make.  In contrast, the stock market hasn't gone up too much since his initial investment, and the bank account interest rate is significantly lower today vs the loan interest rate.  John decided to cut this loan short and has paid it off altogether.  He says that he is now debt free and worry free - not having a financial burden is a great feeling.  While I feel great for him, I also hope that you'll think twice before taking interest as an advantage, it's never an advantage but a way to prolong your life in debt and to give you endless worries.

There's a bible verse that has great intelligence about borrowing, whether you are religious or not:

The rich rules over the poor, and the borrower is the slave of the lender. ~ Proverbs 22:7



Disclaimer: I am not providing any tax advice here, please consult with your Accountant for the best advice concerning your financial situation.