credit – Memphis Flyer

As December approaches, the consumerist holiday advertising has begun in earnest. I was shocked recently to see an advertisement from a local credit union on the bus stop at Union and Cooper. A couple was pictured on the beach with the tagline, “Loans — Live the Life You Want.” It’s not even subtle anymore!

Here are some ideas to make the inevitable holiday materialism more meaningful and less of a financial burden:

Gifts That Keep On Giving
Take a moment to inventory your personal belongings. What things have you owned the longest, and why? What are some things you use every day? What are some things you would replace if they wore out or lost? What do you still own from your teenage years or even your childhood?

The vast majority of things we own are used rarely and eventually discarded. The overlap in the Venn diagram between gifts that are desired and gifts that are enduring might be small (especially for kids), but it’s worth thinking earnestly about what gifts might meet both criteria.

Shopping Cart Tricks
The idea of “retail therapy” is based on real, basic human emotions — buying things you want can feel good. The desire to strive and acquire and stockpile may be natural, but fulfillment from it is fleeting. If you can extend the cycle by delaying gratification and waiting to buy things as long as possible, you’ll experience the same amount of yearning over time but spend a lot less money.

One technique to restrain reflexive purchasing is to institute a personal holding period requirement for purchases; let the item sit in the online shopping cart or on your shopping list for a certain period before buying it. You may be surprised at how many things drop off the list without ever being purchased.

To adapt this method for the holidays, try holding off on purchases for yourself and ask for them as presents. This will keep you looking forward to the next big thing and give your friends and family an idea for a gift you actually care about.

Avoid Credit Cards
Credit card issuers have achieved one of the greatest marketing accomplishments of all time with this concept: “I use credit cards for everything — for the points — but I pay it off every month, so I win.”

First of all, given the profitability of the credit card industry, many people are not actually paying it off every month. But even if you do, credit cards still fuel overspending.

A famous study from 2001 examined the price consumers were willing to pay for desirable sports tickets. One group was told the winner would return after the auction was completed and pay with a credit card, and the other group had to come back with cash.

The credit card group bid approximately double for the tickets, despite many of them almost certainly being “pay it off every month” people. Even if you love your rewards, consider switching to debit cards and cash for a month or two for a reset — you might be surprised how your spending changes. The simple step of having to consider a cash balance in a checking account rather than a sky-high credit card limit that will never be reached can be just enough to interrupt the buying reflex.

The advertising industry is extremely good at tying together the concepts of happiness and spending, especially this time of year. These tips can be one small step toward breaking that link, to free up more time, money, and space to focus on things that really matter this holiday season.

Gene Gard is Chief Investment Officer at Telarray, a Memphis-based wealth management firm that helps families navigate investment, tax, estate, and retirement decisions. Ask him your question at
ggard@telarrayadvisors.com or sign up for the next free online seminar on the Events tab at telarrayadvisors.com.

MLGW just wants to give us a little credit. ¶ Actually, it wants to give natural-gas customers an average $50 in credit, to be exact. After charging consumers for a pre-pay natural-gas buy, MLGW is planning to issue a $25 million refund next month. In order to receive a discount on a winter gas supply, MLGW planned to buy natural gas from the Tennessee Energy Acquisition Corporation during the summer months. But a recent audit suggested the utility should have gotten a short-term loan instead of slowly amassing the funds through ratepayer contributions.

And for a company already struggling with an image problem, even giving back can become a controversy.

At a City Council committee meeting last week, some council members wanted the utility company to mail its natural-gas customers a refund check to restore public confidence.

“We are consistently telling people their meter is right, yet you have been charging them for gas they’re not using,” said Councilwoman Barbara Swearengen Ware. “It may cost you some money to restore their confidence. My constituents don’t trust a credit on their bill.”

But MLGW auditor Lesa Walton said mailing refund checks to the utility’s roughly 360,000 natural-gas customers would cost $284,000.

There are other problems with issuing checks. About 2 percent of the utility’s bills are returned each month. And let’s face it, if you tell everyone in the city that the utility is going to be sending out $50 checks, you might as well make it open season on mailboxes.

“Common sense dictates that you don’t want to spend $284,000 to write a check when you can issue a credit,” said council member Jack Sammons. “We would have $25 million scattered in mailboxes all over town. I think we’ve lost all common sense … if we tell them to issue checks.”

Given the risk of theft and the cost, I think issuing $25 million in checks is a spectacularly bad idea, but I understand Ware’s point of view.

Right now, it’s the middle of May. Soon, air conditioners will be running full blast. The credit is only for natural-gas customers, but those customers may see their $50 credit quickly eaten up in high electricity bills. Will those people really feel like they got their money back?

I’m not sure there’s any way for the utility we love to hate to restore the public’s trust. But putting cold, hard cash back into ratepayers’ hot little hands would certainly help.

Without the audit, the average MLGW customer would never have known about any pre-payment plan. (In fact, council members kept trying to find out who exactly made the decision to pass that cost onto customers but were repeatedly thwarted by attorneys for both MLGW and the council.) Even if a ratepayer somehow heard about a pre-payment charge — applied over several months and slipped in as part of the purchased gas adjustment (PGA) — they would have been hard-pressed to find it itemized on their bill.

The council approves the base MLGW natural-gas rate. Because the natural-gas market is no longer regulated, the PGA is added to account for the fluctuating cost of natural gas as well as the cost of storage, transportation, and delivery. The utility calls the PGA a cost-recovery mechanism, but I call it passing costs onto the consumer. Which is fine, until you find out you don’t know what you’re paying for.

A savvy consumer could have gone to MGLW’s Web site and seen that the base price of gas is roughly 72 cents per ccf (hundreds of cubic feet) plus the PGA. From September 2006 to April 2007, however, the PGA ranged from a high of almost 57 cents per ccf (in November) to a low of 13 cents (in April).

The pre-payment amounted to about 5 percent of the PGA, but if that’s somewhere on the Web site, I couldn’t find it. And if you want to know how much of the PGA is commodity costs or transportation costs, good luck.

Each customer’s credit will depend on their household’s usage of natural gas for the past eight months, so the amount of each credit will vary. But, unless the credit comes with an easy-to-understand chart and a billing history, customers have no way of really knowing if the amount they get is the amount they paid.

I guess we have to trust them. Utility staff say they’re working on transparency, and I’ll give them credit for that. Of course, they’ll have to take my word for it.