$10 a Week - You've Got to be Kidding!

I like to focus my blog on business related issues but I couldn't resist the urge to write about the current government proposal on personal taxes. This will directly impact the economy and our businesses.

According to the Federal Reserve, the average American family owes more than $8,000 in credit card debt. In 2004 the average household owed only $2,200 in credit card debt, which was up from about $1,000 in 1992. The debt shot up almost 400% in 4 short years. The household debt burden is now so high that many have to decide between paying credit cards, the mortgage or buying food. All of the blood has been squeezed from the turnip.

The solution out of Washington would be laughable if this were not so serious. It is to give 95% of Americans a tax credit that amounts to less than $10 per week or approximately $400 per year. At that rate, the average family will be able to pay off their credit card debt in 20 years. Not only is this not a good solution, but it doesn't address the root of the problem.

At the same time that the average household debt increased by almost 400%, the current statistics from the Fed show that national consumer debt jumped dramatically during that same period of time, from 2004 to 2008. What happened during those four short years? Did the average American suddenly go crazy with their credit card? Or did something else happen that caused the debt of the average household to increase so rapidly?

In order to understand what happened, it is necessary to take a hard look at the credit card companies. This is exactly what the Government Accounting Office did in their September 2006 report titled "Credit Cards - Increased Complexity in Rates and Fees Heightens Need for More Effective Disclosures to Consumers". The report was prepared for Senator Carl Levin.

The GAO found that "credit cards now feature a variety of interest rates and other features, including penalties for making late payments that have increased to as high as $39 per occurrence and interest rates of over 30 percent for cardholders who pay late or exceed a credit limit". During the time period that the debt for the average household exploded, the GAO said that the portion of profits to the credit card companies as a result of paying penalties grew. And why not? A penalty is extra cash for the credit card company and does not reduce the balance owed by the card holder.

The biggest failure of the report is that it looked back at historic numbers and made statements like "a minority of cardholders appear to be affected". It failed to look into the future and see what would happen when those policies and practices began effecting many more cardholders. All of the signs were there but it failed to see that a tipping point was about to be encountered that would send shock waves throughout the entire financial community.

Isn't it ironic that Citigroup had the highest amount of credit card receivables in 2004 at almost $140 billion, with Chase and MBNA not far behind. The company that is guilty of usury by charging up to 30% interest and squeezing the life blood out of the average American is now controlled by our own government. Yet nothing has been done to rectify the abhorrent practices that have directly impacted the current economic crises.

There is an elephant in the room that nobody is talking about - and that is credit cards. If this problem is not addressed, this economic crisis will go on for many more years. Our government leaders are supposed to protect the people. They knew this was a problem in 2006 and clearly failed to take the right type of action. All they have done is talk about the fact that there needs to be more disclosure by the credit card companies to the cardholders. Are they serious? You have to be an attorney can decipher what it says!

Senator Levin has drafted a tough bill that will correct many of the malicious and greedy practices of the credit card companies, but it has yet to give birth through the legislative process. Even then, the lobbyists will have their say. Who knows when it will be voted on and when it will become law?

But why wait? Do we need a law to change the practices of companies that are largely owned by the American people?

Our representatives are still are failing to take action - even though they are now in the driver's seat. Why is that?

Peter Drucker on Time Management - Review

This is a review and "thought map" for Peter Drucker's chapter on time management from his book "The Essential Drucker - Chapter 16: Know Your Time".

Drucker makes a distinction between time management for the knowledge worker vs. the manual worker. The performance of a manual worker can be measured in terms of results and is often straight forward - how many parts were made during a hour? Time management for knowledge workers is much more difficult to manage and measure in terms of results. Therefore, the focus of Drucker's observations deal primarily with the knowledge worker.

His first observation is that effective business executives don't start with tasks or plans when it comes to managing their time. They start with discovering how their time is spent. At first, this seems counter intuitive, especially for a guy who promoted management by objectives - which is almost nothing but plans and tasks. But there is a method to his madness.

Time has several important characteristics. Unlike raw materials, it is the only resource that is totally limited and slips away if not put to good use. You can never buy more time. It is also the resource that is used by all and every type of work being performed. It is always a factor no matter what type of work is being done or what type of result is achieved.

Drucker makes the interesting observation that we human beings are not equipped to manage time. Research has shown that our memories are inadequate when it comes to remembering how we spent our time. Our minds are almost self-deceiving. If we are asked to write down how we spent the minutes during the past week, even those who think they do a good job of tracking their time, more often than not fail to accurately report on how their time has been spent. If you don't believe this then get out a sheet of paper and start writing.

The second reason he states as to why humans are lousy at managing time is because we do a terrible job of keeping track of the time. We find it easy to lose track and drift away with some distraction. Then we find ourselves running to catch up. The research to back this up involves people being put into a sterile room with no windows, clocks, furniture or other distractions and they are asked how long they have been in the room. Nearly all of the test subjects dramatically over estimate or under estimate the time. Our time awareness and internal clocks don't seem to work very well. If we are engaged in something interesting, time seems to fly by. If we are bored and would rather be doing something else, then time seems to stand still.

Drucker's recommendation is that the only way you will be able to manage time is to Record, Manage and Consolidate time.

Recording time is relatively easy but requires discipline. Don't record what you are doing every 5 minutes! That is not what he is talking about. Record your time whenever an whenever what you are currently doing changes. For example, if you check your email, record the time. If you meet with a customer, record the time. If you have a meeting, record the time (even if it is a casual meeting). Every time the event with which you are involved changes, record the time. At the end of the day and the end of the week you will not have to trust that deceptive mind of yours (which lies to you all of time) about what you did. You will be able to analyze how you spent your time to determine if you are on track, which is the most important benefit.

Managing your time is a little more challenging and involves a bit of analysis. First, you need to look at your recorded time and diagnose how it has been spent. Is there anything you should have eliminated or delegated? You can then make a conscious decision in the future about spending your time involved in those tasks. Keep in mind that the most valuable resource you have is time. This will help you focus.

The second part of diagnosing your time is comparing how you spent your time against your vision of what you want to accomplish. In other words - your goals. This will also determine whether or not you are focused - or if you are scattered all over the place. Obviously, if you are spending your time on tasks that are not related to your goals, then it's going to be pretty hard to achieve the results that you want. They key idea again is - focus.

Consolidating your time facilitates better management. The concept of consolidation deals with the issues of focus and effectiveness. For example, if you schedule your meetings, reviews and brainstorming sessions one or two days a week, let's say Monday and Friday, not only do you gain more focus but so does anyone working with you. They know what to expect and when to expect it. It clears your plate of potential distractions. If you deal with major issues every morning, you put boundaries around how your time will spent. You manage your time on purpose, rather than time managing you. Looking for ways to consolidate your time will increase your effectiveness.

Drucker said that the manager's central task is working with people. By consolidating the time to do that, you are allowing adequate time to work with other people to discuss the issues each of your face. By having adequate time everyone can talk about what they are going to do and why they are going to do it. The results of such conversations are plans, direction and establishment of performance criteria - critical to your goals and vision.

Drucker believed that when you are working with someone that a 15 minute meeting is in adequate. He believed that it takes at least an hour, in a leisurely environment, that allows for the free exchange of ideas. If time is not consolidated - you will never have that hour to spend with someone.

The bottom line is that Drucker believes that a well managed business is quiet - even boring. One of the steps that management can take to achieve the quiet business is by managing their time.

Thought Map: