Financial Tough Love

I was talking to a friend and they were telling me that finances are looking a bit tight. What to do? Max out the credit cards, borrow from the IRA? These are not good choices. Good financial choices in difficult times are those which slash expenses. How to do that?

Here are a few choices:

1. Slashing expenses means reducing monthly expenditures. If your position is "I can't live without THAT" then it's probable that you aren't willing to make some of the choices required by these demanding times. However, getting started is the most important thing. Financial freedom requires some discipline, but has its rewards.
2. At BLMH, we have a TV antenna system in our buildings. So choice number 1: Cut the cable or satellite TV. If you really can afford some sort of cable or satellite TV, check on bundling phone and TV. However, you may find this doesn't save all that much. If it doesn't, then "cut the cable!" 
3. Need that fancy smartphone? How many people really have need of news, weather, and the ability to tweet 24/7 from their phone? Besides, many of those expensive smartphones are really luxury goods. If you are in a financial place where you need to cut expenses, a "smartphone" is a good place to start. Step down to a basic cellphone. 
4. If you have a land phone line, eliminate the cellphone, or vice-versa. Choose either land or cellphone, but not both. 
5. Need internet? Combine AT+T with DSL, or cable with internet. But ditch those expensive channels!
6. If you are considering a combination plan, remember that the goal is to reduce your monthly expenses. So what good is a plan by Comcast, AT+T or whomever, that increases your monthly bills? The quick answer: not good at all!
7. Stop dining at restaurants and eliminate expensive entertainment. 
8. Postpone that vacation until a time that you can afford one. In the mean time, put a few dollars each month in a "cookie jar" for next year's vacation. Any vacation you take that is paid on credit is one you possibly cannot afford. 
9. Reduce your discretionary expenses, such as double lattes, entertainment, meals out, etc. 
10. Switch from specialty grocery stores to basic.
11. Cook more meals at home.
12. If you have a set-back thermometer for your HVAC, then use it. Otherwise, do it manually and when leaving turn the thermostat up to 78F in summer and down to 65F in winter. Dress lighter in summer so you can use less air conditioning, and wear a sweater in winter. 
13. Clean your refrigerator, replace your furnace filters, clean your clothes dryer filter and if you haven't had your dryer vent cleaned in a year or more, call management and schedule that! Also, have your dryer vent checked to be certain it is unobstructed.  
14. Combine automobile errands to save gas. Drive less and take more walks! The Wheaton Park District has a free indoor walking track which is air conditioned!
15. Look at your credit card and bank fees. Compare and if possible, move to a lower cost credit card. For banks, see if you can eliminate those monthly fees. 
16. Look at your insurance. Can you combine home and auto? Some companies offer discounts if you do.
17. Pay all bills promptly. Late fees and credit card interest is money wasted. 
18. Create a monthly spending plan!
19. Get serious about your financial future, and begin living within your means!

Comments, Corrections, Omissions, References

Note 1.  Good finances begins with making a budget and then sticking to it. Begin by collecting your bills for a month and separating the essential from the discretionary. Essentials include electricity, natural gas, groceries, insurance, homeowner's fees, etc.  Then collect credit card bills and add up your balances. If you can't afford to pay off your credit card debt each month, then you should not be using a credit card. The bottom line on credit cards: If you buy on credit each month and don't pay off the balance each month, then you are taking out a loan each month and admitting you are living beyond your means. You cannot expect that things will "turn out OK" for anyone in that situation with the exception of the bank!

10 Questions to Ask Your Realtor

1. Why should you be my realtor?
2. What is it that you do better than other realtors?
3. How are you going to sell my unit for the highest possible price?
4. How are you going to get buyers to come to my unit?
5. Can you provide me with testimonials and references?
6. How many condo units have you sold (major involvement - 66% of fees to your office) in the last 12 months? How many were in Wheaton?
7. How many condo units have you sold (minor involvement- less than 33% of fees to your office) in the last 12 months? How many were in Wheaton?
8. What are the most common things that go wrong to kill a sale?
9. What do you like about BLMH and why would you consider buying here?
10. Why are you a realtor?

Coexisting with Coyotes

From the City of Wheaton
Here's the original link, and the press release is below: Click for Wheaton Press Release

PRESS RELEASE

Tuesday, June 07, 2011

Experts Share What You Need to Know about Coyotes

WHEATON, Ill. – Coyotes are not leaving the suburbs anytime soon. After all, some of the same things that make Wheaton a great place for humans to live – such as lots of open space and other natural resources – also make Wheaton an ideal place for coyotes to call home.

But with a little knowledge of coyote behavior and what you should and shouldn’t do, wildlife experts say Wheaton residents can live alongside coyotes very successfully. A new video produced by the City’s Communications Department called “Coexisting with Coyotes”talks with two coyote experts to give you the information you need for peaceful coexistence.

In this video, Lynsey White, Urban Wildlife Specialist with the Humane Society of the United States, and Ashley DeLaup, Wildlife Ecologist with Denver Parks and Recreation, share their vast knowledge of coyote behavior and management to answer questions such as: Should I be afraid of coyotes? How can I keep my pets safe? Why are there coyotes in my neighborhood? Is there anything I can do to to make them leave?

In teaching you some important facts about coyote behaviors and pet safety, White and DeLaup draw from their experiences studying and managing coyotes. White worked on the Cook County Coyote Project, the largest study ever done on urban coyotes. As a wildlife ecologist, DeLaup has helped dramatically reduce the conflicts residents of Denver were having with coyotes in recent years.

This video is available for viewing any time on the City’s website and is also being shown on City of Wheaton Channel 10 (CWC10).

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Conflict of Interest

On June 24, I received a written query, which was inspired by my posts about predators. I've edited it for inclusion here: "....ask the board of [a few] years ago about how...a member of the board's company [was involved in the sale of something to the association]. Always saying that his [product] was cheaper. Not a predator, but must say, "conflict of interest"."

"Conflict of interest" is an interesting term. But what does it mean? In the query above, it is assumed that board members cannot have any business dealings with an association. I'm not a lawyer, but I have this view. I had the opportunity to think about this quite a bit and to reflect on it, because of various other business dealings I've had over the years and also because of some extensive work I did in the past, as a volunteer. I've also had "one on one" meetings with attorneys, at my expense, to explore this issue. (Note 4).

The questions that should be asked include "what is a conflict of interest" for a board member in an HOA? What do the governing documents say, and how should the board responsibly deal with bona fide conflicts?"

To me the heart of the matter is the role of the board member as a fiduciary, and the governing documents. The governing documents including the Illinois condominium act, states what types of financial or business arrangements are prohibited. For example, board members cannot be paid for their service to the association. There are other types of activities or circumstances that could compromise the ability of a board member to act solely in the best interests of the entire association. Obviously, as owners, the board member first and foremost has to contend with that personal interest. I have been told that the best method is to always remember that a board member is to wear two hats. When fulfilling his or her duties on the board or acting in the role of a board member, he or she must "put on my fiduciary hat" and put his or her personal interests aside. Another bit of really good advice from a very experienced board member was to remain "aloof." The advice was specifically to maintain a distance from groups of owners for the purpose of maintaining impartiality and objectivity, thereby avoiding circumstances which could lead to a "conflict of interest." In other words, being a board member is a difficult job and it is necessary to maintain a focus on the association and avoid entanglements with specific owners or groups of owners.

The role as fiduciary carries certain responsibilities. A "conflict of interest" would be a situation which prevents or interferes with a board member fulfilling those fiduciary duties. "Fiduciary duties" I take as the ability of a board member to act impartially in matters affecting the association. That could include financial and budgetary issues, upholding the rules, fines, fees, owner disputes, hiring and firing, etc. (Note 6).

I think there are some checks and balances in place in our HOA to minimize these problems. It's that "synergy" between the board and management, and between the members of the board, that creates the checks and balances and strengthens the organization. First, we have a professional management firm specializing in large HOAs. A manager attends all association meetings and provides guidance to the board, and provides instruction and coaching to board members. Second, we have had a reasonably diverse board. Finally, a board member who is in a situation that might compromise their ability to act as a fiduciary, must be willing to communicate with the entire board and management on these issues, should they occur. They must also be willing to act in accordance with fiduciary instructions. "Willingness" is possibly the most important piece. Willingness to ask questions, willingness to observe, willingness put personal agendas aside, willingness to be uncomfortable, and willingness to state when there appears to be circumstances indicative of a conflict of interest or the potential for one.

Communications and training are critical components. Everyone assumes that board members will communicate "conflicts of interest" or possible circumstances should they occur. But do they? It's assumed each board member understands the role of fiduciary. That's another critical piece. But what if they don't? Or what if there are differing perspectives about this on an HOA board, or differing ideas about what's permissible for a fiduciary and what is not? What if a board is unwilling to discuss this as a single group? Of if any such discussions are perceived to be personal attacks?

Here's some interesting questions to ponder about HOA boards, that might be relevant to the question. What happens if a board is split on fundamental philosophical grounds? If the differences are extreme, how does or can the board function? One way is for the board to state it's differences and then use management as a mediator and get to some sort of consensus. Another way is to avoid the issues in which case the board can remain split and simply operate as two boards. However, if this were to occur in an HOA, do we then have members or subgroups of a board performing independent actions and activities? Is that appropriate for a board? In matters that require the approval of the entire board, the experts tell me that the board should work together as a whole. So my opinion is that in certain matters, the board must act as a group. Of course, I suppose the arguments and differences could be so severe that agreement could not even be reached on what, in fact, requires a consensus! However, the question remains, how to achieve a consensus when or if a severe rift occurs? Finally, a question I ponder is, can this lead to various conflicts and if subgroups of owners are prohibited in an association, then what about subgroups of boards? My final question is, what can management do about this if it is unaware of the situation? After all, if a board keeps management out of the communications loop, then management can't provide the necessary professional assistance. (Note 5.)

The way to resolve these situations is via communications. It may be necessary to make very specific requests, and to involve experts. The board of an HOA is comprised of volunteers and technically all are non-professionals and certainly are not paid professionals.

Is it possible to avoid these situations? It begins with the campaigning and election process in an HOA. That's worthy of another discussion but is beyond the scope of this particular post. A question I ask is: Would it be beneficial if candidates or potential board members had a comprehensive understanding of the duties and responsibilities of the board? There's an old saying "an ounce of prevention is worth a pound of cure." Once someone is on the board at this HOA, it's expected that they will fulfill their fiduciary duties commencing on day 1! Our association board's first major task is an intensive budgetary workshop. It's "hit the ground running!"

I've concluded that it is assumed that candidates or appointees know what is expected of them in their role as fiduciaries and what situations are to be avoided, etc.  That might be a tall order in an association in which we have owners who are unaware this 35 year old community is a PUD and what that specifically means! (Note 3).

I'm advocating better preparation for candidates and board members. To that end, this association has prepared a six page, informal document entitled "BLMH Board Member – Summary of Duties and Responsibilities." (Most recent draft dated June 1, 2011). This has been prepared by several members of the board and is currently undergoing review by management. It remains to be seen if it will be used in this association. It would be in conjunction with another set of documents which include specific descriptions of "duties and responsibilities" for each board member.

The general document includes the following topics:

I. Being a member of the board.
II. Know your specific duties and assignments.
III. Be Prepared.
IV. Be a fiduciary.
V. Avoid conflicts of interest.
VI. Be a working member of the board.
VII. Be professional.
VIII. Be Realistic.
IX. Maintain the purpose and confidentiality of executive sessions and board meetings.
XI. Examples of Fiduciary Duties.
XII. Examples of conflicts of interest.

Resolving Conflict of Interest Issues
The next post will look more closely at how a fiduciary could resolve issues involving conflicts of interest.



Comments, Corrections, Omissions, References

Note 1.  The necessity to avoid circumstances which could lead to conflicts of interest carries with it some choices. One of those occurred some months ago when I decided to avoid a small group at this HOA. Some of the members have stopped me over the years, and "gotten in my face" about their issues. I once told one of them "I don't agree" with their position on a specific issue. I was told "you are a hard, hard man!" Since then, owners and members stop me from time to time and attempt to enroll me in their perspective of what I should do as a board member. I've been told "this is the right thing to do," for example. If I choose any other path, I guess it is said I'm doing the "wrong" thing. I concluded that joining small groups could put me in a compromising position in which I might be expected to choose between duties to association and "friends." After all, what's the "right" thing to do? I think some owners truly believe that I should take care of individual owner issues and the association will take care of itself! I prefer to avoid the possibility of being in that situation. I once asked how to make such a situation work, but I haven't gotten a definitive answer and so I remain convinced, particularly in view of recent happenings, that it might put me at cross purposes. Other people are better than I am at resolving their issues with such potential conflicts, I guess. That was and remains a difficult decision for me.

I will avoid situations that could result in entanglements with small groups of owners. Its ironic that my stand on this matter has, in fact, gotten me entangled, and somewhat estranged!

Note 2. I've found the issue of "aloofness" to be interesting. There are always a few owners who want to "bend my ear" for the purpose of proving their case. Most have straightforward requests, some have demands. Sometimes their position is "This association is poorly run and here's more proof; what are you going to do about it, and by the way you should do something about it!" I've handled complaints by being direct in my responses, even when I was an owner (except then it was "isn't this terrible, the board should really be doing something about it. You agree, don't you!"). As a board member, I also tell owners the truth "I don't agree with you," or "I do agree with you" and on the issue of specific complaints "I can't make a promise about this." I've discovered that this may be twisted into "another example of poor communications or a lousy association." I have concluded the message to me might be "Its our way or the highway, Norm!"  

As examples, on the issue of maintenance, owners will time to time issue complaints about a partially completed swale, incomplete landscaping related to a water main repair, a chimney which needs paint, a rusty conduit, flaking paint, etc. etc. I've taken this approach. Be honest and answer these queries or complaints "The association is doing it's best to responsibly maintain the property and balance a very tight budget. Certain repairs are done on a cyclical basis. Perhaps this was missed in the last cycle and it should be addressed in the next." and "Landscaping is just beginning for the year (this to complaints made in April)." Where appropriate, I then do one of all of the following: 1) advise the board member responsible for the area, 2) contact management to discuss specific problems, 3) put it in my notes as a possible issue which requires further investigation. 4) Contact other professionals for guidance. 5) Write an email or letter to the owner, or return a phone call, if that's appropriate, and 6) copy the content of discussions or emails to others on the board. 

However, problems are prioritized. I put the roofing contracts a bit higher than "tadpoles in the stream."

Note 3. Improving the content of the newsletter is one method that is being used to address misconceptions by owners.

Note 4. "Conflicts of Interest" can be subtle. Sometimes, the decisions made to assure that the potential does not exist, are difficult and can have a financial consequence. Here's a "real world" example of the steps that businesses may take to avoid such conflicts. Some years ago I was involved as a principal in a technology company which provided sophisticated process control systems to various industries. We designed and provided systems comprised of hardware, software,  engineering, documentation and training as part of this advanced technology, to facilities throughout the U.S. The technology we offered was to be the best. What did that mean? We wanted to achieve certain breakthroughs in reliability, productivity, cost reduction, fuel consumption, human safety, etc. It was inevitable that we would be required to make recommendations for "ancillary" systems for the owner to integrate. Those recommendations were to be unbiased and in the best interests of the client. The problem? The recommendations could be "tainted" by personal involvement, specifically ownership of common stock, in some of the companies making the software or hardware that we might be inclined to recommend. The solution? Our company had a policy that we should not own common stock in companies we might recommend. Was there a work around? Yes, it was permissible to own mutual funds which might include these companies. Was this a popular decision? No it wasn't. However, it mean that in the internal decision making process, that engineers and technologists would not be arguing a position based upon personal gain. It did allow us to honestly state to clients that we were making unbiased recommendations based solely on the merits of the situation. Oh, and by the way, these were not a "fiduciary" relationships and so there was no legal requirement to take this position. But we considered it to be the ethical thing to do, and we also considered it to be "good business."

Note 5. I've asked a professional about the range of issues and problems in HOA's and their boards and his response was "there are probably hundreds, if not thousands, of HOA's every day in which there are serious differences of opinions." Another professional made the comment "I've attended meeting in which things got really heated, and in one the board members came out swinging!" I've decided to look into this issue quite a bit deeper. I've been discussing HOA and HOA board dynamics and issues with an individual I'll describe as a "behavioral psychologist." I'm quite serious about this, but there are limits to the amount of time and money I can devote to this. Why would this be of such interest to me? There is the fact I do live in a condominium, but in fact, in the U.S. there were about 5 million condominium units according to a 1994 U.S. Census report. However, the Community Associations Institute has estimated that 62 million Americans live in planned communities, including condominiums of which there are more than 300,000! So I view it as an important issue for those 62 million Americans who have made a substantial family investment in this type of living. Can it be improved? Well, I live in one, so where better to find out?

Note 6. Maintaining impartiality and putting the betterment of the association ahead of personal or individual owner issues could be a difficult thing to do, I would think. An HOA board is comprised of individual owners. Each has a personal interest and a personal stake in the association. For many owners, the condominium they own is their largest single asset. So is it any wonder that things might get contentious in an HOA?

Responsible - What Does It Mean?

"Responsible" is a word that we use from time to time. I use it, for example, when I say "responsible finances." But what does that mean? A couple of years ago, I used that and my statements got twisted. When I advocate "responsible finances" it seems some decided this meant that  "Norm is in favor of high fees." How did they get to that conclusion? By what leap of faith? I think certain statements are rubbish and pure politics.

Free Speech
This country prides itself on free speech. So it's possible to say just about anything.  "Norm is in favor of high fees" is a perfectly legal thing to say. It is untrue and inaccurate, but you can say it. Why do people say these things? Perhaps they have a secret agenda. Perhaps they simply don't like "Norm." That's fine.  I may not like someone and I may not understand someone. So I can say whatever I wish? Let's use another example, is it responsible to tell people that "Norm is dangerous?" This word means "able or likely to inflict injury or harm” on others. But it's a free country, you say? So I can say that? What are the consequences for the listener, the person I say that to?

If you were told that a certain someone living down the street was "threatening" or "dangerous" or "hostile" how would you react? If you were a woman living alone and you were told that about your neighbor, how would you feel? Would you think you are safe and that you live in a nurturing, comfortable environment, or might you experience apprehension and fear?

Another example. How would you feel if you were told that there were suspicions of financial wrongdoings on the part of management or by the board. Lets add to that. How would you feel if you were told the money in this association is poorly spent, or frivolously spent? Or that the board was trying to raise fees "as high as possible!"

The Possible Consequences
After months (years?) of exposure to some of the previous examples, I think some people would begin to experience concern about their financial well being, and the health of this association. I think some people would worry more about the perceived and gossiped "special assessment" or "terrible fee increase" that is rumored to be coming. Would you feel better and sleep better at night after being told these rumors and gossip not just once, but many times? Would you be more trusting of your management or the board?

I say that after hearing this stuff, and hearing it repeatedly, most normal, sane, competent people wouldn't feel very well. They might notice there is a small knot in their stomach, they might find they are worrying more about money. Financial or political news on the TV might seem more ominous.

Responsible Finances
To me "responsible finances" means on a personal level, living below my means. Same for the association. It means being careful with the collection and with the spending of money. It means providing for the present and saving for the future.

For example, if someone owes you a debt and refuses to pay, what do you do? If you are "living on fixed income" and that annuity check doesn't arrive, do you just sit there, or do you get on the phone and call to collect? Remember, if you don't you won't be able to pay for that Nicor bill or groceries. So you call. Are you being fair? Of course you are. How would you feel if the insurance company on the other end of the phone said "You're not being fair.  We're going to call someone. We're going to call the state's attorney!" or said "You're picking on me" or "that's repression." No it isn't. It's an agreement and a debt, and if you are unable to get that annuity check, then you won't be able to pay your bills.

Well, this association is also "living on fixed income." Your board and management are attempting to maintain the standards in this association and by that I mean, responsibly maintain the property.  That means, save money to replace roofs in a timely and fair manner. That means replace driveways and repair garage floors. That means keep the streams running, the lights lit, the water on, the garages and hallways cleaned. The budget to do that in 2011 was determined 10 months ago. This association lives on the timely fees graciously paid by 336 owners each and every month. We're living on "fixed income." Our CDs are getting less income than yours. Why? Because this association is a business, whether owners here want to believe that or not. But the banks do. So they offer this association much lower interest on Money Markets, CDs and so on.

If people tell you otherwise, I say they are feeding you rubbish, and they are tearing you and this association down. If you engage in these types of conversations, then you are contributing, too!

Responsible Ownership
Think of it this way. You own a piece of this association and each of your owner neighbors also own a piece. It isn't "your view" and it isn't "your building". Your neighbors own a piece of your building! You and your neighbors each own a piece of every building, tree and shrub on this property. You also each own a small piece of every sidewalk and all of the lawns and streets. If you think your "piece" is the building you live in, the stream outside your window, the street you are on, or the driveway outside the garage, you are missing the big picture. You "own" a small piece of each and every other throughout the association. What you can say is truly "yours" is your unit. That's it. Anyone who tells you otherwise doesn't know what they are talking about.

The association is responsible for the maintenance of all of those shared, or "common" elements. You are responsible for the maintenance of your unit. What you also own are "your" heating and air conditioning, windows, garage door, gas line, water and waste lines, and the electrical system from the meter all the way to your outlets. Those are yours and you are free to spend as much or as little of your money as you want, to keep them spotless and painted and in 100% working order. What you do is your business, as long as you keep the rules in the process.

So when you pay "your" fees and maintain your unit, you are being a responsible owner, and your neighbors are grateful. Paying your fee each month means that their view will be maintained, too. It also means that some of your neighbors on the other side of the association will get a new roof, or a new driveway. That will happen because you paid your fees.

When that water main breaks on your street, or a tree falls in a storm, that will be repaired and cleaned up because of your neighbors financial contribution to the association.

So everyone contributes and everyone wins. That's the way it should be with "neighbors."


Comments, Corrections, Omissions, References

Note 1.  I've read a few wonderful articles on the subject of "Your Castle is Part of Everyone's Castle" and the point of those articles is what I'm attempting to convey here.

Note 2.  I've decided that being a reaction to malicious stuff and that includes gossip is not a good thing. I've decided to take the high road. Honest and responsible communication is one way.