The Middle Class Guy is back in the saddle after a highly middle class week that involved a long, hectic day in the office on Monday, traveling to the Downtown of the Big City on Tuesday for an all-day grant workshop with my prior intern/newly full-time 25-year-old employee and then three days of credit analysis training in the Mad City.
I brought my laptop along and intended to post for three straight nights including on some books that I brought along, but ended up hopping all over the place for three nights with younger colleagues in search of the finest craft brews offered within the fine State of Cheeseheads.
Back in my younger years, before I became a middle aged fogey, I might have bragged about the amount of beer consumed, but allow me to plainly state that I consumed more in the past three days than I typically would in three months.
Some were great, some were good and some were not so good. I do not have all of the types and names here, but it was more small batch craft beers than I had consumed in all my forty-six years in a matter of three days.
The two younger guys who I tagged around with (about ten years younger) knew about and had traveled to most of the breweries in question at some point or another.
I know that some were from New Glarus Brewing Company (Spotted Cow), some were from Capital Brewery, one was from Horny Goat Brewery, one was from Stevens Point Brewery and there were many others.
I do not know how many because I had three different beer flights of four each in addition to the other pitchers and glasses purchased for me by my two traveling partners. By the way, they each consumed twice or more as much than I did.
We traveled about thirty miles out of Mad-City one night to a troll-themed town called Mt. Horeb where I first sampled a wonderful variety of craft beers brewed right on premises at the Grumpy Troll.
For anybody with interest in such things and for future reference, I saved my Grumpy Troll receipt, and the four craft brews pictured below in the foreground are, from left to right, Hoppa Loppa, Captain Fred, Sunflower and Hey Now Brown Cow.
Thursday night, we hit all four blocks around the State capital, consuming craft beer at each of the four Mad-City locations. Glancing back at my receipts, I have one for the Old Fashioned, where I consumed four more craft beers from four separate breweries. I could not name them to save my life, but there was a ginger beer that I liked a lot.
For dinner, we consumed steamed mussels at The Coopers Tavern on our second stop around the capital.
Our third stop was a total dive bar called the New Paradise Lounge, where we spent an hour or two consuming more New Glarus beer.
We ended the night to nearly 1:00 a.m. at the Tipsy Cow, a place that seemed nice enough around 10:30 p.m. when we arrived, but filled with drunk Millennials, many of whom were covered in tattoos and showed multiple piercings by the time we left.
We had more beer there, but I had gone well beyond my limit and could only have one pint there. My partners in crime thought it was great; I hated whatever we consumed.
The reason for my hanging out in my old college Alma Mater town was to attend a three day seminar on credit analysis.
Woo Hoo! You must be thinking. Credit analysis, what an interesting thing to study and practice for three entire days. I know that you are jealous.
Anyhoo…for three days, analyzing creditworthiness and crafting the best public/private funding partnerships was what we studied and worked on.
I am in possession of more information than you would ever care to know about the topic, and completed about a dozen spreadsheets analyzing the cash flow and creditworthiness of several companies, all based on actual projects handled by the National Development Council, who coordinated the training.
I would not care to summarize three days of credit analysis and, if I did, you would not care to read it.
The instructor did share three nuggets of wisdom which I jotted down and will expand upon for my all-encompassing future book on the topic of economic development, which I will share here with you:
- Capitalism Requires Capital. The instructor started our three day odyssey of credit analysis by stating the obvious, but reminded our group that capital is what needs to continue flowing for economic development deals to happen. When the capital stopped flowing for years during the Recession, deals stopped happening, businesses failed and millions of people lost their jobs, which just made it even harder to access capital.
- Our local municipalities do not really do “economic development,” we do project development. Although Presidents promise to address basic infrastructure problems and the States tend to fix roads every so often, most jurisdictions strive to achieve short-term successes due to the political nature of life. Your local Mayor, State representative, Senator or Governor wants to achieve successes now rather than build for long-term success and growth, so you will be more likely to reelect him or her the next time you go to the polls. I know that in my community, we would rather achieve a big deal in 2017 than work on two big deals for 2020.
- Economic development is not fun and easy like you may think. It is a labor-intensive, boring and extremely tough and fiercely competitive business. I can vouch for that a million times over. For every ribbon-cutting attended by Chamber of Commerce representatives and elected officials, there may be dozens of very mundane and stressful background work that your local economic developer has put in “behind the scenes.” A long meeting about how to fund an extension of a sanitary sewer line, or how to engineer the property to best retain storm water run-off or arguing with local road officials about obtaining access to the site are not the kind of things that would make for compelling reality television, but are the kind of things that I often strive to assist with many months or sometimes years before the cameras capture the smiling faces of local yokels with the new business.
Your Own Credit Analysis
Reviewing profit and loss statements including, but not limited to, cost of goods sold (COGS), net operating income (NOI), operating expenses, debt service, cash flow and ultimately calculating a business’s debt capacity got me thinking about my own family’s income, costs, operating expenses, debt service and debt capacity.
Not since the last time we refinanced our home about seven years ago did we take a comprehensive look at our balance sheet.
Completing this training got me thinking about taking a cold, hard look at our middle class family’s balance sheet. I do need to refinance our home again, and soon, so I might as well take a look at our finances before we have to disclose it all to some mortgage guy or gal.
I stayed at a super funky hotel that was previously nice, but a few decades back. My wife and I enjoy watching Gordon Ramsay’s show, Hotel Hell, and this one could use a serious dose of his sarcasm, cursing and, ultimately, his guidance and help.
One of the few things that I did enjoy was my complementary copies of both USA Today, which is standard for nearly 100% of the hotels in our country, and the Wall Street Journal, which is not always provided.
So I did keep up with the continuing saga of Trump versus the FBI and many other matters of interest this past week.
An item that caught my eye in both papers this past Thursday was that U.S. household debt has topped the previous record in 2008, having increased $149 billion in the first quarter of this year to $12.73 trillion.
While mortgages like mine still comprise the majority of the obligations, they now represent a lower share than in 1998, with student loan debt and auto debt making comprising a much higher share.
Even though I think of myself as generally fiscally prudent, I learned that I owe more than the average American in comparison to my family’s household income.
In 2008, household debt represented nearly 100% of household income, whereas it is about 80% today.
Although Your Truly Middle Class Guy and my family do not currently have an auto loan (although we need to get a new car and soon will) or any student debt, our $131,000 mortgage balance represents about 117% of our income of about $112,000.
Speaking of credit analysis, for our family to meet the U.S. average of 80%, we would need to either increase our income to around $162,000 to have a 1.25 income to debt ratio, or decrease our total debt to only about $90,000 or 80% of our annual household income.
What I would prefer is some combination, creatively visualizing myself making more through my writing to about $130,000 per year total, while reducing my family’s debt to under $100,000, which I would currently consider making great leeway in chipping away at our mortgage.
Of course, people like my mother, who paid off her mortgage with my father twenty-seven years ago, and my father-in-law who paid his off years ago as well, skew the statistics.
I suspect that there are people out there, maybe you, who owe two or three times as much as your family’s household income.
When we first purchased our house just ten days before 9/11, we borrowed about $160,000 on a $200,000 home against my salary of about $50,000. We also had car payments at the time, and I can assure you that things were very tight financially.
Things are still tight, but both our household income and our expenditures have doubled since that time.
I hope that this provides at least a little food for thought for my few dozen loyal readers, and the best thing about it for you is that you did not have to sit through three days of credit analysis.
As time passes, I will probably forget most of what we learned, anyway, but I will definitely remember all the beer.