Today at TILE, we talked about the difference between Wall Street which is rebounding and Main Street which seems to be struggling due to uncertainty about the future. We asked why is the Dow still near its 12-month high of 9800 while unemployment is also at a 26-year high of 9.8%? If investors are “bullish” or positive about stocks and pumping new money into companies, why are companies still not hiring? Shouldn’t we be worried that job seekers outnumber job openings by six to one?

Basically, the financial markets, the economy, and the financial health of your school/company/family are all interconnected. It’s a bit like a game of Pick-up Sticks or Jenga; each piece is dependent on the others and without one, the structure could tumble. In the current environment, the key “building blocks” being discussed are Consumer, Government, and Business behavior – and each one reacts differently to the world around it.

For consumers, spending is way down and savings is up. The consumers’ decision to spend less means that stores or restaurants or travel destinations need to plan for lower sales and fewer visitors. Think about it: if you aren’t certain you are getting a raise at the end of the year or a bonus (or that you will even have a job) will you spend more or less on new clothes, restaurants, and concerts? In the recent past, consumer spending has been boosted by the fact that the value of homes has increased (giving a sense of richness), easy credit (“I can always borrow a little more”), and an overall mood that excess was good. But with a general sense of uncertainty, spending has declined significantly.

In contrast to individuals, the government has increased its spending – and is building its debt instead of paying it back. Total public debt stands at more than $11 trillion today and the 2009 projected deficit is $1.8 trillion. Compare this to total debt of $5.6 trillion in 2000. In essence, the government is trying to pick up where consumer spending fell short – by chipping in a bit more. The problem is that no one is sure that the government can keep spending long enough to cover for the consumer. In addition, we all know that larger government debt or deficits eventually mean higher taxes. Someone has to pay off the debt at some point.

The business community is taking it all in. Short-term, they are being thrifty and benefitting from the increased government spending. Longer-term uncertainty remains. Until they have a clearer picture, most companies will tend to hold onto cash and not make large investments – either in people, inventories, or equipment. Businesses are enjoying the current rise in stock prices, but not yet ready to invest in the future. And until companies start looking ahead and consumers start spending, it is doubtful we will see the unemployment figures falling materially – even if our portfolios are looking a little better.

What does this mean for the TILE community? For those of you looking for a part time job, thinking ahead to next summer, or contemplating life after graduation, you are, unfortunately, facing a tough market. The good news is that this is an excellent time to volunteer for a charity or pursue an internship. There are a lot of great nonprofits and companies looking for volunteers and interns – especially now. You can learn more about what really interests you and get your foot in the door to gain experience or learn what you want to do next.

- Amy

Today at TILE we talked about the desire of young adults to learn about financial services, the frustration parents feel talking about wealth, and the need for next generation financial services. When do we stop focusing on literacy and start developing a financial identity? Why aren’t there financial tools that appeal to Gen Y? When will financial institutions begin to recognize there is a new generation of consumers – who have different expectations and different ways of communicating?

At TILE, “Next Generation Financial Services” is a vision inspired by young people and delivered through tools they can relate to. Generation Y is out to change the world. They’ve already altered our political process (i.e. the 2008 Presidential election), the values we cherish (i.e. environment first!), and how we communicate (i.e. texting and instant messages). This is all before they have control of the $1 trillion+ they stand to inherit in the next 10 to 15 years!

Our research has shown that young people want to learn, but ”old people” and “old firms” are speaking the wrong language. Think about it, there are a lot more grandparents learning to text than young kids writing hand written letters. This is the first time the onus is on the older generation – financial institutions need to learn to text too!

Traditional educators focus on literacy – open a book, listen to a lecture, or memorize definitions. TILE is about moving from literacy to identity – from education to action! If we want young adults to be responsible consumers of financial services in the future, we need to stop telling them what we want them to know and start giving them the tools to connect what they care about to their financial life. For example, how do spending habits relate to the market? How can my collective giving impact the market or other people?

What does this mean for the TILE community? There is finally a place to develop a financial identity and bring together all the pieces of our financial life – Spending, Growing, and Giving. While parents or grandparents fund the accounts, TILE members set their own preferences, privacy level, budgets, and donation amounts. The TILE Library is filled with engaging content and answers to all sorts of questions and the Learn to Grow module will jump-start those long overdue conversations with financial advisors. Parents can feel comfortable knowing that TILE is a safe place and advisors get to build a positive brand image. Whether every day, a few times a week, or just when you feel like it, there is now a place to get lost in learning and begin to build a financial identity. At the end of day, TILE members can not only become better investors, but maybe tomorrow’s financial experts!

- Amy

Today at TILE we talked about this week’s gatherings in New York City, some of the people who are attending, and the potential impact powerful networks can make in the world. Why are all these “heavy hitters” coming to New York (and making traffic even more crowded)? What are they hoping to accomplish? Is it something that makes a difference to me?

Specifically, the UN General Assembly, the Clinton Global Initiative, and Climate Week NYC are bringing royalty, heads of state, business leaders, celebrities, directors of non-profits, and just some “people who care” to center stage. Each forum has a unique objective, yet at the same time each asks their members and participants to consider the relationship between individual responsibility and collective action – what can you contribute to the things that matter to you, your business, your organization, and your world?

Organizations like these exist in all kinds of shapes and sizes. They range from the most prominent, such as the World Economic Forum in Davos, to the most traditional, such as the New York Stock Exchange, to the most virtual, such as Facebook, to the most fun, such as a sorority or fraternity, to the most informal, like when you and your friends decide to raise money by biking cross country or running a race. What makes them effective is the ability to attract different kinds of people and different points of view. What we learn from these networking events is that a call to action is much more effective when all the decision makers or influencers are in the same room. For example, when it comes to the New York Stock Exchange, it isn’t just about showcasing the impact that companies have on the market, but also the impact government organizations/politicians, non-profits and cultural icons have on the market. Think about climate change or the fight against breast cancer. It is easier for politicians to approve funding or ease restrictions on research and development when they know there is public support – and companies will allocate more of their R&D when they know government is supportive and consumers are advocates. It can be a virtuous cycle when everyone gets together and realizes they can actually help each other towards mutual goals.

So what do these networks mean for the TILE community? Well, just because you are in one, doesn’t mean it will be a success. Just like relationships, you need to nurture them or they can become dysfunctional or start acting like a baseball team that is 0 and 10 (not fun or effective!) At the same time, when they work they can be really powerful. You get to engage with people who have similar passions and interests. Whether for a business, political, cultural or meta cause, it is usually the case that more gets done the more people come together and pool their resources (financial or otherwise). Have you been wanting to take a stand? Give more of your time to a special cause? Most likely there is either an existing network or an easily reachable group of people that share your interests – go find them and make a difference. I guarantee you the group will benefit from your involvement. In that context, we hope TILE makes it easier for you to find and learn more about the things that interest you. And who knows, it could turn into a powerful network along the way!

- Amy

Today at TILE we asked ourselves… is the recession over?

Today at TILE, we asked the question…Where Did The Money Go? It seems hard to believe that a few states, including California, are threatening to “shut down,” “declare bankruptcy,” or make payments with “IOUs” instead of cash.

States, unlike the Federal Government, don’t have the authority to print money. Thus, just like an individual, they create a budget – and some states are required by law to keep a balanced budget. This means that the sources and uses need to be in sync. In other words, you can’t spend more money than you have!

So, how does a state make money? States source money from income taxes, sales taxes, investments, and the Federal Government. If the sources shrink, then the spending on programs such as parks, education, roads, and infrastructure must also shrink.

For example, if a state’s population generated $100 in earnings and was taxed at 5%, that means the state made $5. If today, with 10% unemployment, the population only generates $90 in earnings, a 5% income tax leaves the state with just $4.50.

The same theory applies to sales taxes – the less people buy, the less revenue to the state.  If $100 in purchases last year was taxed at 5%, the state got $5 in tax revenue. But if this year there was only $90 in purchases, the state only makes $4.50.

On the investment front, states earn a lower return on the money they hold.  Today, they can only earn a few percentage points.  So instead of 5%, or $5 earned on $100 in investments, there is only $1 of investment income.

Finally, the Federal Government is also losing money and having to shrink the amount it gives to the States.

Add all this up and our hypothetical state which had $115 in Sources last year only has $60 this year. That means there is a lot less money to go around and state legislatures have to make tough decisions about which programs to cut. While borrowing is an option, it’s not always affordable or available. States, like companies, are having a hard time raising money in this market.

In terms of the TILE community, we can think about our sources and uses too. The more we track our expenses and the economic landscape, the more we can make informed choices. The money we have often comes from sources such as jobs, investments, and family. If your sources were cut in half, would you purchase less? Would you go out to eat less often? Could you get another job?  How is your investment portfolio doing? If it is earning less, does that mean you have less to spend?

In a perfect world, we can ask for more money or a bigger allowance. The reality is we all have budgets to balance! It’s not that the money is gone, but when less is generated, there’s less to play with.

- Amy