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Sunday, May 28, 2000

Inspirational stories about perspiration
Earn first, spend later is a common theme

There was a time when Joe and Jeanne Elizondo had to sell their furniture and her engagement ring to keep their business going. After 15 years without a vacation, one day they indulged in a trip - over the Harbor Bridge, to Corpus Christi Beach.
   There was a time when Anna Mercado-Flores was a single mother working full time and going to college, unable to afford a car. She saved up and bought a 1977 Chevrolet Nova with no air conditioning because it was all she could afford to buy outright. Borrowing money for a car never occurred to her.
   Now that she operates a growing business, International Meeting Planners, she hasn't changed her self-described tightwad ways. Oh, she's an aggressive spender - on new computers and software for the business and on tuition and books for her continuing education at Texas A&M University-Corpus Christi. But borrowing money to buy personal items doesn't make sense to her.
   Rockefeller was thrifty
   "I'm 42 years old and I've never owned a new car. I'd rather put the money into my business and try to make it more productive and more efficient. And, hey, I could use a new washer, but the one I have does the job."Material possessions aren't important to her - at least not important enough to go into debt or retard her career goals. These are values she tries to instill in her 23-year-old son, values that helped the Elizondos build their business, Greenwood Door, into a financial success that allows them now to indulge in regular overseas travel, and to be a two-Mercedes couple.
   These values once helped make John D. Rockefeller the richest man in America. Rockefeller was a prolific borrower - for business-building purposes. But he always lived significantly below his means. His homes were much smaller and less ostentatious than those of his contemporaries, and once when his wife asked for a new carriage, he told her they'd have to sell the old one before they could justify the expenditure.
   Payday lenders can help
   These values also are in contrast to the proliferation of easy credit extended to young, undisciplined spenders, including those who take out so-called payday loans rather than wait for the payday.
   This is not an indictment of payday lenders, pawnbrokers or other lenders who fill a need and whose high interest rates are a fair compensation for the risks they assume. Nor is it an indictment of the borrowers, especially when the rent's overdue or meals would be missed.
   "Remember, there's a need to fill," says Lupe Gomez, president of Laredo National Bank, who has lost count of the times he pawned his guitar when he was in college. "Some of these people are good people and they have families and they've got to make ends meet. And banks are not going to lend a hundred bucks."
   Marco Arredondo found himself in that predicament several times when he and his wife were working their way through college in the late 1970s.
   He made about $2,000 a year in restaurant jobs and there were times when he would have to take out unsecured $100 loans and pay back $114 by the end of the month. These loans didn't put him behind so much as they kept him afloat.
   Avoid extravagant buys
   When he graduated and took a job with Central Power and Light, his first big personal purchase was a new car, a 1980 Chevrolet Caprice Classic, a significant upgrade from his 1964 Mercury Comet that cost him $250.
   He never thought it capricious to make payment on the Caprice. His earnings provided a sufficient cash flow for the car and later for credit card purchases and vacations taken on borrowed money. And personal spending didn't get in the way of his becoming a consultant with a six-figure income.
   But now he counsels young people not to make extravagant purchases.
   When an intern in his office decided to buy a breakfast table because she had no place in her rented mobile home to sit down and study, he steered her toward buying a used one.
   It seems like a reasonable sacrifice, significantly less than the ones made by the Elizondos. Selling the furniture and the ring was Jeanne Elizondo's idea, her husband says.
   Fixer uppers
   "We were trying to buy lumber. We were trying to buy a table saw and machinery. We were trying to buy stock for our company," Joe Elizondo says. "I couldn't borrow from the bank, not even with a gun."
   He found other help. The late Jack Ryan and Bernie Karchmer of C.C. Brick and Lumber became mentors as well as suppliers. They once wrote off a debt for supplies, Joe Elizondo says, and Jack Ryan counseled him: "You are young enough that if you fail you can still get up and do it again."
   The Elizondos economized at home by buying or finding junked items, fixing them up and selling them at a profit after they were done using them. They learned to appreciate what they had, and so the vacation to Corpus Christi Beach remains a fond memory.
   "We took Popeye's chicken and we watched the water and it was beautiful," Joe Elizondo says. "We imagined we were in Acapulco or the Riviera."
   When in Rome
   Now, Jeanne Elizondo's favorite vacation spot is Rome. She likes having a Mercedes and a house in Country Club Estates, but those things aren't that important to her, she says.
   "Those are material things. If you want to go forward, you've got to forget about the material things in life. You've got to think about the future, the kids, the grandkids. Material things don't mean anything unless there's a lot of sweat behind it."
   That's similar to the Midwest values that Corpus Christi-based international investor Mel Klein says were instilled in him. He was in his 30s when he bought his first new car, a Ford Thunderbird.
   "I certainly have tried to follow a philosophy of not ever spending for personal consumption anything that I had not already earned. I don't believe that one really needs anything for personal consumption that you haven't already earned, that isn't already in your bank account.
   Risk for business
   "I can understand taking a risk if it's going to advance your career or business interest, or put you in a position to make progress in pursuit of your goals. The only times I've ever borrowed have been in business, and it was a time when the source of the repayments were predictable from the proceeds of the business.
   "I'm the wrong one to ask about this because my value system has always been one that borrowing is to advance your career or business goals, and spending for consumer goods is because and you can afford it and you want to reward yourself, to enjoy your accomplishments."
   No, Mr. Klein. You're the right one to ask.


Business Editor Tom Whitehurst Jr. can be reached at 886-3619 or by e-mail at whitehurstt@caller.com

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