Financial Fixups
Posted on October 30th, 2006 – 12:22 PMBy Kara McGuire
I spent much of last week working on the Financial Fixups series that started Sunday. Sorry my posting suffered.
Katherine Kersten, fellow blogger and Star Tribune columnist added her two cents about debt in America today.
She makes a lot of good points. Why are we addicted to instant gratification and obsessed with upgrading? How are we different from our ancestors?
I recently saw someone in my neighborhood get a ginormous flat screen TV only to say they weren’t sure what they were going to do with the perfectly good one they have.
Maybe they should donate it to some deprived child who lacks a set in their room.
Where did we learn these spending patterns? Visa? MTV? President Bush?
What would happen if people stopped spending and started saving?
Will we ever find out?
Or will Grandpa start to spend like us? I saw a recent survey that said more and more seniors are relying on credit cards to buy prescription drugs and other necessities.
64 Responses to "Financial Fixups"
Katherine Kersten’s comments are worth less than 2 cents, and she turns the whole debt concept into a “virtue” argument. The Reagan era and republicans ushered in the easy credit era to payback their cronies in the banking industry. Look where we are now. People are in trouble because the banks are now enticing too many people (who can least afford it) with easy credit. It’s not about “virtue”, Katherine.
Well…just because people are offered credit does not mean that they have to use it. Perhaps the Virtue being discussed was one of personal responsibility, which includes the responsibility to live within one’s means.
It’s a ruse, David. Of course, people should live within their means. It’s also much easier to live within our means if we aren’t being enticed with unsolicited offers of easy credit. Kersten is a clever columnist, with an always conservative message.
Financial literacy is the key issue here. I was speaking with an elementary school teacher recently who bemoaned that the “money” unit is more and more difficult to teach because children don’t understand the concept of money as coins and dollars. Children have savings accounts with automatic deposits rather than piggy banks. Take the game of playing “store” with small children. I grew up with a Fisher Price cash register that came with plastic coins. Now, children have Target-brand cash registers that come with a Target charge card you can swipe through. Of COURSE our next generation is destined for debt!
I loved that cash register. I can still remember the chunky coins and the old wood cash register decals on the side!
on the bright side, kids cannot swallow debit cards. I managed to ingest my yellow 10 cent piece.
what can I say, I had a big mouth.
I’m sorry I missed Katherine’s ‘two cents’ post, I don’t know exactly what she wrote, so I can’t commment on that. But I can comment on Otis’ post: is it always someone else’s fault? This absolutely infuriates me - let’s place the blame for my mistake on someone else, somewhere, because god forbid I actually have to own up to my mistakes and learn a lesson. Like many adults in this country, I get dozens of credit card solicitations a week and I rip every one of them up, Otis. I could charge a gazillion things and have the best house in the neighborhood, with the best stuff, but I don’t - I clip coupons, I plan my meals, I don’t have a plasma or HD t.v., I don’t have a Playstation, I don’t have alot of things. And why don’t I??? Because I learned from my dad that if I can’t pay cash, I can’t afford it. Simple enough. DUH. And those people who continue to send in those credit card offers and then charge up a balance: no one put a gun to their head!! It’s called self control, Otis. It’s also called personal responsibility. Far, far too many people in our society have no idea what either one of those mean. If you are married, own a home, and continue to have kids but don’t put any forethought into how much each kid is going to cost you, well, I guess you’re asking for financial failure, aren’t you? It’s no one’s responsibility but you and your spouse to plan for the future. And you think it’s President Reagan’s fault? Oh for god’s sake - it’s people with Otis’ attitude who have created the society we are in today. What happened to people like my dad, who was raised with Depression era parents who taught him (and he has now taught me and my siblings) how to manage, save and invest their income. Wants and needs are two completely different things, and the people who equate ‘wants’ with ‘needs’ are doomed. I wish there was more ‘real life’ financial curriculum in our elementary and high schools - obviously there are too many parents out there neglecting to teach their kids what they need to know to make intelligent, responsible decisions.
Personal finance is a no-brainer to be introduced into the educational system - it should fit in very well with most basic math courses.
If you can add and subtract, you can do a budget.
I have to say the current focus of the series — the couple with a seventh child on the way — makes me a little angry. Why on earth does this couple keep having children when they can’t make ends meet? To me, that is the pinnacle of irresponsibility — even moreso than the younger, single woman who spends too much and has a bunch of debt. There is no virtue in having seven kids any more. Period. It was one thing when people had farms to run way back in the day — now it’s just stupid. Especially when you seriously can’t afford gas or groceries because your pregnancies are too difficult and you have a ton of medical bills. Wouldn’t one solution be to STOP getting pregnant?!? My god, the hubris of those people — thinking they can do a good job raising that many kids (money issues aside!) in this crazy day and age…. yes, it makes me angry. THAT is irresponsible.
That was my gut reaction too, lmd… More mouths require more money, and at some point the numbers just don’t work. But that said, I’m also firmly prochoice — My choice (partially financial) not to have kids, and their choice to have many kids — realizing that this may also mean huge financial sacrifices.
Interesting that the advisor showed them that paying tuition may not be feasible, but that they decided to keep it as an expense anyway. Since this is likely an emotional decision, maybe it will be revisited down the road. I agree with the advisor that people need to make their own conclusions, but this just doesn’t seem sustainable.
I’m glad that we’ll see each family more than jsut this once. Great series.
Finally, I’m not sure how much of this really is a no-brainer. “Don’t spend more than you take in” is so much simpler in theory than in practice… We’re spending more than I’d like right now on home improvements. The idea is that it’s short term debt and these are our peak earning years. We do have an asset, but I’d hate to lose it. If I waited until I was sure the job was stable, I’d still be living in a studio apartment and riding my bike through the winter. My folks were always careful with their finances (my husband jokes of the two of us, I have better financial genes) but mostly I feel like I picked up their philosophy and a few basics and need to know more (which I guess is why I’m here!)
I agree with the posters that promote better financial education. The magic of compound interest is truly amazing. The key is getting it to work for you, rather than against you.
Lindy, you ought to at least read the article by Kerstan before you start frothing at the mouth. You also haven’t read the entire thread very clearly. Fortunately, right wingers like yourself are in for quite a shock come November 7th!
So, if people can just ignore credit offers, why do we have predatory lender laws?
I mean, it isn’t like some of the loan companies trick people into thinking payments will be lower than they ultimately end up being, right?
Can’t people just realize it is a bad deal and walk away?
(I am being sarcastic, BTW)
I believe we are significantly different from our ancestors - especially when it comes to financial responsibility and personal accountability. And, regardless of your political affiliation I think that Kerstan raised an interesting point by pointing out how there is a lack of virtue in people today. One definition of virtue is “conformity of one’s life and conduct to moral and ethical principles”. We might want to start on a more micro level and begin educating our children at home what it means to be financially responsible - also known as walking the talk. And yes, incorporating more personal finance into the educational system would be a great reinforcement. However, if it does not start at home the likelihood that individuals will live their financial lives within their current means is very slim. Therefore, I encourage each of us to talk to at least one person about this topic of “financial responsibility” and what they could or should do in order to make a postive difference for the future.
Otis,
I’m not a Republican. Really. I realize the author has a conservative pov…
Stop your junk mail. Eliminate TV. We don’t get any offers in the mail and we don’t watch TV so therefore we’re not aware of all the new, cool things we “need”.
No one is forced to go to expensive colleges, send their kids to private schools or lease the nice car. In the end people have to take some responsibility for their actions.
Read the wonderful new-ish book called “Generation Me,” which describes both the adults in this series of articles and how their kids will likely turn out. Intense self involvement. Entitlement. Desire to emulate the lives of celebrities. Or desire to give their children everything it takes to make them competitive with the privileged. We are overloaded with something that substitutes for values–transmitted through unrelenting media images about the rich, famous, and privileged–and have lost the understanding that having basic needs met and feeling freedom from want make one just as happy.
All of these families should get a bit closer to real poverty, so they can think about their actions’ effect on the world. Having seven children, for instance, will contribute to a population boom in the U.S. that is already having a dire effect on the environment. And that’s even IF one could afford those kids.
Also recommended reading: Barry Schwartz’s “The Paradox of Choice,” which talks about how more consumer choices actually make people less happier.
Otis, the only shock I’m going to have on November 7th is the static shock we all get at this time of year! Nice to see that you assume I’m a ‘right winger’ - personal responsibility should never be political, Otis. And the fact that it is to you is just plain sad to me. My votes are generally split between dems and republicans - it’s the person I vote for, not the party, but politics have, and continue to be, a major headache to me. I’m trying to be the best citizen I can be, Otis - no matter my party affiliation. I pay my taxes, I maintain a safe and healthy home, I contribute to my neighborhood, I work hard every day, I pay my bills and I am saving my hard earned money so that someday I can retire and live off of my savings, not the government. Is this ‘right winger’ mentality? And if it is, what’s so wrong with it? Otis, do ‘left wingers’ think and act otherwise? My democratic dad raised me to be this way…how’d that happen?
Thanks to the people who agreed to be featured in the “Financial Fixups” stories. They’re brave souls.
These stories are fascinating and informative in their own right. Also, there’s a voyeuristic appeal to stories like this. They allow us to indulge in feelings of superiority. I sure feel better about my own financial situation after reading some of these stories — not proud to admit that, but there it is.
Kersten’s article was interesting, but we should resist the temptation to cast the “virtue” of frugality in strict moral terms. Financial responsibility is a positive character trait that we should all strive for. But lacking that trait doesn’t make us failed human beings.
On the issue of personal responsibility, people who’ve spent themselves carelessly into debt have made their own beds, and now they must lie in them. But the companies and institutions that have made debt so easy to accumulate aren’t entirely blameless either. Credit card companies, for example, are legal businesses selling a legal product. But some of their practices — predatory lending, exorbitant rates, inscrutable rules and restrictions — are less than ethical.
“I recently saw someone in my neighborhood get a ginormous flat screen TV only to say they weren
I didn’t agree with the advice for the Benson’s. Too much debt and they would be better off filing BK. At least they would have a chance if they learn to budget and stick to it. I’m not a fan of BK, but it’s probably the best bet for them. I think CC companies and banks issue to much credit knowing the odds are with them to at least get back some of it. They are taking bad bets these days.
I just reviewed all the entries and haven’t seen anyone look at the “give them anything they want don’t say no” parenting practices of the past 10 years. I work with teenagers and so many of them feel entitled to anything and everything they want and they want it NOW. Then I go into the stores and see parents buying their children toys (or bribing them with toys) to keep their children quiet instead of practicing real parenting (saying “no”). I firmly believe that the instant reward of getting things wires our children’s brains to instant gratification. They grow up, go to college and get their first credit cards and continue these same spending habits. Next thing you know, they have thousands of dollars in debt. Our governments and politicians do the same thing. It is borrow, borrow, borrow and pass the debt on to the next generation. How are our children going to learn self control when they see their parents trying to “keep up with the Jones” and their government accruing huge debts instead of buckling down and saving? American society is very good at preaching to us to keep our economy strong by being good little consumers. We have learned the lesson all too well.
Quite the disccusion regarding this post! I read Katherine Kersten’s column and while I don’t always agree with what she has to say she did make some good points. There is a virtue in living within your means, and it seems like at least in my age group (under 30) no one focuses on long-term goals like saving for retriment and the like, but instead there’s a huge push to have nice new cars, clothes, and dinners out at fancy resteraunts I guarantee you my parents at this age would never have even thought about eating at. That said, Otis is correct in asserting there are some systematic problems that can trap people financially-the astronomical rates charged by payday lenders coupled with their practice of rolling over loans until they are virtually impossible to repay, the “bounce protection” plans offered by banks that charge flat fees equal to interest in the 200%+ category to keep your checks from bouncing, and the fact that many of the good paying manufacturing and similar types of blue-collar jobs have been replaced with low-paying service sector jobs. Certainly for some people it is very, very difficult to succeed financially. But for many others who make decent money but choose to live like they make twice what they do, there is much that could be learned from listening to the advice of people like my Grandmother who made it through the depression, raised a child as a single parent without receiving a dime of child support, and managed to retire very comfortably due to adherance to the belief that it’s “much easire to be poor when you are young then when you are older” and subsequent choice to live frugally and save money instead of spending every penny (and then some!) that she made.
Bush does have a point on the macro level: if we were all to curtail our spending, our economy would shrink, and that’s never good in a capitalist system whose very existence necessitates growth. I’m not arguing that credit cards or instant gratification are patriotic, just trying to point out that the engine of our capitalist system is growth. Any significant decrease in consumer spending will effect the entire system, and lead to a slow down. How we got ourself into this mess is a historical question. How and if we are going to get out of it is a problem of a different sort, and though it could start with a non-spending revolution, I’m not a believer yet.
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