Money kind of sucks, especially when you don't have much of it. Frankly, even when you have lots of it and you've got your shit together, it sucks because you have to figure out how best to manage it.
I got the doc Maxed Out from Netflix. I think it's exclusive to Netflix because it's through Red Envelope Entertainment, their indie label of sorts. It's basically about the debt problem in this country, and to a lesser degree, the government's debt problem. It's pretty interesting stuff. It paints the banks as the real bad guys, accusing them of having predatory lending practices.
For the record, I don't have a problem with debt. I've incurred lots of it. A part of me wants to say that I've been lucky in that things have frequently just worked out to take care of debt issues. Or maybe I'm just more responsible than I give myself credit for.
The movie makes me think of two things really. The first is that the government and our legislators have done a poor job protecting us from unethical and predatory lending practices. The second is that people simply aren't educated enough to understand basic financial principles. Of course, when your government is owned by the rest of the world, you don't exactly have someone to look up to either.
What I didn't like about the movie is that it practically encourages a fear of borrowing. There's nothing wrong with borrowing if you know you can pay the money back, and you can justify the added expense of the finance charges. I built a business that way, and God knows I wasn't even sure if I could ever turn a profit (I sure spent years bitching that I wasn't).
One thing the film did touch on that does bother me, is that people will make themselves car poor or house poor just to maintain appearances. That's just fucking stupid. From what I've been able to gather looking around my neighborhood, I know for certain that there are some people doing that. People don't need $30,000, gas guzzling vehicles. It's all status.
I'm at a real turning point now. My personal card debt is more or less gone. I'm really trying to put away and invest as much as I can. I'd really like to be giving more to charities, though I'm not sure which. I want to give more because I think I can while securing my own future.
Anyway, put it in your queue. It's a pretty cool movie. Makes you think.
The student loan industry is one of the biggest offenders I know. Fortunately some of their bad practices are being uncovered even as we speak.
Unfortunately I think the worst consequence to the way the government has handled financial concerns in America is that the gap between the haves and the have nots has steadily increased with every year. Those who are benefiting from public policy are doing so greatly and those who aren't are really struggling.
I wish you luck in determining which direction to go in next financially. Giving back is very important, but it is also fair to say that there has been no more imperative time than now to plan responsibly for the future... Lord knows the government won't be able to assist you in retirement! Finding the balance between the two is the challenge.
Interesting comment on the student loans. Maybe I was fortunate -- attending Carnegie Mellon I racked up a VERY large undergrad debt, but it was very low interest, the payments were reasonable, and that CMU degree scored me a good job before I'd even actually graduated (back in 1992, mind you...) I quickly had that student loan paid off.
For the longest time I had NO debt -- the car was paid for, I didn't have a house (still don't, one thing I know I "should" fix, but I can't stand feeling tied to a place), and I paid the credit cards in full every month.
These days I admit to carrying a bit of debt on the credit cards. For one, the bigscreen 1080p TV that was offered "2 year same as cash" for an insane discount (roughly 50% off retail) was just too good to pass up, but I'm also going to be extremely careful to pay that off in full well in advance of the expiration of that "same as cash" expiration, lest I get socked by 21% interest RETROACTIVELY compounded back to the purchase date (that's where those "deals" get you -- too many people don't pay attention to that retroactive thing). In that case, it's "debt" that I can knock off anytime, but choose not to because it's literally not costing me anything to do so as long as I pay attention to it and play their little game.
I also have some debt on one "traditional" card as a result of the trips to Japan and Germany I took, but it's not a HUGE amount, and those definitely fall in the "while I'm young enough to enjoy" it category. I know a financial advisor would hate that thinking, but screw it -- I'm well on the way for retirement savings, I'm not scraping pennies together to eat and pay my utilities, live a little.
Given that I haven't actually PAID that debt off even though I'm technically "smart enough" about all this, I can easily understand how people with less understanding on how this works get themselves in deep trouble.
Congratulations on a successful student loan experience. The truth is that the system works as it did for you for most. But for those that it doesn't, it hurts them a lot... and when you are talking about an exchange for something that is such a public good, as education should be, that is hard to swallow.
The biggest change since you and I attended in the 90's is the significant increase in tuition which is causing a greater disproportion between a student's marketability from the completion of their degree and the amount of debt they incurred to obtain it.
Another big difference is the advent of private educational loans. The federal loans aren't enough to cover today's tuition so students are walking into private loans, which while offered by the same lenders their federal loans came from, are not regulated by the government.
My having left the financial aid industry has been bitter sweet to me. On the one hand I am relieved to no longer be watching students and parents fall into unmanageable levels of debt. Often they do this under the implied trust that we as aid administrators would never steer them wrong.
On the flip side, however, I miss conducting the debt and money management workshops I used to do. I used to love seeing the students' eyes get wide in the 'aha' moment of getting what I was explaining. I was always careful not to portray debt as a negative thing, but rather as something they need to be knowledgeable about in order to make it work for them rather than against them.
Ian is lucky in that we dumped $7K into the Michigan Education Trust when he was a year old and now his tuition is paid for. He's still going to have student loan debt incurred for living expenses, but the amount is so much lower than it could have been. He still doesn't own a credit card.
Unfortunately our debt, although not nearly as bad as two years ago, is still astronomically high. At least our cars (Gordon's 1999 F150 and my 2001 Saturn) are paid off. But we are barely squeaking by.
The one thing we've learned over the past five years is we can make do with much less than we did when Gordon was making $90K a year. I just wish we'd not spent as much as we did so foolishly during those "good" years.
Oooh oooh a topic I like almost as much as coasters! :)
I haven't seen this movie, but it sounds like it blames the lending industry for a lot of the nation's debt problems. They are only half the problem. And this industry only exists because there are plenty of people out there who don't understand the concept of living under their means.
I graduated with about 23k in student loans. The payment was about $250 a month. I consolidated them at 5.3% and I get .25% discount for auto-paying and I get another 1% off after making 36 straight payments on time. After working for just under two years I have enough saved/invested that I could probably knock this out completely, but the rate is low and I can probably get a better return on my money somewhere else - even an online savings account basically gets me to even. So I think of this as "good" debt and will probably just pay it off over the 10 years.
I don't really feel like the student loan industry is among the biggest offenders. I lean more along the lines of mortgage brokers and real estate agents getting people into houses that are too big/expensive for them to afford. Again, if people understood that bigger homes mean bigger taxes, bigger upkeep costs, bigger insurance costs, etc and really did their homework, they wouldn't fall for this. People do the same thing with cars. It's on a smaller scale, but cars are depreciating assets which almost makes it worse. The fact that most new cars lose like 25% of their value as soon as you drive them off the lot ought to make most people look real hard at used cars. Let someone else drive those early expensive miles.
I listen to Dave Ramsey on occasion and he promotes paying off everything except your house as soon as possible and never having a credit card. I don't really agree with this. I use a credit card to buy literally everything and I pay it off in full every month. It not only means I keep the money in my bank account longer earning interest for me, but I usually get a couple hundred bucks in cash back each year from them. So I agree with Jeff - borrowing when you know you can pay it back is not a bad thing. And being able to borrow at zero percent on a credit card or get the absolute lowest rate on a mortgage means you've done a good job being responsible in the past and these rates are sort of your reward.
One thing I think could be improved is the education of people about personal finance in high school/college. What I know, I learned from my dad and reading online. What he knew, he learned from his dad and maybe reading the paper or magazines. In all my years of school there was never one class about this subject. There was learning how compound interest works in math class, but beyond that, I really can't think of anything. I was required to take all sorts of liberal arts classes in college. I was required to take physical education classes. Why not a personal finance class that teaches people the basics of this stuff?
The biggest advice that I could give to anyone having trouble living under their means is to "pay yourself first." Have a percentage of each paycheck automatically sent to your 401k - at least enough to take advantage of any company match. Not taking advantage of that is like throwing free money away. If you're not eligible for a 401k, send it a Roth IRA which allows for tax-free growth of your money. Better yet, do both. Then send some to an online savings account like HSBC or ING. Then live off of what's left. For a while it will seem like you are living month to month and struggling to get by, but all along you are amassing a nice pile of change that will put your future on solid ground.
Here are a couple blogs I read pretty regularly (bot quite as much as Pointbuzz and Coasterbuzz) that are pretty interesting and cover a pretty wide variety of personal finance topics: