Showing posts with label college. Show all posts
Showing posts with label college. Show all posts

Thursday, April 19, 2012

How Do We Do It?

The subject of money comes up more and more as the Great Recession drags on. Folks have been downsized or had their hours cut, or had inflation magically increasing prices in random areas such as food, fuel and medical insurance that are clearly not an indicator of inflation, chipping away at their purchasing power or whatever. In general the poor poor pitiful me stuff has been on the rise. I have been looking around my residence and thinking.

Right now I am sitting in a pretty comfortable recliner that we purchased slightly used for $100, new they are about 4 bills. The couch next to it was purchased by my parents in 1986. The coffee table in front of the couch was free as I found it beside a dumpster and carried it home. Our dinner table cost Wifey (actually her mom) $30 or something back in college. The chairs are slightly mismatched because we combined the best of what both of us had upon combining stuff. Our printer sits on a nice butcher block that my Dad handed down to me at 14 or so. Our entertainment center thing cost $80, it is sort of a wierd piece and we probably won't take it back to the states with us.
We have a coffee maker I got as a used hand me down about 8 years back. Our electric griddle is about the same age and has some issues with maintaining temperature and hot spots. Our Queen sized bed cost Wifey $50 back in college. I think the frame cost us $100 in Georgia. The bed in kiddo's room cost us $30 if I recall. We paid an average of about 15 cents on the dollar for all of his stuff. He thinks toys come from Grandma, thrift stores and the dumpster. So much so that he urges me to go to dumpsters when we walk by them.

We wear clothes until they fall apart. Wifey recently decreed that a pair of shorts of mine had to go. Something about refusing to sew a half dozen holes and not wanting me to be arrested for public indecency in the near future when those holes expanded. I think they were about 8 years old. My clothes are purchased at used stuff places or Walmart. The hat I wear when not at work was given to me as a promotion. I regularly find myself wearing entire outfits of stuff I was given or scavenged. Wifey'c clothes come from thrift shops, personal sales, gifts and apartment stores when they have good sales. Kiddo's clothes are from personal sales, gifts or once in a blue moon purchased new when something really cute is at the store.
Our stuff is all servicable if a bit worn and quirky. When something stops being servicable we replace it though of course we try to get a deal.

I realize that we are different from most folks. I have had enough conversations with people to know that what we do is not common or normal. The income I bring in is decent, but not anything worth bragging about. We probably live on 60% of my take home wages. Wifey stays with kiddo and takes care of the homefront. We paid cash for both of our modest but decent vehicles and do not have any debt. We have put some money away for emergencies and have some fairly decent preps for our place in life.
Aside from guns, precious metals and vehicles the most expensive thing we own is a Sony flat screen TV we spent $800 or so on, which was a huge deal for us. After that we have a couple lap tops that cost about $500 new and it goes downhill rapidly from there.
This is why every time somebody talks about how they can't afford to prepare or save or pay off debt I WANT TO SCREAM BULLSHIT, YOU CAN BUT JUST DON'T WANT TO!

I am not saying that you could or should live like we do. My point is that folks can choose not to be like the broke jokers with maxed out visa cards and home equity loans who live next door. It is fine if you don't want to but it is certainly possible. You can afford to prepare and or save if it is important to you and you are willing to do what is necessary to make it work. I hope this all gives you guys something to think about.
Edited Later to include:
Commander_Zero said...It's an easy enough thing to do on your own, it's bringing the wife onboard that makes or breaks it. If you're both genuinely on the same page about it you have a good deal going...you each act as the others accountability partner.

Once the debts are paid off, its pretty easy to live within your means. Everytime I feel weak and want to splurge I listen to some Dave Ramsey on the internet and it gets my head back on straight. (And usually puts me into a work-and-make-money frenzy.)

What are you doing with the other 40%? Socking it away, Im guessing? Saving for a house? Just wondering what the longer terms goals are.

I wanted to discuss this on the main page because it brought up a couple points worth discussing.
While spouses are a whole subject of their own it is worth touching on. I think it is fair to say that nothing significant can happen in a marriage without both spouses being on board. If you are the guy who takes a spatula to the mayo jar even though you have a full jar in the shelf a spouse who blows through money shopping faster than a cokehead gambling addict it will be an issue. Having some degree of financial compatability is important for a relationship to work and is one of those practical things folks so often ignore when choosing life partners. This is particularly problematic for folks who do a financial 180 degree turn after a decade of marriage. The scenario where you want to go all Dave Ramsey and the Mrs still likes to take her visa shopping for designer clothes is an ugly one. In a lot of ways I have more sympathy for the spouse who wants to keep on with what she signed on for. I wish there was a good answer but if there is I don't know it.

A partner who is on the same page helps, especially if your weaknesses are different. She is strong when you are weak and visa versa. Also generally being passionate about the same goals helps too. Folks aren't usually willing to sacrifice much for things they aren't passionate about.

I agree with you about debt. The thing is that both the good and bad cycles are self perpetuating. If you pay down debt it is easier to focus on paying it off. It is a lot easier to pay cash for stuff when you have no bills except basic living expenses. Then you can really start getting ahead. On the other hand when your income is going to a couple car payments, a payment on a toy like a bike or boat, 2 credit cards and a line of credit on the house it is very hard to save up to buy stuff with cash. Also you are paying a bunch of interest for the privledge of paying tomorrow for a cheeseburger today. The further you go in this cycle of debt the harder it is to get out.

As to the other 40%. You pretty much guessed it. For awhile we were putting most of it into our emergency fund, then we started making huge payments on my student loan. Sometimes we save for big stuff (maybe that isn't saving parse but more of a save to spend which is kind of it's own category but I digress) like when we need a car. About 15% goes for retirement. A little bit goes for precious metals. Some goes for kiddo's college fund.

You are 2 for 2 with guesses. Right now we are saving to buy a house. If it works out right we will have a solid downpayment in a bit more than a year.

As to long term goals. Continue to not make stupid decisions. Buy a reasonable home and pay it off at an accelerated rate. Help the kid(s) pay for college. Continue to save for the future. Get a little doomstead on a few acres in the middle of nowhere. Put away enough cash to retire with some dignity or at least not on a diet of rice and dog food. Also I want a Harley.



Monday, January 9, 2012

Angry

The concept of student loan repayment forgiveness as a public program fills me with rage. I have talked about this before so there is no need to rehash it in full. It doesn’t bother me that for a year we put a huge amount (something like 1/3rd) of my wages toward paying off my loan. We decided that instead of making normal payments forever we would knock it out and of course I borrowed it so paying it back is only fair. However that some folks should get a pass because they borrowed a lot will have a hard time and (probably in part due to degrees in underwater basket weaving and gay transgender Eskimo studies) paying it back seems insane to me. We could debate the politics and economics of higher education all day long but if you borrow money you should pay it back. A guy who makes $25k a year and was stupid enough to borrow 40k for a big shiny truck shouldn’t get a pass anymore than someone who goes to an expensive private school and gets a degree which tends to pay poorly. Hint; don’t borrow a ton of money to go to a private school and study communications or education or sociology. If you want to go into those fields I recommend a much more reasonably priced public school.

Also the topic of mortgage write downs came up again somewhere. That might fill me with even more rage. The reason why is simple. I haven’t bought a house yet, dun dun dun, because I couldn’t afford it. Sure I could make the mortgage but I didn’t have any savings, let alone a down payment. Idiots and hopeful fools who made bad choices I was smart enough to avoid should not be rewarded. However if it is any conciliation to me I don’t see this one happening. It is clear to me that the trend is to hook up the banks at the expense of the people, not the other way around.

It pisses me off when we bail out individuals or companies who make stupid choices. Here is an n unavoidable truth, people learn from stupid choices by suffering their consequences. A person who makes stupid choices and feels the consequences stands (assuming he doesn’t blame everybody else) a good chance of learning a thing or two and just maybe making better decisions in the future. If we bail these idiots out they will not learn how to make good choices. Also there is significant risk that we are telling a whole other group of up and coming idiots to go ahead and be idiots as the government has got their stupid back.
Both of these things make we want to start a fire bombing campaign to show my displeasure. I don’t even know who I want to firebomb, I am just really angry.

On the bright side I had a really good talk with Wifey today which as always, helped turn down the burner under the boiling pot that is my rage. She pointed out that we can take a good amount of pride in knowing that we are doing the right thing. Also that in years to come (these programs come and go, woe is a person or a business who is only viable because of a government subsidy or tax deduction) we will be fine and able to take care of ourselves because that is the sort of people we are.

Note, this article is about a month old. I am trying to clean out my writing folder a bit.

Monday, June 20, 2011

The Next 30 Years Thinking Small

It has become abundantly clear to me that I will have to work harder, smarter and make better choices than my parents did to achieve comparable results. Since I have made decent choices and seem to be continuing to do so I'm not that worried about me. Presumably Wifey and I will do pretty OK. However when it comes to Walker I have some concerns. I grew up in a superpower and more likely than not he will grow up in one power among many, certainly a large and rich country but not as large and rich as it used to be. I am sure the risks for only acquiring mediocre skills and making mediocre choices will be far higher for him. I think that like most things the answer is small and local. I can make sure he gets a good education and has access to college or a trade. We can, through positive modeling push him in these directions. We can make sure that he values education and knows how to handle money. We can also teach him some useful life skills. I guess beyond that it will be up to him. However since his biggest dilemma right now is the fact that he wants to feed himself and is unable to do so effectively (drops stuff and smashes it all over the place) we've got awhile to worry about his path as an adult. However we have started funding his college so it isn't that far away. Like a lot of big goals the key to that seems to be planning. We have done the math and it is certainly doable for us assuming an average income. However if we did like so many parents and started thinking about it at 17 we would be hosed. Prior planning prevents piss poor performance.

Saturday, December 25, 2010

It Was a Merry Christmas

It was a very nice Christmas Day for the TOR Clan. Pretty traditional really; we opened presents, had some breakfast, relaxed for awhile, watched some movie FIL watches every year (don't remember what) and then had a big dinner. After that we watched Toy Story 3 which little sister in law really enjoyed. It has been a quiet evening. I really enjoyed being able to take about a nice long nap between lunch and dinner.

We had a really good Christmas haul this year. I got a mag light, an energizer LED lantern, a Garmin E Trex series GPS, a Kindle, a silver dollar (I was pleased to hear they got it awhile back when silver was a lot lower), enough cash to buy an external hard drive and a few other things. Wifey got some cash, a Kitchen Aid mixer with some accessories, a kit to make baby food at home and some various other stuff. Walker got a ton of clothes, toys, various other stuff and almost a hundred bucks to go into his college fund.

I noticed that most people spent about as much as they normally do this year. The last couple of years may have been down a bit. I did however also notice that people (us included) seemed to put more thought than normal into the gifts they purchased. Instead of just grabbing something as people can do they seem to be putting some real thought into it.

I am looking forward to getting the GPS up and running. I have an old Magellan somewhere but the user interface is seriously lacking. That was back when them and Garmin were neck and neck. Since then quality has improved a lot and the Etrex is pretty darn easy to use. I am quite eager to check out the Kindle. I think it will be useful instead of hauling a dozen books here or there. It won't replace a good old fashioned book for situations where there is inclimental weather, rough use and such. However for something like a deployment or other situation where I will have decent (using a very low standard of dry, minimal electricity acccess, etc) accomodations this will be a lot easier than  30 pounds of books. Also seeing as we move a lot sooner or later the sheer weight of physical books will start to be an issue. Of course I will continue to purchase prep type books in a physical format but for a new fiction novel or just something I want to read the Kindle may be the way forward.
I hope everybody had a really nice Christmas.

Wednesday, October 27, 2010

Medical Insurance and the Fundamentals

Wifey and I were talking last night about our worries, concerns and all that stuff about what is going on with Walker. One thing that occurred to me is that we aren't worried about paying the bill. That is because we aren't going to have a bill because we have good insurance. Not so long ago I was laid up myself with the pneumonia and it could have been a real problem for us.

We have good insurance through my job and it is one of the real benefits. Some jobs offer insurance and others don't. I do suggest you consider that as a piece of the overall compensation for a job. Sometimes particularly when you look at the military the numbers are a bit deceiving.

I am not saying everyone should have X or Y type of medical insurance or even needs necessarily medical insurance at all. Certainly I don't think people should be forced to purchase coverage any more than they should be forced to floss or eat vegetables or save or exercise even though they are smart choices. However I am saying that if you can possibly afford it you are foolish not to have a serious plan for dealing with the costs of medical issues which may come up. Particularly if you are active or your family has a woman of child bearing age it is foolish not to plan for this scenario. A lot of folks talk about all of this self healing herbal stuff. I think that is great but matter of fact it doesn't replace being able to get legitimate medical care for serious illnesses and injuries. When I was laid up with pneumonia all the herbal tea and st johns wort in the world wouldn't do what IV antibiotics did. A nice salve of naturally occurring elements will not replace an x ray and a cast in healing a broken arm.

Medical bills are, if memory serves me correctly, the biggest leading cause of bankruptcy. To spin in in a way that may seem important to the beans and bullets crowd it is really hard to carry around all your beans and bullets in the car after you go broke trying to pay medical bills and end up homeless.

I recall an analogy used by some smart financial type. He described priorities like building a house. The foundation was insurance and your emergency fund. The main floor is retirement planning, paying off your home and investing. The roof was stuff like college funds for kids, charitable donations, etc. The point is that if you try to skip steps you do not have the proper foundation (pun intended) and at the slightest tremor or storm the whole thing will fall down. You could weave preps in there at every level. Maybe the basement would be a real basic 2-4 weeks of food, gun with some ammo, water filter, etc. Real basic but good enough for a power outage or hurricane. The main floor might be a lot more food, heating and lighting plans, alternate shelter plans, a couple more guns with a good amount of ammo, clothing, etc. The roof might be precious metals, barter items and even the coveted off grid retreat complete with alternate power plans.

Survivalists far too often focus on statistically unlikely events instead of realistically and likely ones.  For example this year and the one before, and the one before that we have not tapped into our food storage for anything but getting something we forgot at the store for a recipe. We haven't used our medical supplies for anything but normal occurrences nor the rifles for anything but fun at the range. Our cases of ammo have not been opened and deployed in anger. We have however over the course of the last couple years made a few trips to the hospital. So which is more important? Personally I would say medical coverage though it is simplistic to say the two are mutually exclusive. The point isn't to say you need this or that but instead to talk realistically about how to face life's little challenges. Taking care of the basics like medical coverage and emergency savings before most other stuff just makes good sense.

Thoughts?

Wednesday, July 14, 2010

9 reasons why having a child is like being at a frat party

9. There are half-full, brightly-colored plastic cups on the floor in every room. Three are in the bathtub.

8. It's best not to assume that the person closest to you has any control over their digestive function.

7. You sneak off to the bathroom knowing that as soon as you sit down, someone's going to start banging on the door.

6. Probably 80% of the stains on the furniture contain DNA.

5. You've got someone in your face at 3 a.m. looking for a drink.

4. There's definitely going to be a fight.

3. You're not sure whether anything you're doing is right, you just hope it won't get you arrested.

2. There are crumpled-up underpants everywhere.

1. You wake up wondering exactly how and when the person in bed with you got there.

I can't wait. Hat tip to Maggy of our sister blog for this amusing comparison.

Saturday, May 22, 2010

Little Bit of Life: The Dreams We Were Sold and Reality

This relates to a series of posts I did awhile back (1, 2, 3). My Generation of mid 20 somethings to 30ish were largely sold a pack of exaggerations and outright lies by our parents, teachers and society at large. We were told that the roads are paved in gold and if we get a college degree or a skilled trade (mostly a degree) it is going to be easy and we will quickly settle into very comfortable lives a la the American Dream.

My values and beliefs do not allow me to absolve people of responsibility for their actions.  Somebody who chooses to go to a private school and take 50k in loans to get a degree that correlates with a job whose starting salary is 27k is in a tough spot of their own choosing. A person who makes 30k somehow got a loan for a 350k home then go figure can't pay it is a fool who deserves their misfortune.

It is hard to look beyond what most parents, almost all teachers and society tells us. Especially for teenagers who are sold a dream of how awesome a private college, or college at all it is hard to see the truth.

The thing is that baring programs at a few elite schools which get you internships that lead to crazy high starting salaries things aren't cake, even for those who manage to leave college with that piece of paper. When people graduate or otherwise enter what I call the big boy job market there is a choice. You can get stuff/ whatever rather quickly by borrowing money or you can wait and slowly accumulate things by paying cash.

A person with a normal albeit modest starting salary who goes out and buys a new average but respectable car (Honda Civic, Toyota, etc) and furnishes their apartment/ townhouse on a store card then gets a nice entertainment system on a payment plan will have some nice things 2 months into their job. However they will be paying for those things forever with lots of interest. Also they will be so busy paying all those loans, not to mention their student loans as well as rent, food, utilities, insurance, etc. That means instead of getting ahead they are just trying to catch up to the stuff they don't need they already have bought.

If you follow this blog halfway you already guessed we went the cash route. I am not going to lie it kinda sucks. There are times I get pretty down on the whole thing. Some days the knowledge that you are making the right move doesn't matter much when you have a hard time getting your piece of S car to sputter its way to work, come home after a long day to sit on a beat up hand me down couch your parents bought 25 years ago and try to watch a piece of junk TV without a remote control. I work hard and save and don't have much to show for it. You worked hard to get through school and get a solidly respectable job, made the right choices and things just come so darn slowly.

 Life is so often two steps forward and one step back. Sometimes it is one step forward and two steps back. We scrimped and saved for a long time to have a half of a decent emergency fund. Wifeys car died and that cash became a low end used car. That used car four hundred dollar'ed us a couple times and then proved entirely unreliable and died. So we had no emergency fund AND no second car. We started saving again and finally built up a comfortable 3 month emergency fund. We then saved up and bought a decent used car which should run well for a long time. We put money aside every month for furniture and slowly but surely our house is filling up with halfway decent stuff. In a year or so it won't look like a college kid apartment anymore. At least in our life things are slowly but surely coming together.

We are now focused on getting my student loan wiped out in about one year instead of the projected three. In the last two years we will save what was going to the loan and that will be a solid down on a modest home. We will then work to pay that home off at an accelerated rate as well as saving and other such stuff.

Even though it sucks some days I like that we only have one outstanding debt. Student loans suck but since it got me into a job with a solidly decent income and benefits it was a worthwhile investment. No car payments and couch payments and TV payments or whatever. Of course I would love if things could go faster but I am happy with the direction we are moving in.

As a final thought if we look at history with some perspective we are all just a bunch of whiners; blah blah blah it takes a long time to pay off a student loan or yadda yadda yadda I can't afford a 4,000 square foot mansion on a janitors salary, I can't afford to buy a fancy boat and lastly, I never saved anything and now at 60 when I want to retire it is somebody else's fault. Seriously do a little bit of reading or just google terms like siege, crop failure, famine and black death. Heck take a walk in an old cemetery (pre 1900ish) and read some headstones. I do not know a family who lost 5 kids to cholera or was wiped out by smallpox or influenza or starved to death in a famine. Seriously we have it pretty darn good.

Friday, May 14, 2010

Ideal Times To Make Smart Intentional Choices

So much of what we talk about in terms of preparedness costs money. Not scrounging spare change from your ash tray to buy a 40 of Busch Light but real money. It is nice to say that you can just cut your expenses by doing basic prudent things and then there will be plenty of money for all sorts of preparedness. While more realistic than the spare change plan (though that's good for a 40 every other week or so) there is not that much wiggle room (well without the "have to have's" which back lots of folks into corners) in most peoples budgets.

Of course food bills can be cut as can entertainment and you can ditch the 900 channel cable and such without radically changing lifestyles there is a limit to what can be done. Maybe you want to radically change your lifestyle and maybe not. I can't suggest what you should do, that's on you. Substantially reallocating income you are used to having is quite hard and most people just won't do it. One could say they are sheeple who just want their stupid comforts and thus deserve any misfortune that may come their way. However I would submit that through this blog I interact with a lot of decisively non sheeple folks who aren't willing to radically change their lifestyles even to pursue goals they deem worthwhile.

However when writing an email to a friend today I realized something, well more that I realized something worth mentioning on here. To be blunt most of us spend or otherwise allocate (to savings, preps, whatever) every penny that comes in. As talked about before things have to add up. When you look at setting up an emergency fund or maybe buying a "retreat" or whatever those dollars have to come from somewhere.

The easiest resources to intentionally allocate are ones you aren't used to having! Starting out a job or getting a promotion is the perfect time to make a smart intentional choice. My Co Author Ryan just finished Law School. Soon he will be making significantly more than he has been. He will have the choice between living a low key lifestyle and being able to do some real good things or not. From what he has said in our conversations it will be more of the former than the latter. As his close lifelong friend I sincerely hope he makes the right choice.

Not long ago I got a nice raise. We could have increased our lifestyle and in 3-4 months life would be just the same albeit with a bit more fun money and a but less concern about the budget and a couple nicer things. We didn't do that. Instead we decided that making our lives better is more important than an extra dinner out now and then and some random stuff. We really wanted (not going to say NEED but darn close) a better and more reliable second vehicle. Prior to said raise we really wanted a more reliable second vehicle. Saving for it at a couple hundred bucks a month or whatever we could stash without really taking from other places would have taken roughly forever. Enter said raise. Around this time Wifey started working close to full time.

We took that money and put it away. A few months later we had enough to get a reliable second vehicle. Now we can take that percentage of our income and put it towards our next goal which is whipping my student loan and becoming entirely debt free. After that we will get to the next goal. It is a lot easier to make smart intentional choices if you don't have to worry about which part of your lifestyle or other current plans is going to have to be cut.

Next time you get a raise or a bonus or come into some money take a bit and do something fun that you otherwise wouldn't. Go out to a downright luxurious dinner or take a little trip or buy something you've been wanting and can't justify or whatever. Enjoy whatever you decide to do then put the majority of the money towards smart intentional choices to put you and your family in a better position. It is a lot easier to make what you know to be smart choices (buying stuff with cash, paying down debt, making an emergency fund, significant preparations, buying some land, whatever) with money you aren't used to having.

Take care of each other

Tuesday, March 16, 2010

The American Dream

My recent post on Savings and Debt plus the follow up lead us down an interesting path. I have gotten my mind stuck on this topic for a few days. In order to fully grasp my thoughts you might want to skim through these past posts (1, 2). Now that I have referenced myself a lot lets get to semi new thoughts.

I think most of us grew up on more or less the same American Dream. Do the right thing and study hard then get a good job. By doing this you will be able to do a bit better than your parents did, assuming equitable career choices. Somewhere along the line you get married and buy a nice house with a white picket fence. Get a lovable dog and a good (not necessarily flashy but not shabby either) family vehicle. Join the local Rotary club or the Kiwanis or Lions or Moose lodge (in order depending on how much you actually want to help people and how much you like to party:) have 1.8-2.4 kids who also do the right thing and study hard. Maybe get a water ski boat or a  hunting cabin or a time share in Hawaii. A few more years down the road and then a gold watch and a comfortable pension. Now you have time to make ships in bottles or spend winters in Arizona and of course enjoy the grand kids.

So where are we now? Some folks would say that the American Dream is dead. I would not say that it is dead but I would say that it is realistic for fewer people than it was 40 years ago and far less realistic than 60 years ago. What were some factors that let then, well be then.

If we look at 60 years ago we see 1950. Things were pretty darn good. A lot of this was because the rest of the world was basically blown to bits and missing a big chunk of two generations of workers, under the iron grip of Communism or both and the rest of the world was still largely undeveloped.

40 years ago the nations largest employer was General Motors and wages started at the equivalent of  $17.50. Someone could graduate from high school or get out of the Army and walk into a good job with the kind of wage where you can afford the American Dream. Most jobs also had pretty good stability in addition to health care and pension plans.

 So why are things not going so well now? I think it is a combination of a lot of different factors. Lets look at some of them:

First as noted pretty much everywhere real wages are going down for a lot of jobs. Most notably manufacturing which used to be the ticket for a minimally educated and skilled person to have a solidly middle class American Dream life has taken a real hit. A nice young man can't graduate from high school and get a job at the plant with a secure future for him and a family anymore. The same sorts of folks are often getting the same sort of jobs; those jobs are just buying less.

Also what we consider to be "normal" has gradually trickled up. Homes are bigger and not surprisingly more expensive. We also fill our homes with all manner of expensive gadgets and electronics. People in 1970 did not have $150 a month IPhone and Blackberry packages or tv's that cost as much as a decent used car. As with anything else when the cost rises it means fewer people can afford it.

The above two reasons are the biggest issues at hand but a couple others are in my opinion notable.

Interesting credit and debt have also been factors, if smaller ones.  I am under 30 and I distinctly remember a time when many stores and shops did not accept credit cards. Debit cards were still a dream for some time after that. It is pretty hard to rack up debt when you can't buy stuff on credit. Of course stores have had payment plans and such but not too long ago most people only borrowed money for homes and cars.

Along with the long period of Greenspanian artificially low interest rates, an explosion in home prices, Fanny, Freddie (and eventually derivatives) home mortgages as well as other debt started becoming more and more available to less and less qualified people. I guess when it started bankers were confident that the long and reliable increase in home prices made them getting their money back a sure deal. Later on bankers made their quick money and sold the loans off anyway.

Somewhere along the lines it became more socially acceptable to be further and further in debt. Home prices were a huge factor in this. Getting that 3 bedroom 2 bath with a decent yard got a lot more expensive, but it was still the dream.  People used to have to wait until they could buy something or a reasonable person who was concerned about getting their money back (from them, not in general) would give a loan. For the reasons listed above the grip on reality in our economy loosened a bit and then just plain took a vacation for a couple years. Also to make matters even worse as it got more acceptable to be in debt the American Dream got even bigger.

So people were having a harder time and trying to reach bigger goals to boot. Also folks were were getting further into debt trying to get the American Dream. Somewhere along the line maybe a nice slightly idealistic idea turned into an unrealistic, unsustainable and warped vision of its former self, at least for some.

As Mayberry noted "EVERYONE is force fed the "American Dream" virtually from birth." Our parents, family, teachers and friends as well as the ever present media say this is a good thing and we should want it. I certainly would not say that (at least in the slightly more retro interpretation) it's not a nice idea. However sometimes the dream isn't for everyone, at least not today.

Tomorrow I will talk about defying the norms.

Friday, March 12, 2010

Comment Moderation Fun, Savings and Debt, Life Choices and Education

 I moderate comments and have been doing so for some time. IMO comment sections on a relatively popular (ie read by other than immediate family, friends, etc) open blog often regularly turn into a huge mess of flame wars with spam and extremist hate speech in between.  I really tried and it just doesn't work. I don't know a blogger who has had success with it. At the end of the day I am Captain of this ship so I sail it the best I can, or at least the way I want. One of the biggest downsides of moderating comments is that they slow down the flow of ideas and make those great sideline discussions which either nail down a point or move in an otherwise interesting direction harder. However you take what you can get.

I do like that I get to see all the comments. Usually if it is about a fairly recent post I know what is going on. Sometimes I go back and comment. Other times something jumps out at me, maybe it is interesting or brings us in a new direction or whatever. This is one of those times. Here was a comment from my recent post on Savings and Debt.

5:59 said "Chris: It's easy to say, "they made their bed", but it's not that simple. When an 18 year old is leaving high school, everyone in the world in telling them "you should go to college"; they don't know any better. They go and get a piece of paper and end up with 50k in loans and an entry level job and realize by about age 30 that they should have taken up a trade. It is a problem with our society, and you can't blame an 18 year old for listening to "older, wiser" people.

It is damn near impossible for a family to pay off 50k in student loans, have a decent used car, a house that is out of the city enough to be somewhat safe, and still put away a 3 month emergency fund.

That is not an accident, it is all by design of the government to keep everybody underfoot, and I realize that, but it still pisses me off. We make decent money and are not living above our means, but I can barely afford to buy a little extra food to put back every month let alone put back 3 months savings."


TOR here: Well  now it is time for my thoughts. This comment reeks of a lack of accepting responsibility. It is full of they and them and everybody and society in an effort to somehow pass on responsibility to everyone else. We will revisit this theme in a minute.

Educational costs, debt and career prospects/ income are an interesting discussion. Our society seems to want people to do hard jobs (education and social work come to mind) for modest pay and require expensive degrees. We can't seem to understand why these jobs often (certainly not saying it is all of them but if you work in either you know there are some) attract lazy or not particularly capable people and that the turn over is high. Don't know what the answer is but I imagine either things will keep slogging along dysfunction-ally as usual or something in the equation will change. In any case getting back to the point.

On average a college graduate (BA/BS) earns a heck of a lot more in their lifetime (think it is a million dollars) on average than non college graduates. I do think those statistics are somewhat skewed for two reasons. First in general (remember we are talking about millions of kids, not onesies and twosies) the young adults who graduate from college are far more motivated, smart and hard working then their non college peers. They could be locked in a closet for 4 years and still demolish the other kids in earnings. Secondly I think we are talking about one fairly narrowly defined group and a very poorly defined one. We are comparing adults who went to and graduated from a university or 4 year college with all other adults. Those other adults include highly skilled craftsmen, union workers, various professionals, laborers, small business owners, service employees and shiftless layabouts. The stats would probably not be so skewed if we compared say college graduates and highly skilled craftsmen.

Revisiting my first point. I have a suspicion you were talking about yourself but that doesn't really matter. I do not know you and am going to make some generalizations. Maybe they apply to you and maybe not but they likely apply to some other people. Certainly I do not want to make you or anyone else feel bad. Well except when I obviously bash somebody for being a jerk which is rare these days. I have never heard of Tony Soprano and his friends coming to anyone's house to force them to go to a certain college or take out a bunch of loans or go into a certain career field afterwords.  Eighteen year old kids can get married, sign legally binding documents, buy firearms and fight in wars. They certainly do not make perfect decisions and often don't even make good ones but that is called life. For heavens sake take some personal responsibility.

Far too often people box themselves into a corner and then complain that they are trapped in a corner. Every individual decision they make might be reasonable on its own merit but together they are not reasonable.  Lets break this down with commentary. 5:59's words are in italics and mine are not. 

...It is damn near impossible for a family. Consider your financial situation before getting married, let alone having kids. Like many things in life it is not romantic or feel good but inherently practical.

...to pay off 50k in student loans, have a decent used car, a house that is out of the city enough to be somewhat safe, Here is where many people box themselves in. They say they 'have to have' a certain sort of car and live in a certain type of place and then turn around and blame society and "the system" for their choices. They got those loans to get that degree from that school. They also chose that car and decided they just had to live in a certain place. Nobody put a gun to their head and said to drive a 3 year old shiny SUV instead of a 10 year old Honda Civic with a dented fender or forced them to live in a nice house in the burbs instead of a trailer park or a little apartment.

I really hate when people talk about how there is some sort of a system by our government to keep them down in terms of life expenses, bills, housing, etc. To be blunt that is a very unsuccessful attempt to somehow pass ownership for ones decisions to anyone but their own self. I can get how people back themselves into a corner or stay in a less than ideal situation because of work/ family/ etc. I do have empathy but that doesn't mean they didn't make and aren't still making those choices. Don't get me wrong there are all sorts of legitimate criticisms such as inflation and zoning but that is a different discussion. Pretty much everywhere Americans can make broad and diverse choices about lifestyles and housing. You can go all Dakin and shred your monthly expenses with the purchase of a travel trailer and a bit of land. If that isn't practical because of your urban setting or zoning you can get a tiny apartment and have room mates. Yeah, neither of those options are any fun but that is a reoccurring theme of most practical decisions.

...and still put away a 3 month emergency fund. Lets revisit the last point. Of course you can't save up 3 months of household expenses when you spend almost everything that comes in. In order to be able to save real money or aggressively pay down debt you are going to have to earn more money or go crazy slashing expenses. [Not saying this applies to you but it is a thought I have right now. It amazes me how people don't understand how they stay stuck just barely getting by but haven't changed anything like say; increased their income or slashed their expenses. Somehow the same pay and the same bills come out more or less the same every month. Isn't a definition of insanity continuing to do the same thing and expecting a different result?] I agree that with what was laid out as your/ the above situation the math on an emergency fund just doesn't work. If one diligently saved  the surplus 2-4% of their income towards an emergency fund it would take a really, really long time (not willing to do the math) to save 3 months of income.

Do whatever you want, it is your life. I would like to leave you with two questions to mull over. First, are you willing to take some responsibility for where you are? Second, are you willing to do some unpleasant things in the short term to make your life better in the long term?

Sunday, December 27, 2009

quote of the day

"The ideal American system would be one where the brilliant son of a janitor finds it economically feasible to earn a P.H.D in literature, and the down to earth daughter of a CEO feels equally free to become and auto mechanic."
-Anya Kamenetz

Friday, December 25, 2009

Book Review: Generation Debt, Why Now Is A Terrible Time To Be Young

I just finished the book Generation Debt: Why It Is A Terrible Time To Be Young.  Honestly I think if you are 18-35 or have a kid in that age range you should read this book. Here are some interesting snippets of the book:

-In 1970 the nations largest employer was GM and the starting wage was 17.50 in today's dollars. Today the largest employer is Walmart and wages start at $8.00.


-One in 8 adults has worked a McJob at McDonald's at some point. Overwhelmingly before they turn 30.


-Roughly 30% of jobs in the US require a 4 year college degree.


-In 1960 roughly 3/4's of grocery store workers were full time and they earned a livable wage and benefits. The other 1/4 were teenagers, moms who wanted to make a few bucks and the like. Now it has flip flopped.


-"It is simply not possible today to work enough to cover college expenses without taking a heavy toll on student academic performance." -Some study by an official organization (TOR notes: forgot to write down who)



-That the majority of young people in this country are wasting years of their lives in low wage, low skill jobs is an economic and moral disaster.


-The cause is not a temporary recession but structural changes in the economy. In income and occupation prestige, young adults are behind where their parents were at their age.


-The new reality is postindustrial, nonunion, service-oriented, highly competitive, highly flexible and technology-dependent.


-Today what is considered a basic standard of living has crept upwards.

TOR here: Lets just for a minute work under the assumption that we aren't going to run out of oil or suffer high altitude EMP blasts or a serious Pandemic or have something else happen which will lead to us all fighting our neighbors for our very survival in a small regional/ clannish structure of post apocalyptic America. Think Mad Max but with a few more bullets and no gas. Even if we aren't bayoneting Mr. Smith from down the block to death in order to keep the last box of Crispix on our street things are not looking great for us.

For a variety of reasons (mainly corporate cost cutting) good jobs have became mediocre jobs and formerly mediocre jobs have became dead end low paying jobs. In 1960 roughly 3/4's of grocery store workers were full time and they earned a livable wage and benefits. The other 1/4 were teenagers, moms who wanted to make a few bucks and the like. Now it has flip flopped. By and large this fairly representative of a significant change in our society. Jobs that 30 or 40 years ago would allow a guy to get married and support a family will now barely pay the rent.

Broadly speaking unions are going the way of the dinosaurs.  The day a nice young man could walk down to GM (our nations largest employer not too long ago) and immediately start earning a livable wage with great benefits for doing a job that could probably be done by a well payed monkey are over. Sorry to say but they are not coming back.

Increasingly these middle class union or union like manufacturing/ miscellaneous jobs are slipping into minimum wage no benefit dead end jobs. The way things are going the two real options are low wage service jobs and the knowledge economy. The lack of a middle ground is leaving a lot more folks slipping backwards instead of going forward. It is not that there are more good jobs or more great jobs but that there are less decent jobs.

I don't think it is fair to call all folks in this age range adultessents or brand them as lazy or shiftless or whatever. I also don't think it is fair for us to just idly sit back and blame the economy or anything else for our situations.

Part of it is our expectations. We want a job that is interesting, emotionally fulfilling and pays well. Realistically we can probably get 1 or 2 of the 3 and we are lucky of pays well is in there.

For this age group who for whatever reason do not have a Bachelors degree the picture is bleak. The traditional 'get a job at the bottom, work hard and go up' which got so many non college grads of my parents era into reasonably comfortable decent paying positions with benefits are few and far between these days. For the older folks you must realize that what worked in your day doesn't work so well now.

I definitely have some thoughts about the future of my generation (again assuming I am not bayoneting the neighbors to keep my cereal) but will leave that for another post.

[Edited to include: I received compensation for last link]

Sunday, September 13, 2009

My Thoughts on Dave Ramseys 7 Baby Steps

First and foremost I am not a financial planner or a financial adviser or an econ major or really anything at all that is close to an authority on things financial. What I am going to say is a combination of what I personally do and what I think. If you choose to follow my lead odds are it will work fine for you because it is a pretty generic and conservative way of doing things BUT all decisions you choose to make and their consequences (good or bad) are yours and yours alone. Use your head, study up and make decisions but OWN THEM because the consequences are yours alone. Consider yourselves disclaimed.

On a semi random note while writing this I found an interesting blog post about some guys thoughts on the Dave Ramsey 7 Baby Steps plan. I will go step by step and then give some more general thoughts at the end.

Anyway to my thoughts. The steps will be bold and my thoughts on each will follow.

Step 1: $1,000 to start an Emergency Fund. The first step is good. $1,000 for most people and $500 for those with pretty low incomes. Some folks might say this is not enough and that it will not 'cover' a lot of emergencies. I duno entirely about that but the big thing to keep in mind is that this is just the first step and you will save more later. As he says "$1,000 will not cover every emergency but it will cover a lot of them". I am inclined to agree with that statement and especially for someone who had absolutely no savings this is a big improvement. If you think that amount of money is a bit low because you have a big family and such then go with one months cash expenses.

I personally thing this is great because it more or less meshes perfectly with my concept of a cash emergency fund if you just have it in cash. See my old post for thoughts on what denominations this should be in.

Step 2: Pay off all debt using the Debt Snowball. In this phase you pay off every debt except a home mortgage if applicable. I do not think this is a bad idea and it is designed to give some quick wins which can be rewarding. It is worth mentioning that higher interest rates should probably have some priority. Also if you have a debt that has significant emotions attached to it such as a loan from a friend or family member it might be good to pay that off first regardless of interest. In any case paying off all your debts is a good thing to do. There is of course the implied task to avoid getting back into debt or at least use it in a better manner in the future.

Step 3: 3 to 6 months of expenses in savings. This is a very important piece also. As Dave Ramsey pointed out in his book "Money Magazine says 78% of Americans will have a major unexpected event in the next 10 years". Things happen, jobs are lost or you are cut to part time, income fluctuates, cars blow up, medical problems bring unexpected expenses, homes are damaged and all sorts of other crappy stuff happens. This will cover you in a lot of situations or at least give you time to figure something else out.

The biggest thing I learned here from the book is that most of these events are non job related so even those with a secure income need an emergency fund because stuff happens and from time to time you need more cash than can be massaged out of the monthly budget. Leaning more toward 3 months living expenses will probably work for those with secure jobs is probably reasonable and for those with fluctuating incomes (real estate or any sort of contract or comission work) and those in job fields where layoffs are frequent (construction, consulting, etc) 6 months or maybe even longer would be prudent. The point that single folks or one income families need to have a bigger emergency fund was pointed out because if the wage earner looses their job for whatever reason 100% of their income is gone instead of just part of it for a dual income family.

My biggest disagreement with this program is that (at least in the beginning which can take years) it over emphasizes getting out of debt at the expense of setting up a real emergency fund by waiting until you have absolutely no debt (except a home mortgage) to save more than the original $1,000 from step one. While having cash in the bank earning 3% and debt at a higher interest rate doesn't make absolutely perfect financial sense I believe holding more cash is probably wise. The reason I believe in saving even if you have some debt is that if things get completely fucked you can live off of savings for awhile. While lower bills will help some they will not keep a roof over your head or the power on or food in your stomach or gas in the car.

Lets say you owe $10,000 in miscilanouse debt and instead of putting every available dollar towards paying off that debt you save some. You have squirreled away about $4,000 in savings (which is about three months living expenses for you)and the $1,000 from step 1. All of a sudden out of the blue you loose your job. Having only $6,000 in debt would be helpful because you would have somewhat lower expenses but what you need is cash to survive until you replace the lost income from your job. Absolute worst case you can prioritize essentials (shelter, food, transportation, etc) and use cash to survive for awhile which makes holding some cash even if you have debt better than less debt and no cash.

While it is true that the place between steps 2 and 3 is temporary it averages almost two years which is a long time, I believe 18-24 months is what the book says. I would personally rather have debt for 2.5-3 years and have money in the bank to cover us should it be needed.

Step 4: Invest 15% of household income into Roth IRAs and pre-tax retirement. I find nothing to argue with in this one though getting back to my last point I do think it is dangerous to postpone saving for retirement. If you stick perfectly with this plan it will work but it is always easier to save for something (especially as abstract for us youngsters as retirement) next month. Maybe you aren't able to save 15% but at least save something NOW AND EVERY PAYCHECK. We need to up the amount we put away for retirement. Got to think some and talk to Wifey about this matter at a later date.

Step 5: College funding for children. I think if parents have their financial house in order making preparations for childrens higher education is absolutely the right thing to do. How much, when and under what conditions Mom and Dad will help Timmy go to school is a stand alone book. However isn't it best to let your opinion and the circumstances decide these matters with enough cash saved to back it up whatever seems best? There was some fairly specific advice on this matter in the book. It seems like the key to this is planning early and sticking with it. Unless you are fabulously wealthy and know 100% that when the time comes you can just write a check you need to plan.

Step 6: Pay off home early. Can't argue with this step in any way. The great point was made that while most people say this just isn't realistic it is IF YOU DO NOT HAVE ANY OTHER DEBTS!

Step 7: Build wealth and give! Invest in mutual funds and real estate. Got nothing to argue with about this one.

Now for some more general thoughts. I think all do the steps are good but don't really think that working on one means another can not be addressed. In particular I think that following the steps exactly is a great thing to do to get out of being in a real crappy financial situation. However I am not convinced that someone who is already working on their debts (if applicable), saving for emergencies and retirement needs to radically change their plan.

Also I sort of disagree with Dave Ramsey on one thing. He is absolutely against car loans and often the first suggestion is to get rid of a car with a loan and buy a couple thousand dollar junker for cash untill you can pay for better. Of course having a brand new truck that cost 30k and a car which cost 20k and payments for both with a combined income of 50k a year is insane. Selling these expensive cars which the people can not afford is an easy decision to make.

I think saying that all car loans are equally horrible is overly simplistic. Having a huge loan on an expensive car is stupid but a smaller loan on a reasonable car is not the same thing.

I personally disagree with that plan simply because junker cars break all the time. Of course any used car (heck any car really) are a bit of a craps shoot but those in the $2,500 and below price range seem to cause the most problems. Realistically for a lot of folks $2500 or so is about the amount of cash they can readily scrape together in cash.

Maybe I feel this way because we took this advice and got burned. The last car we bought fell into this range and we bought it for cash. It cost us several hundred dollars in miscilaneous repairs over the course of a few months and then died. We later sold it for $400. I know lots of people who have had similar experiences. Sometimes you might get Grandma Johnsons used Honda civic and drive it for 100k but at least as often you will get a car that either $500's the crap out of you or just dies, or both. [Yes I am aware that some good reliable vehicles can be found in this range and I am super happy you had great luck with the one you bought. That you need to mention it goes a long way towards the exception proving the rule. Also for the super mechanical these cars may turn out OK for you. ]

What we should have done is taken a couple thousand bucks of our money and then got a loan for enough to get something relatively new and low mileage say 7,000 dollars for a good few year old Toyota with reasonable mileage. Yeah having debt sucks and so does paying interest. Then again at least in that situation you know what you will be paying every month and the odds are high you will have a car that is trouble free for awhile.

I certainly do not think having a car/ truck payment is ideal. However you can probably make a lot worse decisions then getting a loan (at a reasonable rate) to purchase a reasonably priced reliable used car which you will drive until the wheels fall off.

Guess those are my thoughts. Would you like to share yours?

Friday, May 1, 2009

A few drinks in and thiese things are really pissing me off

This shit is so fucking dumb. I get that in a 24 hour news cycle there needs to be some filler and all that stuff.

Congress is talking about how the BCS system is a problem that needs to be addressed. Some dude in Congress was citing the interstate commerce clause as a reason to start meddling and potentially pass some legislation to this effect. I get that the interstate commerce clause has been interpreted to mean the federal government can get their hands into anything they want but seriously WTF? We have two wars going on, our economy is in the crapper, a nuclear armed nation is within spitting distance of falling to the fucking Taliban (it worked out real well for us last time those asshats were in charge of a nation), we are potentially on the verge of a pandemic and we our elected representatives are talking about fucking college football?

Also lets give Mrs. California some peace. She doesn't think gays should be able to get married and she told Perez Hilton her opinion which did not make him happy (maybe someone should teach him tolerance). Lets all just move on.

We have a lot of important stuff to deal with so lets work on that instead of driveling crap.
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