I am, frankly, tired of hearing personal finance gurus pick on Starbucks. I don't know how many times I've heard them calculate the amount of money people like me spend on lattes per month, and what that money would do for me if I, instead, put it towards my retirement. The fact of the matter is, you can do this kind of analysis with everything you do: how much money would I save over ten years if I never turned on the heat, if I ate my food raw instead of cooking it, if I cut my own hair, if I never went to a movie, etc. But, for some reason, Starbucks is a common target. I don't know why. Maybe I'm just wrong, but I never tell a client who's struggling to make ends meet and to keep his spirits up that he should forego his morning cappuccino, which may be his only pleasure of the day. We are social animals, afterall, and we can't hide in our caves all day. If not for coffee shops like Starbucks, more people would be going to bars to get a break from their troubles. You can't get drunk and dangerous on a caramel macchiato, and it's cheaper than therapy. Besides, if you're self-employed, it doubles as your corporate conference room and satellite office. Where else can you get all that for 3 or 4 bucks a day? For my part, I'd rather cut my own hair than give up this innocent (and cheap) diversion. And this does not mean I'm in favor of rampant spending on "entertainment" if you're trying to live on a budget. I'm just suggesting that it's not an evil thing to have in your budget. Give up beer instead.
Someone has turned the urge to open up the dirty topic of credit card debt into dramatic art. Abundance, "a community arts performance project about money as told through the stories of people in the United States" is written and directed by Marty Pottenger and produced by The Working Theater. It's been playing in a number of cities in the U.S., primarily in the northeast. The project began with interviews with millionaires and minimum wage earners, and explores our culture of consumption from the perspective of six individuals in financial crisis. I missed the play when it came to Washington, D.C. in the fall, so I'm looking forward to the documentary film that's still in the works. For more information, go to www.abundanceproject.net.
Everybody I know over the age of 35 is obsessed with planning for retirement, whether they've done anything about it or not. Even twenty-somethings are admonished to start saving NOW or else. With warnings of a dire future screaming out from every personal finance magazine and book, not to mention from the mouth of the ever-reproachful Suze Orman (she scares me), how do you face the issue? And what, if anything, can you do if you're barely able to pay your current living expenses as it is? Alot of people I know, especially friends of mine in their twenties and thirties who got caught up in the tech boom and crash, are in that boat. I have to confess that I'm ill-prepared myself. When I look at the savings milestones I was supposed to have reached by age 30, 35, and 40, my response is to -- well, bury my head in denial and hope I don't live long enough to have to worry about it.
There's never, ever any good news on this topic. I've checked. One website, www.fiftysomething.com, reports that "Americans Face Serious Risk for Outliving Their Retirement Savings." According to this site, even Baby Boomers who have managed to save alot have no idea how to make it last. Take a look, if you can stand it, at the 2003 Retirement Confidence Survey results put out by the Employee Benefits Research Institute, at www.ebri.org/rcs/2003. Apparently, most of us don't know how to calculate how much we'll need to retire on. Only 68% of us claim to have even saved for retirement. Other tidbits from this study are (1) Baby Boomers are postponing retirement (not surprising); (2) Many people who are working today will not be eligible for full Social Security benefits until the age of 67 (most people still think it's 65); and (3) If you save $20 a week, that comes to $1,040 a year, and if you do this for 25 years (assuming an annual rate of return of 5%) you'll have saved over $50,000. The survey results do show a bit of optimism, though. Among Generation X survey participants, 49% reported feeling "somewhat" confident about their prospects for a comfortable retirement, and 19% reported feeling "very confident."
I'd like to hear from anybody who knows how other cultures deal with retirement. Is there a kinder system out there in the universe?
I wish more people would acknowledge that luck plays an enormous part in our financial well-being. Those of us who went to college on student loans remember classmates who came to school in brand new cars (one of my classmates had a license plate that read "THXDAD"), went to Europe on spring break, and had no idea what "work-study" meant. A job paying $45,000 a year looks alot better to someone who has no loans to pay off, and is still on the family payroll, than to someone whose monthly student loan payment exceeds the monthly rent on an apartment. (I'll admit that there is perhaps one advantage to starting with nothing: it's less likely you'll suffer from second generation apathy.)
Some of us started out on the right foot, but then were thrown into crisis by divorce, unemployment or illness. I've talked to many divorced women who took time off from their careers to raise children and who, for one reason or another, are not receiving adequate (or in some cases any) support payments from their ex-husbands. Along with a lower standard of living, they're often forced to accept that their earning potential has drastically diminished during their years of child-rearing. Like divorce, unemployment can deplete your life's savings in the blink of an eye. Who knew that the same tech employers who were offering attractive signing bonuses, stock options, and moving expenses just a few years ago wouldn't be able to pay you even as a part-time contractor today?
I'm not arguing that we shouldn't take responsibility for our lives however we start out or end up. I merely suggest that if you've been hit by misfortune, you should give yourself a break for not being as well off as some of your colleagues or neighbors who have the same education or earn the same amount of money. We live in an overly judgmental society that equates financial security with moral uprightness. It's no wonder that people are more willing to talk about sexually transmitted diseases than about debt.
There's a heavy silence around the subject of personal debt, a silence which defies the common truth that misery loves company. If you're maxed out on credit cards, you know who you are, but more likely than not, you don't go around sharing that information and striking up rousing conversation about it. So much is written on the subject of the consumer debt crisis, yet the voices of those affected are rarely heard because of the shame and stigma of being in debt. While there are organizations that purport to help people who are in debt over their heads, most of us do not participate, and for good reason. When advice is sought, we are often patronized and made to feel ignorant and immoral. We are judged.
In order to improve our situation, we need to know who we are collectively and as individuals, how the credit card industry manipulates our spending habits and creates consumer guilt, and what our real-life options are for escaping the tyranny of debt. If we can understand the cultural and economic forces that brought us down this path, and see that our behavior as consumers is carefully predicted and measured by the corporations that count on our money, perhaps we can better control the outcomes in our individual lives.
As a bankruptcy lawyer, I hear many different stories about how people got into unmanageable debt, and, invariably, every person I meet, no matter how well-educated, believes that his/her situation is more dire than it is, suffers from deep embarrassment and shame, and feels isolated from society. In my own experience, as a struggling law student, then as an underpaid government lawyer with a pile of student loan debts, and finally as a single parent starting all over again, I have felt these same emotions. So, with this blog, I want to share some of the stories I have heard, bring to light the truths about the credit industry and what they know about us that we may not know ourselves, and provide useful information for navigating through the myriad of debt problems that plague our daily lives. But mostly, I hope to participate in opening the doors to conversation and through that, peace of mind.