Why debt happens, no matter what 

Budgets are like apartments. Whenever you change living situations, all your stuff seems to magically expand or contract to fit the space. When moving into a smaller place, stuff gets left behind, or sold. When moving into a larger space, distressingly, things accumulate in the corners, and boxes of old useless stuff take up residence in never-opened closets. So it is with money. In that initial decade of most Americans’ adulthood, they will run through a gamut of feeling poverty and feeling flush, and usually they will find that happiness exists whether their means are meagre or grand (though nearly everyone naturally prefers the latter). The trouble is, just as every apartment or townhome or house feels too small after a while, every budget feels a strain.

For the undisciplined, like yours truly, these strains are like water building up at a river’s dam, and every so often the operator will turn on the spigot to let a torrent of money flow through to relieve the pressure, and before you know it, you’re the proud owner of waterfront property on Lake Debt.

Like many Americans, I have a fine lake, leaping with silvery-scaled Past Due Fees and covered by a fine dark cloud of mosquito-like Interest Rates. The lake was the work of my ignorance about the cost of living in Santa Cruz—an obstinate, possibly psychopathic ignorance—for the better part of a year, in which I outstripped my income by the sum of approximately $1,000 each month. Glancing at my computer’s budget program, I see that the sum total of all my savings accounts, checking accounts, retirement accounts, credit cards, and loans is a blood-red negative $27,640.93. By the cruel and crude accounting of the dollar, I am worth less than nothing to this planet.

Such an admission may sound shocking—not just because of its melodramatic tone, for which I apologize, but for its precision. Even including the once-risque subject of our sex lives, there is no conversational topic more taboo in America than finances. We are meant to conceal from each other our incomes, hide from our companions the true total of the restaurant check as we pick it up for them in generosity (as if it were a quiz not to be cheated on), peel the price stickers from our gifts, and keep our various gripes about not having enough money to our damn selves.¹

Part of the reason is America’s insistence on pretending there’s no such thing as socio-economic relativity within our borders or our society. What seems like a lot of money to one person is a sneeze in a lacy handkerchief to another, and it’s easier to pretend otherwise when the subject is never broached. But a bigger part of the reason is our private sector insists on keeping employees in the dark about their co-workers’ salaries.² While it seems as if it’s done out of politeness, to avoid jealousy or other awkward emotions, the underlying reason is the leverage it gives employers when each new applicant must essentially guess at their worth, and often, in eagerness not to lose an opportunity to a lower bidder, guess low.³

Nevertheless, though it feels oddly painful, like broadcasting the details of a dreadful breakup or telling all you fine readers how I really feel about my mother, I am going to share each and every penny of my budget in this article. Why? Because it’s the only way I can explain the difficulty of my experiment to live in Santa Cruz on $2 a day.

The Plan

First off, I’ll admit the $2 thing is a gimmick. Nobody could pull that off. The scheme was actually to make it through May spending only $310, or $10 a day, excluding monthly bills (because, sadly, I can’t up and decide not to pay rent). After much finger counting and paper scratching, I figured the minimum I could spend on food without starving myself was $8 a day, leaving $62 of my monthly spending for other purposes, or $2 a day. Pleased with the mathematical symmetry of this plan, I furthermore resolved to use my debit card for the food (and only food), and pull out the remaining $62 in cash, which I would drop into my wallet $2 at a time, so it accumulated like vacation time or savings account interest.

That’s how I wound up at my bank on April 30 with an empty wallet and a simple request, “I’d like $62 worth of $2 bills, please.”

The $2 bill came to represent a lot during the course of the month. Its rarity is part of the joke, of course, but it also seems to symbolize the hidden inflation that’s suddenly apparent to government officials now that we’ve pinched ourselves awake to the recession that’s been happening since we sent an enormous chunk of our economy’s productivity to Iraq. In the past, $2 bills have been used by gentleman’s clubs to encourage higher tips in the G-string, or struggling factories to show municipalities just how much they rely upon the spending power of their employees. My gesture was at once less and more dramatic. I thought if I came to rely on little old Jefferson—who normally gets hoarded away in desk drawers or returned post haste to the bank vault, and who adamantly refuses to slip into anything so crass as a vending machine slot—I’d return to the mythical, mystical “value of the dollar,” clutching my greenbacks before each purchase to second-guess its necessity, and also awaken the clerk to my transaction so it becomes less anonymous, and therefore more important. In other words, I wanted to break the numbness of tossing money around.

I’m not sure exactly when the national hallucination that spending money makes the economy strong began, but I remember something from a newscast in the mid-1990s⁴ about a mall that opened across the street from my childhood home, and how the hope was that the extra spending there would stimulate Colorado’s struggling economy. I asked my dad if they were mistaken, and meant just the area’s economy, but he explained that the statewide recession was tied to people saving their money instead of spending it, making it difficult to create new jobs. And sure enough, Spend Ourselves Back to Health became a national obsession, especially in the wake of the dot-com bust. It continues to this day, as everyone with a stimulus check can attest.

But the problem with this theory is that it was rooted in the stability of the dollar from the late ’80s through the ’90s. Circulating dollars did indeed create jobs, though most economists agree that the economic surge in America had much more to do with productivity gains and the emergence of cheap labor markets overseas. Unfortunately, the official mantra of spending first and asking questions later (epitomized in our cowboy president’s reckless and unconservative splurging) led most Americans to imagine their apartments were big instead of medium, and the average American family’s credit card debt ballooned from $2,900 in 1990 to $9,300 today. My credit cards bear the burden of $14,000.

The dollar’s strength evaporated into debt in both Washington and the Jones’s bank account. China is the only major nation still stockpiling the dollar to keep it healthy, since they depend on our voracious appetite for cheaply manufactured goods to mask its inflation. And inflation it is, folks—when prices remain stable only because the quality of goods is deteriorating, when bread prices are doubling, when gas prices are … well, you know: that’s inflation⁵ . The U.S. dollar is like a fully-loaded semi breaking the speed limit down Highway 17. If it weren’t for China and other developing nations relieving the cost pressure on goods, that truck wouldn’t even have brakes.

All of which begs the question: are we on the verge of a depression? History does repeat itself, but depressions are like unhappy families; each one is a little different. Every time one happens, governments tend to figure out what caused it and plug the leak in the economic boat in the aftermath. So are we on the verge of flying stockbrokers and dusty bread lines like the 1930s? Probably not. My theory is that the next depression will be one of debt, as has already been evidenced by the subprime mortgage crisis.

What that dead canary indicates is that many Americans, if you give them half a chance (and I should know, because I’m obviously one of them) will live beyond their means. This is especially true of the younger generation, who have been raised to high standards of living, but cannot seem to command the salaries to keep pace, and so turn to financing. The American dream has been a slow crawl from saving up money to make large purchases, to taking out bridge loans to complete large purchases, to full financing with no money down and zero percent interest for six months … on a Big Mac.

The problem with credit is that it is not money. Money is issued by the government and bound to be honored by law as valuable. Credit is extended by private corporations who could, within the bounds of each credit card agreement⁶ , change their minds and take it back. Or, better yet, just charge more for it. Maybe I’m just paranoid, but it seems that if an economic downturn led to an egregious number of personal bankruptcies, credit card companies would be forced to get more choosy about extending credit, and kids emerging from college would inherit a world that runs on “use credit to buy it” prices and nothing more than the change in their pockets from entry level wages.

Instead of bread lines, picture children living at home into their thirties, high employment turnover as people scramble for security, small employers closing doors in the wake of retail stagnation, large employers accelerating the hiring boom and bust to take advantage of all those cheap scrambling workers, and colleges strained to the breaking point as students stay as long as possible, realizing that they are trapped by their need for a degree and the impossibility of living without relatively cheap and easy-to-obtain student loans. In other words, what’s happening right now, only with more panic.

Is it possible for a member of the credit-addicted generation to revert to a cash lifestyle? The answer is yes, but first one must fight the demons of generosity, and rediscover the meaning of food.

Week 1—The Power of No

The first 10 days were easy. I stocked up on $52 worth of groceries from Safeway, reasoning that it was the cheapest place to shop⁷ , and, armed with a full tank of gas and a steadfast resolution not to spend money, made it to May 10 having spent only $62.50—my grocery budget and two quarters for a parking meter in Capitola. My wallet was fit to burst with $19.50 in it. I was packing my lunch every day and riding my bike with the wind in my increasingly scraggly hair, happy as a bluebird.

The mental trick was making a game out of saying “no” to myself. Do I want a Pom Juice? No. Can I see Iron Man? No. Should I pick up the latest Harper’s? No. Hey, look, the ice cream man! No. Want to have a beer after work? No. Wouldn’t it be nice to drive to Big Sur this weekend? No. Aren’t you going to replace those jeans with the hole in the knee? No. Rare Björk b-side? No. Will you please shave? Um, OK, but not too much. Those razor blades have to last.

It was during this first week that the flaw in the experiment became apparent: it’s easy to do anything radical for a little while. The trick is becoming frugal for life. Already, my frame of mind was slipping into, “Well, I’ll just wait until June.” In my imagined economic apocalypse, there is no June. When the economy bites you on the butt, there’s no light at the end of the tunnel to wait for. Everyone realizes that depressions don’t last forever, but it’s not as simple as pointing to the calendar page when it will be over. To truly embrace frugality, one must be willing to form entirely new habits, and something about simply denying all the pleasures in life didn’t strike me as a sustainable habit. After all, people flocked to movie theatres in the Great Depression.

Cutting out self-gratification was a start, but not a finish.

Week 2—Do Unto Others

My first major purchase is a $4 package of Sour Patch Kids. I happened into some free tickets to the Santa Cruz Film Festival, and my girlfriend didn’t feel right attending the movies without a snack, so I bought them for her. In the moment, this triggered a rush of warmth: using money to buy things for other people is the best, as if each dollar’s higher calling is in the service of generosity.

This pointed to the source of a lingering grouchiness that took over as I entered my second week. How does one act frugally without slipping over the line into stinginess? My friends and co-workers were all extremely supportive of the entire endeavor, so there wasn’t any special pressure to spend, but it still felt strange and anti-social to withhold the little polite offers, while at the same time accepting any charitable offer that came my way. Saying “no” to myself felt healthy (in the way that a briskly cold breeze is said to be healthy when it makes your cheeks ruddy), but saying “no” or nothing at all to my favorite people felt like the first step on the road to Jerk.

The average American donates 2.2 percent of their income to charitable causes⁸ , which would translate to $1.36 of my monthly allowance. I resolved to find someone worthy of a dollar, and also spend the majority of my $2 daily bread on others. But a funny thing happened the minute I made this resolution—the minute I started planning how to spend my money, it became easier to spend it. I ate a few lunches at Pizza My Heart, which, even drinking water, cost me $7. I bought myself a cookie for a buck. I grabbed a Budweiser for $4 (does the $1 tip count as charity?). And then, in a fit of either forgetfulness, impishness, or just plain stupidity, I went to Jack in the Box and got myself an Ultimate Bacon Burger meal with a medium Coke for $6.71⁹ . Voila! broke.

What struck me was that all of my spending, except for the 50 cents in the parking meter, was on something edible. Even with $62 a week to spend on groceries (which was turning out to be plenty—some of the food I bought the first week lasted me the entire month), I still needed more discretionary expenses for food. This eventually became the central focus of the month: I tried different grocery stores, farmers’ markets, buying local, buying bulk, buying by the meal, buying for the week, and not buying anything at all; I starved, gorged, shared, horded, parceled, reheated, snacked, skipped, and caved in; I made elaborate meals and simple ones and still the $2 bills in my pocket kept getting spent on food.

Food is just the odd duck of the budget. Just like we can force our lungs to work or let them do their thing automatically, our food consumption is a flexible expense that is also necessary—we have the illusion of control over it, because the options range from cheap-as-free to champagne wishes and caviar dreams, but in the end, you have to feed yourself with something.

Week 3—Vacation

In a colossally stupid moment of forgetfulness, I embarked upon this experiment for the month of May without noticing I had a vacation planned to Providence, Rhode Island, on Memorial Weekend. The airfare was already booked, and I was staying at a friend’s apartment, but frugality is one thing at home, and another thing on vacation.

Add in the fact that my host just lost her job, and I felt more than a little like a chump for even thinking about trying New England on $2 a day. Most of my friends said it would be OK  to just take a break from the experiment, but that felt too easy. To keep some cap on my vacation spending, I decided I’d get a bonus budget of whatever was in my change jar at home—and that, shockingly, turned out to be $100.

I still spent too much, because I had to buy my hosts dinner in return for their generosity—remember, I’m trying to avoid the road to Jerk—but it was still an extremely thrifty trip, with most of the time spent chatting in deck chairs under a beautiful sun, or playing cards, or just walking around looking at old architecture.

My friend’s job loss got me to thinking about another major economic factor that plagues younger people: employment instability. Her firing was particularly capricious, with invented excuses covering up for the fact that her co-workers simply didn’t like her (and I’m not just taking her side—I believe it), but still typical in the fact that it was swift, brutal, and sucked up as just part of life these days. I’ve been laid off in corporate cutbacks as well, and can vouch that there’s no worse feeling than getting canned; it’s like getting dumped, only on top of all the crying and self-doubt and anger, you’re also broke.

By the same token, today’s workers are more willing to job hop pre-emptively. The lack of employment loyalty has cut both ways, in a syndrome I call the You Can’t Fire Me, I Quit tactic. My father has worked at the same company for 35 years. I have had four full-time jobs and five part-time jobs in eight years.¹⁰ Talk to most people under 40 after a few drinks, and the most ambitious ones (i.e. the most motivated and talented employees) will impart that itchy feeling if they’ve worked the same job for two or three years. Far from simply accepting job turnover as a necessary evil in today’s corporate climate, young workers have decided to drive it.

It’s an interesting phenomenon in which neither side has incentive to budge—employers are reluctant to give out expensive benefits like quality health insurance and company cars to people who won’t stick around for the long haul, and employees are so paranoid about the random axe that they can’t keep one eye off of Craigslist. What makes this high turnover possible, of course, is credit cards—the ultimate financial stopgap when there’s no savings account to turn to. Once again, I wonder if a drying up of the credit market wouldn’t have severe consequences given the employment climate. What would happen first: a stronger social net from the government or a return to company loyalty?

Week 4—The Bottom of the Barrel

According to Harvard professor Elizabeth Warren, who gave a talk at UC Berkeley last year called “The Coming Collapse of the Middle Class,” in 1970, the average family saved 11 percent of its income. Today, the average savings are actually less than zero. In 1972, the average amount of credit card debt as a percentage of annual income was about 1.4 percent. Today, that percentage is 15 percent. Families in the past generation, despite moving from a one-income model to a two-income model (in other words, thanks to women entering the workforce and staying there through motherhood), have spent themselves into day-to-day oblivion.

But not how you think. Warren worked with the government to run data on spending patterns, comparing an old fashioned nuclear family (mom, dad, two kids) in 1970 with the same family unit in 2003, adjusting all figures for inflation. Families today spend 32 percent fewer dollars on clothes. They spend 18 percent less on food, including eating out and bottled water and everything. It’s 52 percent less on appliances (and think about how many of today’s appliances didn’t exist in 1970) and 24 percent less per car (even with SUVs). The only things that went up were electronics, dog food, and liquor, but not by a whole lot, certainly not enough to explain our lack of savings.

Where did the savings go? Well, a mortgage costs 76 percent more—even with today’s much lower rates than the 1970s—for the same size of house. Health insurance, even with employer sponsorship, costs 75 percent more. While families spend less per car than they did in 1970, they need two of them, so overall car costs are up 41 percent. Childcare simply wasn’t an expense worth tracking in 1970, and now it’s part of the default family budget with both parents working, so make that 100 percent increase. And taxes for the nuclear family went up 25 percent.

So in the 1970s, a typical family was single income, earning about $32,000, spent about half its income on big fixed expenses, and in the 2000s, that family is earning $74,000 with two incomes, but spending about three quarters of its income on life’s necessities. (Again, all these dollar amounts are inflation adjusted.) In fact, a typical family today has less money left over for life’s little flexible purchases (food, clothing, appliances, gasoline … electronics, dog food, liquor) than dad did in 1970.

That’s a family. What about another half generation forward, with today’s college graduates emerging into the bright blinking sun, cap in hand, ready to find whatever full-time employment philosophy majors find?

I don’t exactly fit that mold, being a good decade removed from undergraduate school with a solid amount of time logged in a career, but that theoretically only skews the numbers to be more positive. My rent is $690 for a comfortable shared two-bedroom in Seabright—nothing amazing, but not a hovel, quite possibly just average. Toss in utilities, and it’s $800 a month. Keep in mind this is rent money, not mortgage money, so I’m garnering no equity for my housing cost, unlike the above hypothetical screwed family. My health insurance (which is private, and less expensive than the offer my employer makes) costs $165 a month. My car is paid for and in relative good health, but the insurance, gas, and routine maintenance still conspire to cost about $100 a month. My phone is $55 a month—and it ain’t no iPhone. My student loans are $280 a month. And the minimum due on my credit cards is $300. So fixed expenses for what I believe is a fairly average, fully employed thirtysomething male in Santa Cruz: $1,700 every month. Add in the paltry $310 I allowed myself for everything else in May, and that equates to a yearly expense budget of $24,000. With current tax rates, in order to take that home, my salary would need to be in the $30,000 range.¹¹ Lo and behold, that’s, according to Salary.com, the average income for a reporter in California.

You could run these kind of numbers for people in any life situation, from a 20-year-old receptionist to a 40-year-old manager, and find that, for the most part, average salaries match up fairly well with average lifestyles on a tight budget. If it’s impossible for a two-income household in America to save money, the single-income households (who compete with the two-income folks for salaries) are obviously not going to do better, and without Herculean attempts at thriftiness, will spiral very quickly into revolving debt.

What happens when the credit for that debt disappears? What can people who aren’t in a two-income situation do?

The Future of Money

There are three things that I believe are going to happen, that need to happen. The first, and most within the direct control of our government, is a relaxation of personal bankruptcy laws. Congress toughened these laws in 2005, even as bankruptcies have quintupled since 1980, under heavy lobbying pressure from credit card companies. According to James Suowiecki of the New Yorker, “There’s a reason we did away with debtors’ prisons: having millions of people enslaved to their debts is a bad thing for an economy. Putting people into Chapter 13 essentially means they pay a heavy extra tax that goes straight to the credit card companies. That creates a disincentive for debtors to work, since the more they earn the more they pay. It also takes away spending power—not the best thing during a recession.” He also notes that between 1995 and 2004, when personal bankruptcies doubled, credit card company profits still managed to triple. If you rankle at the profiteering of oil companies, gape in wonder at the money that grows on trees for credit lenders.

The second is we have to embrace inflation. While Bernanke—who is definitely, 100 percent, guaranteed, not going to argue with you, smarter than me about the economy—fears a wage-price escalation getting triggered, the simple fact is that America, as a nation and a collection of individuals, is overburdened by debt, and inflation, with the proper restrictions in place against uxorious lending rates, allows debt to evaporate, perhaps avoiding some of the inevitable bankruptcies mentioned above. How to embrace inflation without becoming a slave to it—or triggering worldwide financial disasters—is a task for the Bernankes of the world. But, clearly, ignoring inflation hasn’t done us a lick of good.

And the third is more social, and perhaps inevitable. The Boomer-era stigma against multigenerational households needs to wither—both twentysomethings and eightysomethings should be welcomed into the bosom of any household lucky enough to pull in two paychecks. Right now, popular culture still makes sport of the loser who camps in mom’s basement at 30, or gets chuckles from the cantankerous dad who lives in the attic and constantly creates trouble for the married couple, but in reality it’s not a collection of personality flaws and failures that lead to multigenerational households; it might even just be common sense.¹²

Perhaps more intriguingly, America could see the resurgence of the company town. If the fixed expenses that saddle their employees with an inability to save are housing, health care, and appliances, companies might find that the only way to ensure loyalty amongst a panic-stricken and constantly worried workforce is to provide those very things. Before you scoff, look at Google, with its free meals and free childcare. Add some dorms to its already collegiate campus, and you’ve got yourself a company town.

Until these changes happen, though, consumers are going to attempt to control the flexible spending, which means less clothes, fewer electronics, and less on food. We are not going to spend the economy’s way out of this. In fact, according to Warren’s studies, we never were.

So go ahead and try it. Grab a fistful of $2 bills and live the austere life for a week, or a month, or a year. In the not-too-distant future, it might not be a choice, and practice makes perfect.

¹ We are also meant to avoid bragging about having too much money, though this rule is observed with less rigor. _Back

² For instance, due to an agreement with my boss, my salary is the one detail I will withhold in this article. _Back

³ I worked at one company in Colorado that bucked this trend, posting all employee salaries and listing clear reasons for any bonus or raise as it was given. This had the effect of actually improving morale and pushing employees to do tasks that led to higher pay and promotions, and strangely the company still got away with paying only average salaries to its employees without losing too many to theoretically higher-paying competitors. The system was far from utopian, however; at a certain level of management, the salary information went back under the veil, leading this former employee to cynically wonder if the system weren’t more of an attempt to hold unionizing forces at bay than any actual stab at workplace productivity reform. _Back

⁴ For the younger readers out there, start by picturing a world in which AOL was king and the suffix “dot-com” was still considered nerd slang. _Back

⁵ Ben Bernanke, the Chairman of the Federal Reserve, does not believe this current inflationary spate resembles the 1970s. Speaking to the graduating class at Harvard on June 4, Bernanke stated that today’s America is more energy-efficient and economically flexible than it was in that era. He did admit to the inflationary forces of the current downturn: “Some indicators of longer-term inflation expectations have risen in recent months,” he said, and it’s the Fed’s belief that when people expect inflation to happen, it exacerbates inflation. (So put those heads in the sand, little ostriches!) The other difference is that in the 1970s, salaries kept pace with inflation, causing a mutual escalation between wages and prices. “We see little indication today of the beginnings of a 1970s-style wage-price spiral, in which wages and prices chased each other ever upward,” he told the graduates, who were sitting on an average of $140,000 worth of tuition debt. (So keep refusing those raises, employers of America! The average male, employed full-time, now makes $800 less than his father in 1970, adjusted for inflation.) It’s worth noting that this inevitable round of inflation being “different” from the 1970s doesn’t necessarily equate to it being better. _Back

⁶ Read one sometime. Great nightmare fuel. _Back

⁷ Wrong! As I soon discovered, the cheapest way to shop is to visit all five local groceries stores and buy what they specialize in, which has to be done by bicycle to keep gas costs from eating the savings. The chart below was my attempt to compare a basket of goods across the grocers. This is not the official “basket of goods” used in the Consumer Price Index the government invented to gauge inflation, as that basket is bigger than Mary Poppins’ handbag, and includes televisions and housing costs and jeans and handles of Popov. I just made one up, and added in some California “essentials” to better reflect the eating experience here. A word on Trader Joe’s, which everyone mentioned as the cheapest place to shop and so won a place on the chart: comparing a typical grocer to TJ’s is like comparing apples to plastic-wrapped apples—Trader Joe’s specializes in MREs for the bohemian set, and so it took some twisting and hoop jumping to compare their prepackaged produce and frozen meats to the raw ingredients on offer elsewhere. Also note: this chart does not take into account food quality. _Back

⁸ Giving USA Foundation study, June 25, 2007. _Back

⁹ The average American spends $492 a year at fast food windows. _Back

¹⁰ A study from Arizona State University finds that American job turnover is 1.5 times higher than Europe’s, and cites different labor policies and a higher minimum wage as major factors. It also examines the American notion of a “test drive” in which firms make hiring decisions with the knowledge that the employee can be dumped after a few months. _Back

¹¹ The federal poverty level for a single person is $10,400. _Back

¹² Think about this next time someone tries to use the ridiculous canard that immigrants are taking jobs from Americans. The truth is, we’re our own worst enemies—we’ve taken the jobs from ourselves, by throwing everyone into the workforce (which wasn’t a misstep by itself) and then watching fixed expenses rise to the level of a two-income home. The only way to get a step ahead now is to add a third income, which either means wholescale acceptance of polygamy and polyandry, or (and this is the less facetious point) a trend toward single children living at home and contributing to home expenses well into adulthood, or until they get married … eerily similar to how people lived their lives before the Great Depression, only instead of families pumping out kids to help at the farm, they should breed in order to reap the benefits of minimum wage at the 7-11. _Back

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Jeff  - Live within your means   |Registered |06-14-2008 18:34 Interesting article Chris, but I gotta tell you: some of your ideas about money are borderline delusional. Look at the pool on money in the issue you were published in: more than half of the people have less that $500 in credit card debt. Yet you titled the article "Why debt happens, no matter what." Debt doesn't happen no matter what, it happens when you spend more money than you have. Forget all that yaya about life in the '70s: the system isn't impossibly stacked against you, that idea is a crutch you are hanging on to so that you can continue to feel good about spending money you don't have. I graduated not all that long ago, had loans and a fairly low paying job: I was broke and I acted the part. I didn't own a car or a cell phone, I didn't buy four dollar candy for my girl, and a sure as heck didn't take a vacation that involved airfare. I sucked it up and paid my bills until I could afford those things. In my case it took about four years of riding my bike in the rain, signing up for 'universal service' on my home phone, and enjoying broadcast tv on an old set I got for free at a yardsale. Lots of people are doing it, you just don't see 'em at the Blue cuz they're off doing stuff that's free. Chris - I know you weren't asking for advice, but since you already laid out your finances for all to see, I can't help giving some: you need to cut up your credit cards, sell your car, ditch your cell phone, and pay down that debt. Consider getting a second or better job. 14k is a lot to get out from under, but it can be done. Good luck, Jeff Reply | Quote 0   0

Chen  - Don't budget your food, IMO   |Registered |06-16-2008 09:35 Chris, I have to agree food budget is a tricky thing. After one attempt at limiting my food budget I have decided it just isn't practical to have a solid budget for food. As a student with part time job I live on financial edge all the time, but limiting my food intake really impacted my performance in school and work. So I decided that instead of having a budget I will have a healthier practice of buying my food whole and cook for myself. For the price of a burger at a fast food joint I found that I can easily make 3 meals for myself. And when those accidental debt hit (like needing to go to emergency room or having car broken into in my case) and I have to make the awful decision of forgoing month’s rent or starve, Food Bank is a savior. I really hope more people will leave comment on how they are saving up, at the same time keep in mind each individual have a different living situation. Reply | Quote 0   0

Chris J. Magyar   |SAdministrator |06-17-2008 16:59 Jeff: I certainly do think most Americans would be better off if the Suze Orman gospel of financial austerity took hold, and my final conclusion points to a world in which that is inevitable, but it's just not realistic to ask a generation raised on Boomer excess and consumerism to wake up and smell the Folgers instead of the Starbucks. I actually agree with your advice -- in fact, five years removed from college, I could have written the exact same paragraph about myself -- but financial living has its ups and downs, and one bad year is enough to tip someone from the half with less than $500 in revolving debt to the half with more. The deck might not be stacked one way or another, but the dealer's on a cold streak right now for most Americans. For the more personal advice, you're right: I already own the cheapest possible cell phone and the cheapest possible car (it cost me $400), which I'd gladly ditch, but my job requires both to be done well. My job is also such that I cannot devote time to a second job -- news happens all the time, and public meetings happen in the evenings. Alas, all I could do was cut those credit cards up (a fun day, actually) and figure things out. Psyentity: Food is the rub, isn't it? It's probably the only decision we make three times a day that is the difference between spending pennies or a sawbuck. While a flexible food budget is unavoidable, I do think there are ways to curtail unnecessary food spending. Lately, I've been a big fan of farmer's markets for produce: what they lack in selection, they make up for in price. Reply | Quote 0   0

Jeff   |Registered |06-27-2008 10:10 Thanks for the reply Chris, good observations. Reply | Quote 0   0

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