Is There A Way To Climb Out Of This?

As in inveterate eavesdropper, I enjoy “Dear Abby” type columns. Presently, I like Slate.com’s “Dear Helaine” who answers personal finance questions.

Today’s “Dear Helaine” letter stopped me in my tracks because it succinctly and powerfully captures so many citizens’ dire reality.

 Helaine,

I am 41 years old and have not come into any windfalls of money, nor is there any hope I will. My financial situation is as follows: I make $15 an hour plus tips, and my paycheck is usually about $1,300 every two weeks after taxes. My rent and utilities take up about half of this income. My husband is unable to work because of a disability that is not disabling enough to qualify for Social Security. Our children are 22, 19, and 16. We have been living in a cycle of poverty pretty much for the past 23 years. And yes, we’ve been hit with student loans and medical bills that just don’t get paid—my husband is $30,000 in default. My older kids are working in low-wage jobs, $10 to $12 an hour, but as of now are not contributing to household expenses because I want them to build a life outside of the money-sucking hole of my reality. So, yeah, it’s dire. What kind of financial planning helps people get out of poverty? I am moderately intelligent and a really hard worker. I’m also kind of giving up. Most of the time, I would rather spend $8 on a pack of PBR than plan for retirement or emergency funds. My financial life is an emergency. Is there a way to climb out of this?

As I read it, I thought of Conservative Republicans’ knee-jerk response to poverty, people are lazy. I trust that this woman is telling the truth when she says she’s a “really hard worker”.

I purposely didn’t read Helaine’s response because I wanted to think about it independently. And I wanted to know what you think.

Two initial observations.

• student loans and minimum wage jobs, will their young adult children get college degrees, will those degrees provide them with any kind of competitive edge ?

• the husband is a “net loss”, spending, but not earning, can he do anything to generate some income?

It’s very easy to understand how the author, and the legions in her situation, would simply say “fuck it”, I’m going to enjoy today a little bit because tomorrow is looking real bleak.

I’m going to go back now and read Helaine’s reply. Mine would take a long time to write because there is no easy answer or quick fix to the family’s predicament. Of course the same is true of poverty writ large.

Final thought. Will this woman, her husband, and the 19 and 22 year olds vote? If so, for whom? They, and the legions like them, could determine the election.

[Can’t decide whether to give Olen an “A” or “A-“. Either way, a caring and thoughtful reply.]

What Endurance Athletics Has Taught Me

Most people want to get in shape in a fraction of the time it took them to get out of shape. A vast majority also want to win the lottery and fall in love over night.

The key to success in endurance athletics is building strength, stamina, and mental toughness over time. The key is taking the long view towards incremental improvement, week-to-week, month-to-month, year-to-year. Am I stronger, fitter, more confident this week, month, year? I’ll never be strong, fit, and confident enough. When most successful, there’s positive momentum, movement along the continuum. Positive momentum requires waking up and getting out the door, even when I don’t feel like it. Especially when I don’t feel like it.

How to create positive personal finance momentum? The key is incremental improvement which results from saving more than I spend month-to-month, year-to-year, and then investing in passive index funds month-to-month, year-to-year. Building the strength, stamina, and mental toughness to hold on for five, ten, fifteen years. Rebalancing on occasion.

How to be a better human being? By being a more active, patient listener this week, this month, this year. By being a little more friendly to others, more empathetic, more curious, more understanding.

It’s much easier to write about the long view and incremental improvement than it is to apply it consistently. In some important ways—including as an endurance athlete, as a blogger, and as a close friend—I’m lacking positive momentum right now. This is the point in the post where I wish I had an inspiring insight to close with.

Postscript: Alexi has momentum in her life.

 

 

Trenchant Research on How Birth Order Affects the Way You Spend Money

Thanks to Brown and Grable by way of Horkey for this description of how birth order affects the way we spend money.

Was blind, but now I see. By “trenchant” I mean amazingly facile.

First born. My oldest brother. The best editor I’ve ever had:

The oldest child in the family tends to be mature, confident and, more often than not, a perfectionist. As a result of the responsibilities and expectations placed on them by parents at an early age, older siblings are well organized and generally in control of their lives.

‘Firstborns handle money differently. I see a pattern in a lot of people that I know. They are viciously protective of making sure bills are paid on time and living within their means, which includes building savings and investments.’

Middle child(ren). My sissy and older brother. The best middle siblings I’ve ever had:

“While the oldest child is often given the lion’s share of attention from parents, and the youngest can typically do no wrong, the middle child might feel lost in the shuffle.

Middle children are resigned to the fact that someone is always both ahead of and behind them in terms of familial structure. As a result, they are often found to be naturally gifted problem solvers with excellent negotiation skills. And when it comes to financial habits, the middle child is a born saver, with nearly 65 percent of the group contributing money to their savings accounts each month.'”

The youngest. Myself. Such a perfect, little, Idaho potato that my parents immediately decided to procreate no more:

“More often than not, this person is. . . the life of the party.

While the youngest children might seem charming and fun to be around, they also tend to demonstrate bad spending habits and are typically the least financially responsible of their siblings. It doesn’t help that parents have often become more lenient about discipline by the time the second or third child is born.

Parents have a habit of overindulging and spoiling the youngest children in families. Ultimately, this desire to protect the baby of the family can backfire, causing the individual to spend rather than save for a rainy day.”

Thanks to these poignant insights, I’m going to start trying to save more money. All while remaining true to my life of the party, charming, fun to be around self.

 

All Things Considered–Long Weekend Edition

• How to teach personal finance.

• The power of the pen. The bin Laden papers were going to be released independent of Hersh’s London Review story of ObL’s death. And Hilary Clinton really wants all her emails made public. And Tom Brady’s never done anything wrong. The Obama administration says Hersh’s story is “filled with inaccuracies”. Which is a lot different than saying it’s untrue.

• Best sports presser of the week.

• Warren Buffet, minimalist. “Money has no utility to me anymore as I am very happy with what I have but it has enormous utility to others in the world. More possessions to me would actually be a liability more than an asset.”

The data was faked.

Seven uncomfortable truths about living in Norway.

• Minimum wages compliments of fivethirtyeight.com. Look out Columbus, Seattle is closing fast.

CFe6fsMUEAAViTY-1

Sentence That Restores My Faith In “The Public”

From today’s Wall Street Journal.

Investors pulled $12.7 billion from actively managed U.S. stock funds in 2014 through November, and put $244 billion into passive index funds from Vanguard and others, according to Morningstar.

Related factoid:

Vanguard is undercutting many rivals on fees. Investors pay 18 cents for every hundred dollars they invest with Vanguard, compared with $1.24 for the average actively managed mutual fund, Morningstar said. The company also is beating its passive rivals, which charge an average of 77 cents for every hundred dollars.

MI-CH113A_VANGU_9U_20150104185406