August’s (Financial) Retard of the Month Is A Good One

Time for good old common pennies, amirite?

Time for good old common pennies, amirite?

 

No, no, no, no, no. 58,000 times, no. Because we haven’t made fun of enough of these undifferentiated debt bloggers yet. So here’s another one! Lindsey Thurston at Cents & Sensibility. These vermin are so indistinguishable, so repetitive, so devoid of originality that they think they’ve uncovered new strata of cleverness every time they fashion a pun on “cents” and its homonym “sense”. The sad(der) part is that the logo on Ms. Thurston’s site doesn’t even spell its own name correctly. It uses the wrong homonym: “Sense and Sensibility”, just like the original (unreadable) Jane Austen novel. She also used the same image from the Lauren Graham movie Bad Santa that we did a few months back. Sister, if someone’s going to violate copyright law around here, it’ll be us, OK? Besides, you clearly stole this line in your bio from every other Financial Retard of the Month we’ve already objurgated over the years:

I graduated with a Bachelor of Arts (in Psychology) and a monstrous $45,000 student loan.

Do you people realize how tiresome this gets, this general first-person declaration that you borrowed far more money than you could afford (to achieve an empty goal, no less) and now think that your broke posterior is qualified to write a single word about money? (Other than “Keep me away from it, before I burn my fingers with it again”?) It’s the same 1-chord song, but only the singer changes. We’d now link to every Lindsey Thurston clone who’s already brought similar steaming plates of rotten lutefisk to our attention, but there are literally dozens of them and it’d take forever.

Blue-collar champion and master of the practical Mike Rowe recently summarized the state of self-destructive higher theoretic education and the accompanying student loan industry, stating “We are lending money we don’t have to kids who can’t pay it back to train them for jobs that no longer exist.” Or in the case of what one can do with a B.A. in psychology, jobs that never existed. As always with these people, it gets better.

Lindsey got knocked up at 19. (Fat girls really are more fun!) She and the father went their separate ways, and if there’s a worse preparation for adulthood than being a single teenage mom and then proceeding to incur $45,000 in debt while attending college for a useless degree, we don’t know what it might be.

That’s only the start. Lindsey graduated in 7 years, which we’re guessing wasn’t due to a Mormon mission and a medical redshirt. She then met a guy who thought that hitching his wagon to a single mom with a 7-year old kid and a Lake Baikal of red ink would be a prudent decision. You’re not going to believe this, but their fairytale romance didn’t work out. 2 years later they split, and she returned home with…well, when it comes to these pathos research projects it’s best to quote the original sources:

I ended up getting the job (but with low pay) back in my hometown  and went about trying to start over. I never seemed to have enough to make ends meet though. I was working three jobs at one point trying to “catch up”.

But how can that be possible, given that she had an invaluable university (not “college”, she’s Canadian) degree? Nothing’s more important than an education, so how did that impressive psychology B.A. not attract hundreds of employers with lucrative job offers? Especially since she spent so much time crafting it?

This gets weirder. Ms. Thurston continually refers to her blog as “Sense & Sensibility.” The only reference to “Cents & Sensibility” seems to be in the URL. She can’t even do rehashed puns right. Nor has she figured out the one homonym that mastery of should be a prerequisite for attending the 2nd grade:

I made too much too (sic) qualify for “interest relief” on my student loans and other social programs and too little to make ends meet.

So by all means, create a personal finance website then. We learn that Ms. Thurston is currently $35,000 in debt, but that’s totally cool because she used to be $67,000 in debt. You see, this stuff is all relative. And if we were to point out that the Control Your Cash principals are several multiples beyond that, but in the other direction, then that would just mean that we’re ostentatious and insecure blowhards who love rubbing our good fortune in poor people’s faces.

(Actually, it would mean that we refrained from making calamitous decisions such as reproducing far too early and handing stacks of third-party cash over to a university, but most people don’t like to hear the truth.)

We’re skeptical of the $35,000 figure, too. If the graphics on her site are any indication, and are calibrated arithmetically and not logarithmically, it’d seem that she’s more like $53,000 in debt. She has two bars on the right column of her main page, one showing that she’s paid off half a $50,000 debt and the other showing that she’s paid off maybe 1/20 of a $29,000 debt. She gave these bars the precious names “Makin’ A Dent-O-Meter” and “Kickin’ Ass-O-Meter”, and would it kill these net drains on society to act like adults and take this stuff seriously? Then again, why should they when there’s endless reinforcement in the comments? One commenter wrote “Hey 32k is a lot!!! Great job!” Taking that on its own merits, 35k is an even bigger lot. (!!!)

Imagine if there existed a personal finance blogger who created a ”Kickin’ Ass-O-Meter” to quantify her augmenting positive net worth. Her monthly cash flow rose $2000 last month, her net worth $16,000, and the Kickin’ Ass-O-Meter documented the increases. Most people would regard that as unseemly, a crass display of one’s materialistic bent and the kind of thing better kept private.

Then how the hell is it any different when you’re trying to reach zero instead of some other number? Ms. Thurston ought to keep this to herself, but this is 2013. Accruing consumer debt is no longer something embarrassing, but rather something to be proud of as it cements one’s position as a victim yearning to break free – a Strong Woman Who Shall Overcome Whatever Life Can Throw At Her, even if what life’s throwing at her is a 16-lb. shot put and she’s the one who hoisted it in the first place.

Ms. Thurston even admits that she was inspired to create her blog after discovering one called, ahem, “Making Cents of Sense.” You see what the author did there? Here, we’ll walk you through it one more time. She noticed that “cents” and “sense” sound identical (though they’re spelled differently), and considered it dexterous wordplay to bring that coincidence to her readers’ attention.

Our favorite part was when Ms. Thurston offered financial advice to her kid, now 16. The easy joke to make here would be that the advice was “Do everything I didn’t do,” but that’s exactly what it is.

[S]he doesn’t understand the value of money in any real sense. She connects the two facts that there are things she wants and that they cost money but that’s about it for insight. The idea that she has to earn money before she can spend it seems to be the missing link in her brain.

That’s a blockquote. Which means it’s Ms. Thurston referring to her kid, not us referring to Ms. Thurston.

Jesus H. Of course she splurged on a wedding.* Of course she’s going back to college for another bachelor’s degree, because 7 years in university just weren’t enough. And of course she’s made a list of goals (people who never accomplish anything love to list goals), one of which is…that she promises to spend 45 minutes a day entering contests. Because you never know what you might win. What she’d win from spending 45 minutes a day on a StairClimber is more certain, more beneficial, and more tangible. But it’s also less fanciful, and considerably more difficult, so we can discard it immediately.

If you take one thing away from our site, let it be this: By and large, people want to be poor. They make the decisions and willingly execute the activities that will invariably result in being poor, therefore it stands to reason that they must want to be poor. Nothing will convince them otherwise, as they happily continue with the same destructive habits (spending too much, overeducating, writing interminable self-referential blog posts) that got them poor in the first place.

The good news is that thanks to them, the field is a lot less crowded for the rest of us. Don’t crank out kids when you’re a teenager, don’t spend money you can’t afford, don’t borrow money to exacerbate the problem of spending money you can’t afford, and stop selling assets and buying liabilities. Read this and you’ll never be anyone’s retard.

*If you’re $35,000 in debt, and you do anything beyond paying $50 to have a justice of the peace marry you, you’re splurging. 

 

#MakeCollegeUnnecessary

Melvin's busy making spacecraft, but as soon as he's on his break he'd love to hear your analysis of heteronormative role play in modern media.

Melvin’s busy making spacecraft, but as soon as he’s on his break he’d love to hear your analysis of heteronormative role play in modern media.

 

Of course, it already is unnecessary, but try telling that to the liberal arts majors who seem to be providing most of the vocal power for the latest rallying cry/hashtag. No less formidable a force than the President of the United States has made “college affordability” his latest pet cause, arguing that the marketplace of education should be subject to something other than natural laws.

Things cost what they cost. Prices, with exceedingly rare exceptions, are inversely correlated to quantities bought. When the price of gas rises, it might not affect your own driving habits perceptibly, but one person in a hundred or a thousand is going to say, “Screw it, I’m taking the bus.” And if Chico’s decides to knock a few bucks off the price of its Magique pull-on ankle pants, they’ll sell more pairs to more fashionable if budget-conscious women. Raising prices means lower demand. Meanwhile sales (in the sense of “discounts”) increase sales (in the sense of “revenue”.) This is so obvious that pointing it out hardly counts as cogitation.

College was historically expensive, which is why a) for centuries, hardly anyone went and those who did were rich, and 2) in the last couple of generations, parents started creating college funds for their progeny. Save today, spend on Junior 18 years from now. It wasn’t easy, but supposedly nothing worthwhile is.

As a quantifier of how far we’ve advanced as a society, we’re reminded that university attendance is way up and that a larger ratio of our college-age colleagues are heading for tertiary education than ever before. This is supposed to be a pure representation of prosperity, akin to rising per capita income or declining infant mortality. In a future utopia, 100% of high school seniors will attend Harvard, Yale, or the safety school of their choice (probably Penn.)

What percentage of age-appropriate people should be attending college? Far less than do now. The evidence is overwhelming:

  • The college graduate who works at a retail job, far from being a tragic anomaly, has gone beyond cliché and turned into a quotidian feature of life.
  • Just about every personal finance blogger on the planet – i.e., people who think they have some sort of qualification for talking about money – carries tens of thousands of dollars in student loans and doesn’t even seem embarrassed by the situation.
  • Tuition has outpaced inflation by about 150%. We’ll explain why this is in a minute.
  • The most uncomfortable truth of all, for baccalaureate holders who want reality to be something other than what it’s currently constituted as: qualified blue-collar workers aren’t merely getting by, they’re prospering. Nor are they going into debt to do it.

Regarding the 3rd point above: when the federal government began the nationalization of education financing, that put downward (political) pressure on interest rates. After all, what’s the point of bureaucrats getting involved at the behest of our elected representatives if they can’t lower rates for the benefit of the voting public? Interest rates went from what the market would bear – i.e., where the lowest rate lenders were willing to offer matched the highest rate students and their parents were willing to pay – to something lower than that. Sallie Mae has no incentive to turn a profit in the same manner that independent lenders would, knowing that taxpayers can and will make up the difference.

The schools still operate with respect to the balance sheet, however. The University of Michigan might not be a for-profit venture in the same sense that DeVry or the University of Phoenix is, but the former still has an endowment to maintain and expenses to pay. Out of tuition and gifts mostly, and tuition monies are less subject to whim and variance than donations are. So…

If you’re a university, why not increase tuition far beyond its historic norms? You have tens of thousands of potential incoming students, all of whom have been convinced (or convinced themselves) that what you’re selling is indispensable. Throw a dead cat (its body donated by the biology department, where smart kids are learning marketable skills) and you’ll hit a professor (its body taking up space in the humanities department) who will argue that college education is a public utility of comparable import to electricity and water. The only difference is that the local power company is probably a mandated monopoly that’s forced by law to charge below-market rates that cover expenses and allow for a modest profit. Meanwhile, universities don’t operate under such constraints. If every university in the United States decided tomorrow to double its tuition, students would grumble, lead protests, wear Che Guevara shirts, listen to Rage Against The Machine, maybe even burn effigies of Richard Nixon, but they’d still get their parents to pay. Largely because they can’t see nor comprehend the price tags. I still have enough to pay for this week’s pot and hummus wraps, right? That’s all that matters. Besides, I don’t have to start paying back until I graduate.

Perverse incentives, again. Now you’ve just given Johnny Undergrad motivation for spending money and time on a master’s degree and deferring life even longer.

Debt will kill you, often creating a hole in 4 years that you can spend 8 times as long digging out of. It doesn’t matter: education remains a drug more desirable than the purest batch of crack. Maybe that’s the problem, a semantic one. “Education” implies a universal good, like “health” or “prosperity”. But education is what you get when you absorb and retain practical knowledge. Which indicates true education – knowing that Shakespeare intended Prospero to be an autobiographical character in The Tempest, or knowing that the duration of a vehicle’s spark line is based on total primary circuit resistance and coil voltage available?

Now, knowing which of those will remedy a weak fuel/air mixture and get someone’s car running smoothly? Okay, which of those can you learn only in an inexpensive community college or trade school? Finally, which will impress an employer (excluding deans of college English departments), and make a tangible difference in the world?

Stop complaining, and stop moving in a direction other than forward. When a significant portion of college students realize they’ll be better off elsewhere, those colleges will notice. When parents begin to acknowledge that the math will never pencil out on their daughter’s performing arts degree, purveyors of higher education will have no choice but to communicate more effectively to their clientele exactly what they’re getting for the money. And hopefully, our demagogues in charge will realize that the stated goal of higher enrolment shouldn’t be an end unto itself.

How We Paid Off $0 In Credit Card Debt

 

 

Our target audience. This is going to end so badly for them. That being said, the one without the syphilitic sores is kind of hot.

Our target audience. This is going to end so badly for them. That being said, the one without the syphilitic sores is kind of hot.

 

By not incurring any.

Fine, 4 words probably don’t constitute a regulation blog post. But there’s got to be something we can do to distinguish ourselves from (and discourage you from following the examples of) the galaxy of personal finance bloggers who do nothing but chronicle their debt. (“One woman’s journey/one man’s journey/one couple’s journey/one family’s journey from debt to freedom.” And it’s always a “journey”, which is as close as most of these people are ever going to get to a vacation. Or at least a vacation that they didn’t finance with a credit card and spend 20 years paying off.

The old saw is that an ounce of prevention is worth a pound of cure, but our calculations show that 16:1 isn’t anywhere near the size of the ratio between the benefits that accrue from the prevention of paying your freaking bills on time and the cure of minimum monthly payments, bankruptcy, or burying one’s head in the sand.

Like most people of our vintage, your bloggers first got credit cards when we were in college. (It was our parents who grew up in an era when credit was something consumers sought out, rather than the other way around.) Come to think of it, American Express didn’t even seem all that concerned about whether we’d reached the age of majority.

(Note: It’s amazing that today you can, for instance, overhear a person offhandedly give their name or even their phone number to someone, then use your mobile device to find out where that person lives, where she works, how many kids she has and what her friends’ and pets’ names are.

But in the pre-Internet Age, what you could conceal was every bit as impressive as what you can uncover today.  You could get a speeding ticket in one jurisdiction and never have any court on the other side of the continent find out about it. You could avoid people for days on end, and blame it on having a landline only and no answering machine. And you could lie about your age and get a credit card with very few questions asked, if any.)

That original Royal Bank VISA card is long gone, but fondly remembered as the most significant totem of the entry into adulthood. Certainly more than a driver’s license. They give those to adolescents.

The first items bought with that card included…groceries. And little else beyond that. Using the card was more of a challenge than anything else: Is it possible to swipe plastic in place of cash whenever possible, and not scream in horror when the statement arrives?

You know how kids are better at picking up languages than adults are? Maybe this is a similar phenomenon, because there isn’t an 8-year-old in the world who thinks about financing purchases of candy and Pokemon stickers.* But adults will rationalize their revolving balances with whatever excuse you give them. “It’s the holidays, I’m not Scrooge.” “It’s only $15 a month, it’s not like I can’t afford it,” etc.

If you can’t pay cash for it, you can’t afford it.

Who doesn’t love a blanket statement like that? The implied second half of the proverb is that it refers only to consumer goods. Basically, anything where 14.99% annual interest is impossible to justify.

No one expects you to pay cash for a house: the opportunity cost is too great. Why spend a decade or longer saving up for the price of a house when you can borrow the money, at significantly less interest than credit cards levy, while simultaneously not having to pay rent? If you’ve got the down payment available and the credit history (see above), it makes perfect sense.

You shouldn’t have to pay out-of-pocket for a hostile takeover of a plastics manufacturer, either. Just put up $15 million or so of your own money and borrow the remaining $850 million. The company itself is an asset by our definition, in that it’ll generate income under the right conditions.

But the purchases that result in people snowing themselves under with credit card debt are usually moronic and wasteful. Yes, we understand that you want to impress your new love interest by eating at that Mobil 2-star seafood place instead of Red Lobster. And that $150 for two (including varietal house wine per the maître’d’s recommendation) is going to get you somewhat closer to sex or a more intense if equally superficial level of companionship. But there’s still the business of the monthly statement. And our research has shown that balances are a lot easier to pay when they’re smaller.

Decades later, with more income, we’ve adopted the curious habit of not living like college kids. We have real furniture, for one thing. And trucks, with thirsty gas tanks. We even have satellite radio subscriptions, tool kits and health insurance, all of which goes on the credit card. And you know what? We still pay it off in full every month. It’s the craziest thing. It’s almost like we read the cardholder agreement, saw what we’d be in for if we didn’t make our payments on time, and decided to act responsibly.

Once again: Doing smart things is important if you want to build wealth. Avoiding stupid things is at least as important.

COMING NEXT WEDNESDAY: How We Paid Off $0 in Student Loans.

 

*Is Pokemon still a thing? Or did it die out 14 years ago? How about Beanie Babies? Ah, the pleasures of being childless and not having to stay on top of juvenile consumer trends.