Sunday, March 30, 2008

Find the Couch

In moments of financial stress people often resort to looking under the couch cushions for loose change. Before you get that desperate, first examine the piles of items all over the couch, and on your tables and your chairs and other pieces of furniture. And the floor. Ask yourself this:

Why do I own so much stuff?

Everything we buy that we don’t need is wasted money. Everything extra that we own is wasted time and energy, and money, too. It takes time to care for possessions, even to navigate around them if they’re on the floor. Blogs are filled with posts about how overwhelmed people are with clutter. How preoccupied people are with neatening up their dwelling spaces and organizing their possessions. De-cluttering expert Peter Walsh has even credibly linked clutter to obesity. Owning too much stuff is obviously related to financial problems, because owning, storing, and moving excess possessions is expensive. But we don’t only buy excess things. We often inherit them, are given them, or pick them up off the sidewalk. And then, unable to make the decision and actually get rid of them, we stuff the items into our homes, or worse, put them in storage. Some people have bought second houses just to hold their extra stuff. Many thousands of people are paying for storage spaces that hold a variety of supposedly useful items they are able to live without, but that they can’t seem to let go of.

Why do we own so much stuff? Because we can. The wealth in America is so great that people can collect broken bicycles off the street, stockpile them in the dozens in their back yards, and nobody comes and takes them away. Nobody even knocks on the door and asks for one of those extra bicycles. Perhaps whoever needs a bike doesn’t live anywhere near the person who is hoarding them. But the bottom line is that we live in an age of mass production, and the thousands of useful items that people are holding onto are replicated again and again in many other households. At one point I discovered that I had 13 can openers. I had bought two of them, one of which was inferior and I stopped using. So why hadn’t I gotten rid of it? Sheer inattention. Nobody I knew needed a bad can opener, so of course I never gave it to anyone. And my kitchen was large enough to store it and all the other excess can openers without ever having to confront the folly of owning so many. I’ve probably paid to move all these at least five times, too. And I’ve wasted time packing and unpacking them with each move. It’s a minor issue, you say. But what if it was 13 bicycles?

When we worry about de-cluttering or about cleaning or sorting or organizing our possessions, we focus our energy away from the important tasks of our lives. Maybe we have books to write, muscles to exercise, or jobs to find. We intend to make big changes in our lives--after we do a major cleanup. But the cleanup never happens, and neither do those big changes. By acquiring, holding onto, and endlessly arranging and having to detour around excess possessions, we are hiding the couch. How are we ever going to find the loose change under the cushions if we can’t find the couch?
And just what is this loose change under the cushions? I know I’ve strained that metaphor to the breaking point, but bear with me. The change is the hope of a better life. The coins found under the cushions are just what we need to stave off a disaster, or bankroll a new success. They are extra capital exactly when we need it. Stored bicycles and can openers are not, because they are not liquid assets. Their value is dependent on a market. If we are bound and determined to have extra stuff around, we should make it be extra money. That’s something that we can use in an emergency. We can’t pay an unexpected dental bill with a broken bicycle or a can opener.

Monday, March 24, 2008

Talkin' 'Bout Your Generation

Are young people (aged 18 to 34) spending less money on music CDs, and more on paying off their credit cards? This is the fascinating theory proposed in the April 2008 issue of Esquire by Chuck Klosterman. Statistics show a decline in CD purchases (yeah, we knew that), but without an upswing in other consumer purchases that would make sense. As he points out, if you stop buying CDs, you don’t do it to switch to buying video games or movies. They’re not the same kind of entertainment. I would add that their cost is very divergent, especially the video games. Just think how many CDs you would have to not buy to purchase just one more video game. Doesn’t make sense to ditch one for the other.

So what was happening? According to Klosterman, maybe young people were paying off their credit cards. This is an interesting theory, because every statistic I’ve heard in the past four years suggests that the national personal debt average is now rising more than $1,000 per person per year, including the average personal debt of college age people and people in their early twenties. This is consumer credit card or store card debt, not mortgage or college loan or automobile loan debts, all of which are secured. (You can’t go bankrupt on student loans, so they’re probably the most secured of all debt. I’ve heard of people who died before they paid them off, although probably that’s an exaggeration.)

But Klosterman doesn’t say where he got his figures claiming that fewer people ages 18 to 34 had credit card debt in 2004 than they did in 1989. And he also doesn’t say that the people that age with credit card debt had lower debt. Which kind of argues with the stats I heard in 2004, that college students had on average $5,000 in personal debt, higher than they ever had before. So this is perhaps a case of dueling statistics. Or maybe it’s just another way of viewing the same statistics.

But leaving aside the question of accurate statistics, here’s the more important question: Does this mean that the generation that went wild with credit cards during college and then in their first years as adults suddenly got a dose of good common sense? Maybe. Klosterman posits that they wanted the money they used to spend on CDs to pay off other debts. But I’m wondering if they were able to change their spending habits because their horrible financial situation got outed in the media so thoroughly.

Once it’s not a dirty little secret that your generation can’t afford a lavish lifestyle, or that your cohort has been charging up a storm on credit cards, well, you don’t need to front about it any more. Fronting. It’s a street term. Keeping up with the Joneses is the old-fashioned way of describing it, but it’s the same concept. You see that other people have the signs of wealth, and you overextend yourself to imitate them. What a relief to discover that their cars are leased and their car loans are upside down, and they’re moving back in with their parents in order to pay off their credit cards! Now you can stop pretending you’re rich, too. And maybe consider asking if you can rent you old room from your own parents.

I don’t know. It’s just a theory of mine. The Esquire article doesn’t mention research to support this, either. And I haven’t seen any other mention of this idea yet. After all, money is the last taboo. Over and over again, surveys and studies have proved that Americans would rather talk in great detail about their sex lives than reveal any detail about their monetary lives. Which is crazy, then you think about it. So what’s happening, if it’s happening at all? Are Americans learning to be more honest about their personal finances? Wouldn’t that be wonderful, if so? You wouldn’t have to pretend that you have the income of a stock broker by conspicuously consuming everything in sight. It would become acceptable to say no, you can’t take off for a week in the Caribbean with your buddies—few of whom can afford the trip, either, by the way. You finally admit that you can’t afford to buy a pricey condo or expensive new car.

And just think of where this could lead. It could spell the end of Bridezilla weddings! Without crazy consumerized brides demanding that $30,000 and up be spent on a weekend full of outsize marriage activities, people could actually get married without going into hock or demanding that their friends and relatives do so. Couples might even stop charging admission to their weddings. Reveling in vulgarity and greed would cease to be a major part of the wedding experience.

There would still be the problem of the baby boomer generation and its ferocious consumers, many of whom are in deeply in debt, what with big mortgages, college costs, and taking care of their elderly parents. But that generation is about to inherit whatever their parents leave, so maybe they don’t have as much to worry about as the 18 to 34 generation. That’s the theory, anyway. Hey, the baby boom will figure out something to its advantage. It always does.

But just think. The youth of our country might actually be able to end the consumer madness that has been afflicting our country for a long time.

Or not. Depends on how many plasma TVs you buy.

Saturday, March 15, 2008

Beware the Ides of March

Yes, it’s that time of year again. The time when people finally face up to the unpleasant fact that there is exactly one more month before their Federal income tax return is due. And usually, some money with it. After all, if you’d expected a refund, you would have filed for it in February.

Spring is on its way, flowers are popping up, and the temperature is rising. But so are our anxieties. We still have those lingering Christmas bills to pay off, plus all the bills from those mood-altering purchases we made in January and February. We’re wishing we could escape the last gasp of winter by fleeing to some sunny clime like Florida. We’re possibly angsting about how to pay for new Easter clothing, feasting, and treats for the kids. Not to mention all those skiing vacations during spring break.

And those taxes just won’t go away. Plus, this year our government saw fit to promise people a stimulus rebate, a payment of cash that is meant to be spent immediately, to bolster our economy. (Which whether the president will admit it or not, is in a recession.) But to get the stimulus payment, we must file a tax return. Yes, even the 23 million elderly people on Social Security, including those who haven’t filed a tax return in decades, must somehow figure out how to file a 1040A form. Otherwise, they don’t get the stimulus payment. And you don’t either, unless you file.

I’ll bet you’re already mentally spending the money the government will send in May, even though you haven’t quite figured out how to pay the money you owe the government in April. March is a good month for dreams. The weather is so changeable that actually getting out and doing things is often impossible. But sitting at home planning to spend money is always easy. Okay, so here’s why I say to beware the ides of March. You can dream all you want, but you’re only allowed to spend the stimulus rebate once. That’s right. If you receive a $300 check from the US government, you’re not supposed to go out and buy a $600 anything. Maybe the only way we can have a prosperous economy is for every single one of us to be stuck in massive credit card debt, but I doubt it. Your personal first responsibility is to your own financial situation.

And you have all those bills hanging over you from the last few months to consider. If you’re forced to divert some current cash to pay the IRS on April 15th, then things may be even tougher for a bit. So when you’re putting together your St. Patrick’s Day party or getting supplies for Easter egg dyeing, remember that March is a treacherous month, sunny and soft one day, icy and miserable the next. Do not give in to the impulses that urge you to spend money you do not have yet. Or money you owe to someone (like a creditor or the IRS), or money you simply will never receive.

When you get a chunk of money, put it to the use that will give you the most peace of mind, both now and in the future. Because you have a future. And I guarantee you that the best use of your money is not in overextending yourself. As all those elderly people now limping into tax offices across the country to file their 1040As know, every little bit of money you save now will make the future much more financially secure. We don’t have to worry about Brutus and a conspiracy of senators out to assassinate us on the ides of March. We have to conquer our own self-destructive financial impulses and habits instead.

Saturday, March 8, 2008

Regaining a Healthy Sense of Proportion

A recent article by Dan Zak published in the Washington Post, “If It's All About You, You're in Trouble. Why a Sense of Entitlement Can Wreak Havoc on Happiness.” was passed on to me by a friend. The article talked at length about the tendency of people today, many of them young people, to expect that everything in life must go their way. And to be outraged brats when it doesn’t.

The entitlement mindset is not exclusive to Generation X or its successors. One can make a pretty good case for the Baby Boom being the first entitled generation. But actually, the post-World War I generation described by F. Scott Fitzgerald probably was the first modern entitled generation. But who remembers them except English and History majors? Still, all that wild dancing and drinking, driving around in Model Ts, and buying land in Florida, with little thought of consequences. Sound familiar?

The Post article is about narcissism. But the fallout of narcissistic behavior isn’t just lots of public and private rudeness, it’s also gigantic personal debt. Because apparently most of us think like the rock song (now rented for a credit card ad) that goes “I want it all, and I want it now.” Which leads to buying things we don’t need, or even things we do, without a sense of proportion. (As in, “How am I going to pay for this?”)

There are seductive reasons for wanting everything now. For one, the hot item of the moment doesn’t last very long as a hot item anymore. Technology is churning out new toys so fast that if we don’t grab at them immediately, their moment is already over by the time we amble to the store. The appearance machine is doing the same thing. It’s not enough for Americans to have the best teeth in the world anymore; they have to be blindingly white. Cars and clothing and entertainments become passé as status items almost before people living outside the big cities even hear about them. And so on. In this race, the only way to win is to keep shopping, and keep buying. Right now.

But wait a minute. Remember all those people dancing in the Roaring Twenties? Remember what came next? The Depression. Yeah. Currently, we’re in an unofficial recession, which is a mini-depression only if it ends soon and doesn’t involve too many people. Despite all the economic safeguards we now have and all the governmental concern over the economy, if too many dominoes are knocked down, this nasty situation could become very big.

So if you are one of those people who want perfection, who want everything now, and who furthermore expect the world to provide it for you, maybe now is the moment to reconsider. Maybe now is the moment to gain (or regain) a healthy sense of proportion. A lot of people are already suffering bad economic times because businesses that were providing them with good incomes have tanked. Who’s to say that yours won’t be affected next? Wouldn’t it be a good idea to have a plan, just in case? To scale back on some of the unrealistic expectations, bratty ideas about what you deserve, and insane spending patterns?