Rob M. recently forwarded an MSNBC article which proclaims life is harder now, some experts say. By “some experts”, the author means Elizabeth Warren, whose ideas I both love and hate. “Warren’s theories fly in the face of conventional wisdom and those crowded malls,” the article says. Her theories also fly in the face of my personal experience. Sometime I’ll sit down and read a lot of Warren’s writing at once so that I can post more than a gut response.
Here’s an example of the sort of debt I see in the people around me: This woman — who recently appeared on The Oprah Winfrey Show — has $135,000 in debt and spends $400/month on Starbucks. She spends nearly $60/week on tanning and manicures. (Her husband bears responsibility for this debt, too, of course.) I don’t know couples who are in this much trouble, but I’ve seen a lot of wanton spending in my time. (I’ve done a lot of wanton spending in my time!)
At Dumb Little Man, Jack has posted some advice that the Oprah couple ought to heed: 10 smart ways to live below your means. Most of these are mantras you’ve heard before, but it never hurts to review: buy store brands, buy used, keep your car as long as you can. My favorite — avoid advertising — isn’t listed here.
Elsewhere, Pick the Brain recently asked: What tools do you use to manage your personal finances? We’ve covered this subject a couple of times at Get Rich Slowly. Someday I’ll find the time to compile a comprehensive list!
Finally, if you don’t read the Get Rich Slowly discussion forums, you’re missing out. There are some smart folks over there. The place has been hopping lately, with interesting threads like:
- The effects of politics on the U.S. economy (as you’ve noticed, I try to avoid politics in the blog, but they’re fair game in the forums)
- Kitchen appliances: The good, the bad, the unnecessary (this is a great topic — I may have to appropriate for a front-page post)
- I started the success stories forum for the Wii contest, but now that we’re finished with that, this area is taking on a life of its own. It’s a great place to crow about your personal finance victories. For example, SJean just found the courage to successfuly negotiate an increased salary. Awesome!
The forums just passed the 750 member mark. Next stop: 10,000 posts!
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Is that the same episode where Suze Orman suggested the woman get a job at Starbucks for the health benefits? I’m sure that was some sort of sleek marketing for the new Starbucks Saved My Life movie.
Anyway, Suze also told a guy on the show that he should burn all his DVDs and sell the originals. Isn’t that illegal in the US? I was flabbergasted.
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I didn’t see the show, but after reading references to the couple all over the web, I hopped over the Oprah to read the recap. Oh my, was she something else! I had a hard time wrapping my brain around that level of debt. Wow! Just wow!
I don’t think she’s typical, though. Most of the people I know who are in massive debt got that way by over-purchasing housing, not by losing control at the mall. So, my personal observations correlate with Warren’s and Tyagi’s conclusions. That said, I live in flyover country where most people aren’t flush with HELOC money. Prices here rose just fast enough to be out of whack with local salaries, not enough to fuel a drunken spending spree the way they did on the coasts.
The Two-Income Trap strongly influenced my family’s decision to move from the west coast to the interior of the country. Relocating gave us a way to reduce our housing costs and increase our standard of living, while continuing to save for retirement and college expenses for our children.
Anyway, I just wanted to provide a counter-point. Thanks for a thought-provoking post…and blog!
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RE: the Life is Harder article. So today’s dual-income couple earns $19,340 more, after taxes, than the 1970′s single income couple. Then they spend $12,580 of that ‘extra’ income on child care so they can both work. That’s leaves a grand total of $5,500 actually earned by the 2nd worker (after day care expenses so that person can work).
Then they choose to spend $4,430 more on housing than the 1970′s couple, leaving only $1,070 of ‘extra’ income.
My math must be way off. I can’t imagine anyone would work and put their children in day care all year long just to earn an extra thousand bucks. Maybe it’s not that life is harder now than in 1970, perhaps it’s doing the math that’s really harder.
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Wow… sick and selfish. She “needs” manicures & lattes while her kids don’t have health insurance. Kicking her coffee habit ALONE would cover most of that cost.
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I just read the Oprah recap, and this piece of advice hit home.
Suze has some tough love for Felice. “I personally don’t believe you’re selfish. I think you’re selfless. I think because you don’t have a self, because you don’t know who you are…that is why you’re doing these things that you are doing. You are just simply trying to find yourself,” she says. “You are trying to define yourself by the things that you buy rather than you define the things around you. And you keep buying new and new things because you can’t find the definition of yourself.”
Wow. I’ll admit I identify with that statement, although I’m not amassing insane credit card debt. I now pay my credit card bill in full each month. But I understand trying to figure out who you are and thinking that projecting a certain image will get you there. I did this quite a bit during college because I wasn’t really happy, and the habits continued up until about a year ago. It was then, three years into a solid relationship, that I realized I was content. I had everything I needed in life already. Family, friends, a good job, a wonderful fiance…it’s like I didn’t realize I was already happy and fulfilled until that moment, and my need for *things* suddenly subsided.
I still have to talk myself out of purchases, and I’m not always successful, but I am so much more level-headed about it now. I have other goals that are more important.
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JD — Just wanted to agree with you 100% about skipping advertising to avoid advertising to reduce unnecessary expenses. I think our DVR expenses have been repaid 5-10x because we don’t watch commercials anymore. Best of all, our kids don’t end up asking us endlessly for stuff they saw in the commercials.
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Sorry — this is probably a duplicate, because I just HAD to fix the horrible typo. I am way spoiled by being able to edit my entries after submitting them in other places I write. Doh.
JD — Just wanted to agree with you 100% about skipping advertising to reduce unnecessary expenses. I think our DVR expenses have been repaid 5-10x because we don’t watch commercials anymore. Best of all, our kids don’t end up asking us endlessly for stuff they saw in the commercials.
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Hmm, I like Elizabeth Warren’s books and think they are certainly worth reading as you contemplate where to live, what profession to pursue and how much of a mortgage to take out. Having an expensive latte habit is not the best habit you can have but if you lose your job, you can easily cut back. What will really send you into bankruptcy in the event of a job loss is the large mortgage payment.
Even though I’m cheap by nature and not a keeping-up-with-the-Jones’ type, I’m amazed at how easily money flows out of my account.* It costs a lot of money to maintain what Americans think of as a middle class (or even lower middle class) lifestyle.
*I have managed to stem the flow a bit by direct-depositing money to a high interest savings account.
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I understand that store brands are much cheaper most of the time, but still hearing this advice always saddens me.
Cheaper isn’t always better and often the cost are stripped down on something important, and the ecological costs can be a lot higher because of this.
I know it’s important to stay out of debt, try to live frugally and everything, but please, keep in mind that here in the western world, we have an opportunity to think about something else than money, too, every once in a while.
I’d like to give this advice to everyone: Buy organic!
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I came here to say pretty much the same things as TosaJen. Removing advertising. I am a reformed compulsive spender. Luckily in those days I didn’t have a credit card so I could only spend down to 0$ in my checking/savings. But now looking back its almost sickening the money I spent on stuff I used for a couple days and then tossed in a closet.
I still have that tendency but I have cut advertising from my view and now I don’t “need” new things very often. I even resisted the allure of the iphone which was pretty good for me I think. No TV = best decision ever. Even without commercials the level of marketing and promotion of “the lifestyle that you should be living” really ruins perspective on reality.
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Now what I’m going to say right now, I don’t want anybody to misconstrue as being judgmental of these people, because I’m not trying to be judgmental, but HOLY -ING -ED -ITY CREDIT -ING AND A MANGO AND -ING !!!
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wow, fill in a bunch of (bleeps) there, since the blog software ruined my witty response.
I was absolutely flabbergasted reading their stories. More than anything else, I can’t help but wonder why the banks would let them continue to spend after a certain amount, say $50K on the card. You would think after the first $50K, the banks would say “D’ya think you could pay us some of that back first before we lend you any more money?”
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Re: Oprah article
I question the suggestion of moving to Seattle. Yes, the tech sector is strong up here and he could probably find an excellent job. However, our housing market is not “booming” as she says; its collapsing.
Of course, in Seattle she could get a job in Starbucks’ corporate office.
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Give me a break. Life is harder now that we have electricity, automobiles, food whenever we want it, comfortable shelter, telephones and internet.
Everybody, in the western world, is living like a King compared to someone just 100 years ago.
Life is as easy as it’s ever been. Maybe that’s the problem.
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Something really resonated with me about that woman’s story — the manicures thing. When I was a single mom and VERY broke, I used to get bi-weekly manicures. It was a huge splurge on my very tight budget, and I’m sure some people thought it wanton. But I did it because my self esteem after being freshly divorced was so low, that something small like a manicure was a huge deal to me. I didn’t get a lot of time alone back then, my ex was MIA, and I had two young boys. The 30 minutes and $20 that I spent every other week on JUST ME was an investment in my sanity.
Anyway, I wasn’t 140K in debt (I was a student and was slowly gathering 30K in student loan debt, tho), and I wasn’t eating out at all, and I wasn’t married, etc etc, so I know my situation and hers were very different. But reading the post reminded me how easy it is to judge others’ actions negatively. I do it myself all the time. Every time I hear a story like hers, I have to spoon myself up a good dose of humility and remind myself that I am not in her shoes.
… And thank goodness
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I watched the Oprah episode referenced above. Boy, that Suze Orman is a piece of work. (In addition to her blundering advice, she coined a new meaning of “selfless,” which typically refers to the habit of self sacrifice for the benefit of others, not to a lack of identity.) Her financial advice made no sense to me. She said the couple should sell their house and move to Seattle, but she also said that house is under water (i.e., no equity). If that’s the case, how can they sell? They’d have to come up with other debt to pay off the 2nd mortgage and settlement costs, and given their circumstances, that seems impossible. Also, how would they obtain housing in Seattle? They certainly couldn’t get a mortgage, nor could they get an apartment anywhere that requires a credit check. Finally, moving to a new city where the couple has no network of friends or relatives (e.g., to assist with childcare, etc.) would be foolish at a time of financial distress. In my opinion, bankruptcy is that family’s only option.
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Love the kitchen essentials discussion. I’ve been thinking lately about how a total newcomer to cooking would get started on a budget; I was in this position a few years ago, not even owning pots and pans. Here’s my thoughts on the bare minimum: http://sustainablefoodblog.com/posts/1193422941.shtml
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