our financial situation as a culture
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| Sun, 03-05-2006 - 4:20pm |
Hi all.
I visit here sometimes but don't usually have time to post. But right now I don't feel like grading papers so I thought I would . . .
I've been thinking recently about how being in debt is the new norm. And most companies no longer have pensions, but people are not planning for retirement. Now bankruptcy laws are tougher . . . are we going to have some kind of financial crisis where people realize how bad it is getting?
So I guess the question is, what are our goals after we get out of debt? How much will we all be saving for retirement? What kind of an account or investments will you have? It's so far away that I can't really imagine it, although I am putting $350/mo. in my 403B account.
I feel like once we get our heads above water then we should just relax and do all the fun things we denied ourselves, but then again, I think that's how this whole mess starts. We graduate and we think that we deserve a nice apartment and new car and expensive vacations, etc. I am glad that Oprah and others are focusing on this issue, but it seems like it is too late for so many people.
I don't want to point fingers, but I think that credit cards are a huge part of the problem. Buy now, pay later! It just doesn't make any sense.
What about teaching your children about money . . . what are your plans? We don't have any children as of yet, but I think my parents did a good job. My dad gave me an allowance (my age) weekly, but I had to ask for it on Saturday or I didn't get it. They would give me money for Christmas and my birthday too, but other than that, I either had to work or keep my spending low. It seems like a lot of parents just give their kids money when they ask. I think it's a good idea to make it a set amount and make the kid budget within that. My dad also put me in charge of some money I inherited at a young age. Of course, all I did was ask the financial advisor what he thought I should do, but since I had "in charge" of it since I was a child, I wanted to see it grow. I didn't want to run out and blow it all on a car when I turned 18 or 21 or whatever the age was when I assumed total control of it.
In bad news, last year our condo was assessed at 27% higher than the other identical units in our building (the assessor had seen a work permit for our address, but it was just to restore the kitchen to its previous condition after a fire, not to make it nicer). We appealed and it was reduced to just 4% higher (which still wasn't fair), but the woman was obviously a looney. She was very emotional and irrational and basically threatened to raise it this year if she lost the appeal. And guess what, this year it is 27% higher than everybody else's again, as if we had no grounds for winning the appeal. This equals $500 a year MORE in taxes than our neighbors in identical units, many of whom have redone their kitchens but who didn't need work permits. So we will appeal it again of course, but I can't help but worry that the stupid woman has a vendetta against us now or something. Plus we won't hear about our appeal until after taxes are due, so we'll have to come up with the extra money anyway. And to top it all off, our assessment has gone up 132% since 2004. It will still be an 82% increase in two years if we are reduced to where everyone else is, which just plain hurts.

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I agree with you that having debt in today's society is the norm and acceptable. Sometimes when people are trying to pay off debt, we are the ones who appear to be unusual. My hubby and I have about $40k of debt, not including our main mortgage. About $20k of that is in car loans @ 2.9%, about $11k in a 2nd mortgage @6.75% and the other $8k is in a 0% credit card. We are still contributing to our 401ks now, even though we have this debt, because except for the 2nd mortage it is all at very low interest rates. Our goal is to pay off the 2nd mortage, credit card, and 1 car by the end of the year. For the future, we would like to get ahead of the car thing and start saving up for our next car so that we can pay for it in cash. We'd also like to save up for to pay off our house, and then save for non-retirement income that we could use if we decide to retire before we can tap into our 401ks. Oh, and then we're hoping to have kids, so eventually we'll start to save for their college. So, nothing fancy, just trying to save up so that we have some security we can fall back on. And peace of mind. :)
Sorry to hear about your extra property taxes. :(
I agree with you that we need to teach our kids to be wise about money. I'm glad that Oprah is having her Diet Debt series to bring more attention to this.
Hey phoenixgirl - I'm glad that you posted!
I love your quote:
All my best,
Danni
Yes Credit Cards are big part of the problem any more. I honestly thing that there need to be laws passed governing the credit card industry. Capping interest rates, and controlling who they are allowed to give a credit card to. Sorry but a college student with no job does not need a credit card.
That and spiraling cost of living with very little increase in wages. The price for everything keeps going up and I don't know about you but my pay has increased very little in the past couple of years. I think it's a load of crap that they don't take the price of gasoline into account when they calculate CPI. Not to mention the huge increase in heating costs that the country is seeing. People have to spend a lot more money to just keep their same lifestyle and no one wants to make cuts in their lifestyle.
Add into those two things, the consumer culture we have. You need this, you need that. Buying is patriotic. You too can owe this doohicky for just $15 a month for the next 100 years. And this is passed off as what success is.
In the past few years, I've seen a lot more drive for people to get out of debt than I have before. Dave Ramsey and others of his ilk are becoming household names now. So I do think that people are waking up to the mess we've gotten ourselves into. But you're right for a lot of people it's too little too late.
I'm planning once I get out of debt to fund my 401K to the match my company provides then open up an Roth IRA. I have a long time to go before retirement thankfully so I'm hoping to provide myself with the most comfortable lifestyle I can. That being said, I don't own my own home yet so I also needs to start saving up for that and I plan on having a child in the next couple of years which will be another major expense.
As far as what I plan to teach my children about money. They will be given an allowance but they have to put part of it aside into savings. That is what our culture needs the most is the understand that savings is how you become secure. Plus the idea that you don't need to spend every dime you make. They will also have chores that they will need to perform or they won't get their allowance. And I'm hoping to teach them about charity as well. I'm thinking for every new toy that comes in one has to be donated or something along those lines.
Plus hopefully I'll have enough money left over after retirement savings and getting my emergency fund built up to put aside money for them as well. Not necessarly for college but just money in general. I was able to get through school only taking out $13K in loans (and a lot of that was poor planning on my part) between getting scholarships and working for a company with tution reimbursement and I found that when it was my money paying for my education I was a lot more serious about it. And some kids just aren't cut out for college. But I would like to be able to give them a cash gift either to pay for school or to help them set up their first place because that isn't cheap either.
I agree that our culture is not helpful in keeping this sort of spending in check. I also keep wondering what we should be doing to help children learn about all of this stuff. I particularly am considering what I might do to help my niece(s). I have been bouncing around the idea in my head to figure out some way to 'pay' her not to get a credit card while she is in college. I'm not sure I'll be willing or able to do that when she gets to college (she'll be 14 this month) but I sure wish I hadn't done that. It would be nice to find some way also to help her get a Roth started sooner rather than later. I've also been mulling over an idea in the back of my mind to do some sort of classes or something for high school girls. It would be great to find a way to get the girls who's parents are able to pay for theirs in such a way you could provide the course to disadvantaged girls for free. I wouldn't want to necessarily make money at this. Even better if you could get the girls in the same class together so you would get some diversity training rolled in. :) Anyway, the things I daydream about.
On another note, I wanted to comment on the idea of getting completely out of debt before you start saving for retirement. I realize that this is a decision that has lots of variables and no one answer is right for everyone but I really encourage you to take a looooong hard look at that decision before you go that route. For those that are barely or not making minimum payments on their debts, I can understand that choice. For me, I am easily able to make minimum payments plus so I have a different set of considerations. Also, if you are paying a particularly high interest rate, this decision may make more sense. Again, I have been able to keep my interest rates very low so I have a different set of considerations.
If you have never read any charts about compounding interest, make sure you have done so and really calculated the difference in the funds you will have in 20-30 years if you delay contributing now in favor of debt reduction. I think this can be pretty much a dollar and cents decision but I recognize that there are emotional/motivational components to these decisions. I think it is important to recognize that this is definitely a case where the sooner, the better. Maybe even more so than debt reduction. I have never seen any chart that illustrated someone 'making up' the lost ground by contributing more later. I suppose it is possible but I think the general consensus is that it is nearly impossible to make up that lost ground.
This decision becomes even more important if you are leaving employer-contributed funds on the table. No debt is costing you 100% return but that decision is. You aren't going to get any better return. Obviously, if you aren't immediately vested (I do at my current employer but didn't at my former), that gets a little different but still, look long and hard at whether you really want to be making that choice.
Peg
Edited 3/6/2006 12:25 pm ET by p7eggyc
Peggy! I've also been wondering how the heck to teach my kids about this, when I don't have myself educated on it myself!! Of course I'm trying to teach them how to save and be discerning consumers, but for me it's learn as you go.
This class/workshop idea you have can fit perfectly into Girl Scouts. You CAN do it... and the girls that can pay as well as the girls that can't are already involved. Same for diversity.
Just a thought!
That's a good idea. I have in my mind that it needs to be with older girls closer to the time they would be starting to manage their own money but I'm sure there are some pieces of this that could/should be taught earlier/younger. I have a good connection with the council in my area though so I will have to give it some more thought.
Peg
It definitely should be a parent's responsibility to include MONEY in their teachings to their children!
Hi Ladies - you may find this link helpful - it's a link to a post I did about educational materials for teaching pre-schoolers about spending and saving:
All my best,
Danni
I have much to say on this topic, but will limit myself for the moment to mentioning that Mary Hunt has a good book on the topic of children and money called "Debt Proof Your Children." It outlines the method she used to teach her children about money, and I think it's great. I would recommend checking the book out of the library (rather than purchasing it), though, as the main content is contained in about two chapters and the rest is sort of just fluff.
Gotta run. Much to do today (old business contact asked me to come in and discuss working on some projects for them, so that's good news on the money front! But it means I've got to get in gear and actually get moving at some point this morning! LOL).
Blessings,
Heather
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