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

August 30, 2013
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. 

 

Filed Under: Bad Examples, Consumer Debt, Financial Retard of the Month Tagged With: , , , ,

How We Paid Off $0 In Credit Card Debt

May 31, 2013

 

 

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.

 

Filed Under: Consumer Debt, Credit Cards, Making Smart Choices Tagged With: , ,

A Reader Explains How Control Your Cash Turned His Life Around

October 12, 2012

 

Milton (Bradley)

We’re exaggerating, but not egregiously. We recently received an email from a reader named Milton (a real email, not one we concocted to create a mailbag with.) He understandably requested anonymity, but here’s the gist of it:

I’ve been enjoying your blog since I discovered it (via the Simple Dollar– talk about a fortunate turn of events) and am reading through all of the entries (having already read your ebook… twice).  I read the one about the site Digging Out From Our Mess, [NB: A site we’ve lambasted on here, and for good reason] and clicked the link to their site.  Based on their About page and updated totals, in almost exactly three years they’ve managed to reduce their debt load by a whopping NEGATIVE $281.39. I found CYC after I’d already started my own deprogramming and had eliminated my debts, and have begun investing and building wealth.  But even at my worst (read: dumbest) I don’t think I was this bad at personal finance.  At the very least, I didn’t think it was a good idea to trumpet my ignorance to the web-surfing world.

300 million more like him, and this country could be a superpower again. We asked Milton to explain how he – a presumably ordinary cat with the same hopes and desires as most of us – started building wealth and this is what he had to say:

I live and work in New York City.  I’m the IT Manager for a mid-sized engineering firm.  I’ll be 44 in about two weeks, and am single with no children.  I have three sisters and no brothers.  My parents were born in Puerto Rico and came to the mainland US in their late teens.

You refer to your own “deprogramming”, which implies that the old you thought it was awesome to incur debts and not care. Is that accurate?

Yes. We grew up poor and didn’t learn about money and finances.  Like everyone else I know, my parents didn’t teach us about money.  My father never learned English and worked at menial jobs his whole life, squandering what little money was left after expenses.  My mother stayed home with us and did what she could with what little we had and didn’t build up any savings.

God, how depressing. And how typical, to think that life’s purpose is misery. It was a common belief in Milton’s father’s generation and those previous, and still a fairly common one today. (That’s a comment about the menial job, not a joke about having 4 kids.)

It wasn’t all bad.  Among the lucky breaks were that I did not go to college and avoided many of the pitfalls of growing up in an impoverished area.  I’ve never used tobacco or illegal drugs, I rarely drink and I don’t gamble.  After jumping from one job to another for about 3 years, I settled into my current job and within 8 years had been promoted from mail clerk to computer specialist.  At 29 I was making more than twice as much money as my father had ever made (adjusted for inflation).  Even my financial ignorance had a bright side.  Thanks to my mother’s distrust of credit and debt, I didn’t get my first credit card until I was 27.  I was debt-free and had a $1,000 line of credit. So there I was, making good money with only a few monthly expenses.  Just like Dad, I’d spend whatever was left after the bills were paid.  Unlike Dad, I had a LOT of disposable income to dispose of.  Computers, home electronics, art supplies, novelty gadgets, exercise equipment… anything that caught my eye was as good as purchased.  I had the money, why not enjoy it?  As my credit limits rose so did my spending and my interest rates (up to 29.99% at times).  I funded my 401(k), but only about 1/3rd of the maximum.  At some point I had actually set up my withholding so that I was only getting back a relatively small refund each year, which I then dumped into a savings account that was earning .3%. I’m not the sort to spend much time looking back at what cannot be changed, but I cringe whenever I think of where I could be today if I’d had a better understanding of money when I was young.

Of all the dumb things to do (and we all do dumb things), Milton picked some of the least dumb ones. The standard vices aren’t just of dubious morality, they’re expensive. Fortunately, the ones he picked were easy to fix: if you want a greater 401(k) contribution, contribute more to your 401(k).  

 

What made you see the light? 

I think that getting older and paying more attention to finances is what woke me up.  I was getting to that age where you start to think about retirement options, and I also realized that I was paying around $750-800 a month in finance charges on my credit card debt.  Gads, it makes me ill to think about that again.  After a couple of aborted attempts, I managed to wipe out around $24,500 of debt in around 18 months (helped in large part by the $12,000 that was sitting in that savings account… sigh).  A few months after that, I finally stopped wasting money and started building up my savings (Trent would’ve been proud of my emergency fund).  Happily, it was around that time that I found your site and finally began to understand how it is that I could make my money work for me instead of the other way around.

Milton emphasized his point with a sigh, so we won’t pile on, but you see what he did there? Every personal finance site in existence tells its audience to “create an emergency fund“, which is horrible and self-defeating advice. Why? Because it implies that you’re not in an emergency right now. Milton was, and didn’t realize that having a debt load twice the size of your savings counts as an emergency. (Nor did he realize, at least not immediately, that there’s a way to halve said debt load which is so easy that it’s easy to miss.)

 

How have you begun investing and building wealth? That is, what have you invested in (beyond the stuff you were investing in before, like 401[k]s and stuff)?

I am fully funding my 401(k) now and paying attention to where my 401(k) funds are allocated.  I opened an account with Vanguard and put some of my savings in a mutual fund and the rest into a brokerage fund.  I’m invested in ETFs and a bond fund (specifically, VTI VNQ VXUS and BND).  When my profit-sharing bonus comes in at the end of the year I am planning to invest in a few stocks as well.  I will be looking for stable and profitable companies with good fundamentals. I plan to try my hand at real estate within a year or two.  I’m hoping that the housing market and interest rates stay depressed for a few more years. (NB: Douche.) I have vivid dreams of owning multiple homes on 15-year fixed-rate 2.95% mortgages that I can pay with spare cash (deep breaths… deeeeep breaths…).  It’s a challenge for me to do something risky, but it’s too good an opportunity to pass up.  I live in a co-op and do not want to buy a house in New York City; I am researching locations where I can get a good deal on a modest house in a good area. I have other plans that involve comic book artwork (which I dabbled with in the ’90s) and I might see returns from that sooner.  At worst, it will provide some extra money that can go 100% towards wealth-building.  If the stars align, this plus a few rental properties might allow me to retire early.  And of course, I pay all of my credit card balances in full every month. (Italics ours, not that they were needed.)

How much time do you spend on this? 

Too much, because I started investing 2 months ago and I’m still at that anxious stage.  I’ve already gotten it down from checking my finances several times a day to 3 or 4 times a week.  By the end of the year I should have that down to once a month.  Long-term, I intend to stay on a once-a-month schedule for my investment accounts and a quarterly schedule for my 401(k).

Is there any advice you’d give people who are just discovering CYC for the first time? Like, what recommendation worked better for you than you thought it would? (Or what would you avoid?) 

The most useful thing would be to follow your advice about removing emotion from the equation.  I imagine that a lot of people who read your site become indignant at the implication that they’re doing a lousy job of managing their finances (and in some cases, their lives).  A defensive attitude is an obstacle that can derail their attempts to get their finances (and lives) in order.  It may sting to be told that what you’re doing is stupid, but the sooner you realize that what you’re doing IS stupid the sooner you can stop doing that and start doing something smart.  The best advice in the world won’t do any good to a person who leaves in a huff because they think failure should be rewarded with a pat on the back.

Couldn’t have said it better ourselves. Although we did say it differently, in the footer: This is personal finance for people who want results, not coddling. Milton’s doing fine (repeat: fine) and there’s no reason why you can’t, either. He didn’t grow up with any inherent advantages, obviously. The closest thing he had to one was his abstemious mother and her example. On balance, that’s a lot to compensate for a diligent if financially unsavvy father, in a house with 6 hungry maws, where English wasn’t even the first language. To recap, and this couldn’t be simpler if we used puppet theater:

  • Don’t flush money down the toilet (drugs, alcohol, gambling.)
  • Fund your 401(k) to the max, and get the matching funds. Free money.
  • Treat consumer debt with aggressive therapy, i.e. living ascetically until the debt’s all gone. The occasional “splurge” defeats the purpose, and keeps you poor longer, if that’s what you’re into.
  • Then, once and only once that’s done, can you start investing. Investing, not speculating. Speculation is for rich people. The aspiring don’t have that luxury: they need to build wealth methodically before building it in riskier ways.

What else should Milton do? He’s on a smarter path than the vast majority of people. He needs to spend less time checking his investments, but he acknowledges as much. We can blame that on how new he is to investing. It’s like when a formerly sedentary person develops and commits to an exercise-and-diet routine. Once you do, it’s only natural to weigh and measure yourself abnormally frequently. Then, when the pounds and inches start falling off more slowly (because you’re getting closer to perfection, and thus there’s less room for rapid improvement), you eventually start checking the numbers less and less often. Milton bought assets, sold liabilities, and is now enjoying the inevitable increase in wealth that follows. Spend your money on things that further your wealth, don’t spend it on things that don’t, and you’ll get rich no matter how otherwise stupid or lazy you are. It never fails. You don’t even have to be smart like Milton.

Filed Under: Making Smart Choices, Newsflash Tagged With: , ,
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