Yellow's Green

The Adventures of Money Blog.

Friday, September 22, 2006

Set up for Fincial Failure

Although I decided very early on that I'd do whatever it took to stay at home with my children, I found myself strongly defending the working mother yesterday. Sure, it IS a choice - but for most it's a choice between impoverished (by American standards) living and getting by ok.

It's seems my generation is set up to fail, financially, from the get-go:

- Lack of financial education
We are NOT educated about financial matters in our school systems anywhere, unless you choose an optional money management class while in college (when it's already late in the game).

In fact, my Mother-in-law told me how her kindergartener is already being taught to live on credit! He was sent to school with a bagged lunch, and no money to buy a hot lunch. It being his first experience with school lunch, he didn't really understand how it worked, and got in line for the pizza and chocolate milk on the menu at school. They gave him the food, and simply charged it! They just assign the kids numbers and charge the meals, sending the bill home to Mom and Dad. It's teaching kids to live on credit from the beginning. My MIL must write letters to the school saying that her children are NOT allowed to charge their meals, yet she still gets bills sometimes. (With no way for her to monitor what's really being purchased, or who's really doing the charging.) Bad deal.

- Cost of education

The cost of higher education is just going up and up, with federal aid being cut, and student loan interest rates going up. Those with parents not helping financially (for whatever reason) are finding it next to impossible to leave college without debt.

Take my own case, for example. After high school, I didn't go directly to college because I couldn't afford it. For a year, I worked three jobs and saved almost every penny. I got a full-ride scholarship to a community college, and went there for my first two years. During my second year, I worked as an RA- again saving most every penny I could. I didn't expect to be able to go on to my bachelor's right away, because nowhere in state had the major I wanted, and out-of-state tuition seemed too high. Then, I was offered a very generous scholarship (my 3.9 GPA helped) to Washington State University. I immediately called WSU's housing department to get interviewed to be an RA (free room & board is a great deal) and was offered a position. I figured between the scholarship, the job, and my savings that I would be able to afford it. Well, between the cost of tuition raising every term (at a higher rate for out-of-state students) but my scholarship and wages remaining fixed, strict standards for being able to gain state residency (hopeless), and unexpected fees, I was out of money in one year. Cash flow was GONE.

University of Idaho, just a few miles away, was willing to let me pay in-state rates - and I figured it would be less expensive there even without the help of scholarships and paying my own room and board. (Of course, with yet another transfer there were requirement changes that tacked on more time at school, meaning more money.) I got a new job, applied for scholarships, and nervously took out my first loan. By my fifth year of school, I was finally old enough that I didn't have to report my parents income on the FASFA (not that my parents paid any of my tuition in the previous years) and I qualified for a small grant. With all that, I graduated with $12,000 in student loan debt, which didn't seem bad to me at all. I consolidated right away to lock in a low interest rate (less than 3%) and paid as much as I could each month. Unfortunately, my career path was one of non-profit work - and my income was not big enough to really take a huge bite out of my loan. I still have more than half of it to pay off, which isn't too bad, I guess, for having been out of school three years now.

- Predatory Lending

I don't recall a day in college where there wasn't a booth or a mailing somewhere offering me a credit card. My parents had always instilled a "don't live on credit" philosophy in us, so it was easy enough for me to resist the temptation. But then, I got really low on money and was concerned about my ability to pay bills. I got a credit card for "just in case." (I chose it based on the 0% APR, and the cool Van Gogh design.) I used my card to buy things online because it was more secure than my debit card, but never carried a balance. Among my peers, I was an exception. I was one of the last I knew to get a card, and most people I knew DID live on credit. "We're young. We're supposed to have fun," was their reasoning. One guy I knew racked up $10,000 in credit card debt in his first year of school. And he was just one who told me about it. I never even noticed if he had any nice "stuff."

- Health Care

I was dangerously and stupidly without health insurance for a while. In my mind I couldn't afford it. I did get sick frequently, and have daily medications I have to take. Doctor bills really add up! When I did buy the student health insurance, I still had to pay full price for my meds, and all the copays for doctors visits, plus whatever else insurance wouldn't cover. I ended up paying more in health related expenses after I was insured than I had before. Fortunately, I never did have an emergency while in college, and that would have made a big difference. Besides tuition, medical spending was definitely my biggest money eater through college.

- Gettin' hitched ain't free

So Erik and I were married in a very low-key nontraditional way, at close to no cost. But that's not the price tag I'm talking about. It's good that Erik and I are both frugal, and consumer-debt free, but he also had student loans - and not at the same low fixed rate I did. We worked hard and fast at getting rid of that debt, but still it was there.

- Makin' babies ain't free

Well... maybe making them is, but birthing them certainly is not. Because insurance rates are so high, many employers are offering less and less health benefits. If you were paying for the whole birth, insurance free (a very bad idea), the least expensive route (besides attempting to keep the whole thing a secret, never seeing a doctor, and birthing in a back alley somewhere) is a midwife - which averages around $3,000-$4,000. Don't even think about a hospital birth without insurance! With insurance, you'll still probably be paying a few thousand dollars out of pocket for a birth.

- Competing for a home

When women entered the paid working world, they doubled (well, increased anyway) the income of their homes. But, the housing market is based on what people will compete for and are willing to pay. So, when people's buying power doubled - so did the cost of homes. It's not anywhere close to the same story it was for my parents buying their first home, or their parents. Read "Two Income Trap" for a more complete picture.

- The rules have changed

Some of us did have great financial examples in our parents. Unfortunately, due to everything listed above, you can't "just not worry about it" and "get by" these days. Yes, the basics are still the same (spend less than you earn, etc.) but the vigilance it takes to live by those rules has increased. If you do get by, there's still a huge lack of safety net if one member of a two-income home loses a job and can't go back to work. Job stability ain't what it used to be. Retirement and health benefits ain't what they used to be. And because of incresed life spans (and the medical costs often associated with it) inheritances ain't what they used to be.

So, although Erik and I both have college degrees, they are only a small advantage due to the fact that neither of us pursued high-income career paths. Had we been in the same relative financial position a generation ago, me staying at home and us buying a house would be a relatively easy option.

As far as working mothers go; anciently, mothers have always worked - only recently have they not been allowed to take their children with them to work or have their children work along side them, and THAT makes a big social difference. I would actually love to work a paying job again, but only if I could bring Jasper with me, and finding somewhere like that is unlikely.


  • At 9/27/2006 1:25 PM, Blogger DEBTective said…

    I'm proud of you for you and your man living small-time, dollface. You're right ... the basics are still the same, and the longer you can live by them, the farther ahead you'll get. Keep working to deep-six the debt and connect with your cash, baby. Great job so far and keep going!

  • At 10/01/2006 11:17 AM, Anonymous ric said…

    Had a rough day sweetie? You are usually much more optomistic than this. Have faith in your brains and in your determination to make it no matter how hard. There have always, always been people who have had disadvantages and made it anyway.

    Keep in mind these things as well. The work that those working mothers who had their children with them did was often backbreaking and just barely helped them survive. We live in comfort.
    It has always been the parents job to teach their children how to live.. financially and otherwise. I don't think parents in the past did any better than nowdays. Yes, credit and the things that are thrown at us are aggressive but think of all teh benefits we have at well. At least the kids in our country do have the opportunity to be educated without us sending them away to indentured servitude as apprentices. They can pretty much choose their life path.

    College IS outrageously expensive but even if it is painful to get through we can work it out if we are determined. Parents have always sacrificed to give their children whatever opportunities they could just as we are saving to help our children pay their way through. If some emergency should prevent our helping them there are still options available.
    We still have the power to choose not to go into debt and the ability to teach our children the same. We don't have to buy mroe house or car or depreciating stuff than we can afford. we aren't landless serfs in medieval England or being bombed out of our homes or blown up in the streets or raped when we go to bring home water like so many people in the world. We are blessed. We have opportunity.
    Notice I left out healthcare. That is the wild card but all we can do is prepare and hope for the best. It wastes our time and energy to worry about things we can do nothing about... and I agree the healthcare system in our country is very, very broken. It won't help me to rage though.

    We are blessed. Be thankful.
    love you!

  • At 10/01/2006 11:56 AM, Blogger Amber said…

    Thank you, Ric!
    You know, you're totally right, and I love you for it. I really am thankful for what I have and both Erik and I often talk about how good we have it. :) Love you back.

  • At 10/02/2006 1:34 PM, Anonymous samerwriter said…

    I agree with much of what you write -- there are a lot of obstacles to overcome to be successful, but ultimately we all have choices along the way.

    I truly admire the choices you've made: college, a non-profit career, and staying at home with your children are all admirable, but with those choices comes the price -- less financial security.

    To be honest, I'm not really sure that our parents' generation had it that much better. It's just that the sliver of their lives that we see are long after the poverty-stricken post-college years :)

  • At 10/02/2006 4:41 PM, Anonymous handworn said…

    I agree with much of what you said. Your story makes me most thankful that my parents were compulsive savers and investors, so that I didn't have to go the college-loan route. But that also allowed me not to become financially mature, myself. That took some time.

    Houses are a little different. There are plenty of places where houses are quite cheap, at least on the East Coast. But people buy into the I-have-to-haves fully as much in housing as in smaller objects. I-have-to-have a house of X size, in Y condition, in Z fashionable area. We, by contrast, bought a Philadelphia house needing a lot of work at sheriff's sale, for $23,500, and I'm doing as much of the work as I can, myself.

    Actually, once you reject the "lifestyle" brainwashing caused by TV, it's amazing how cheap you can live. We own one 8-year-old car, free and clear, and simply schedule around each other for using it. We almost never shop or watch TV-- by choice. We buy our clothes at thrift stores, because they're perfectly good clothes for far less. We borrow books at the library or pick them up used for a dollar or two, rather than buying brand new at Borders. Y'know?

    And with all the saving, we do have some left over. I'm starting to get interested in dividend-paying stocks, myself. Let someone else's work pay for what expenses we do have.

  • At 11/24/2006 12:31 PM, Blogger 100Student said…


    I recently published an article on the dangers and benefits of student loans and other forms of college financial aid – here is a quote from it, in case you are interested:
    Student loans repayment can be a real nightmare without adopting some strategies that would help the new graduates to organize their social and financial life. Here are some strategies they can use to do this:
    - An additional part-time job;
    - Freelancing is another option (meaning that they can do particular pieces of work for different organisations, without working all the time for a single organisation);
    - They should try to keep their living expenses as low as possible (live in a smaller apartment, live with a roommate to share some of the expenses, find an apartment that is closer to the job, to eliminate the extra-expenses for transport etc.);
    - To apply for forbearance (this is an immediate solution for hard times when the new graduate is in impossibility to re-pay the amount of money and the need for student loan consolidation becomes apparent; it is a temporary period, when the graduate can postpone or delay his or her re-payments until a later time on a federal or direct loan after the beginning of the re-payment, and when the student doesn’t qualify for deferral). The forbearance must be applied through the lenders of the loans.
    - To consolidate the payments.
    If you feel this helps, please drop by my website for additional information, such as federal student loans information or additional resources on private student loans .




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