financial responsibility

No Forgiveness for Youthful Stupidity

June 6, 2013 By Jennifer Derrick 4 Comments

My neighbor’s child graduated from college this week. When she came over to thank me for the gift I sent, I asked her how the job hunt was going.

“Not great,” she sighed.

“What happened?” I asked.

“Well, I had two interviews with this one company and I thought things were going well since they seemed so interested. But then I got a call saying that they weren’t going to hire me because my credit check came back bad.”

“What’s wrong?”

“I was stupid and missed some credit card payments during my sophomore and junior years and I’ve got some high balances now. I’ve also got a lot of student loans, so I guess that counts against me, too.”

I was sympathetic toward my young friend, but not surprised. More and more employers are using credit checks as a way of narrowing the field of applicants. This is especially true for any position that involves handing money. And, sadly, my friend was an accounting major. Yikes.

The thinking goes that if you can’t be responsible for your own bills, you might not be responsible with the employer’s money, either. Further, large debts are a red flag to an employer because they feel like someone with monetary problems might be more tempted to steal. You might be the most honest person on the planet, but the employer doesn’t know that. Other things being equal, they’d rather take their chances on someone with clean credit. Most people won’t steal, but they want to guard against those who might.

What this means for kids is that they have to learn to be responsible with money from the moment they get that first job, credit card, or apartment. In my day, employers didn’t check your credit, especially for entry level jobs.You had plenty of time to recover from your youthful stupidity. No one knew that you’d overspent, overindulged, and overdrawn yourself in college or when you were just starting out. By the time you moved far enough up the ladder to come under such scrutiny you’d (hopefully) matured and cleaned up your youthful monetary indiscretions.

That’s not the case today. The job market is competitive and employers can be choosy. Technology makes a credit check so simple that employers find it an easy way to screen and compare applicants. If you’ve got screw ups in your credit report, it’s going to come back on you immediately. Many employers won’t even give you a chance to explain in an interview that you made some mistakes but that you’re now taking steps to rectify the situation. They just see that credit report and toss your resume in the trash. You don’t have time to clean things up, so it’s best not to get in a mess to begin with.

Sadly, this is easier said than done. Financial education is lacking in the U.S. It’s up to the parents to take kids under their wings and explain the financial ropes. Unfortunately, too many parents aren’t knowledgeable either.

So what’s to be done? If you’re a parent, you have to realize how important it is that your kids get off on the right financial foot. You have to teach them about money and, if your own financial life is a disaster, you have to clean up your own act and model what you want your kids to achieve. If you’re a teenager or college student, you have to make the time to learn about money and how to be responsible with it. You can’t just leave all this stuff for “later” and expect it not to bite you in the butt.

There are plenty of free and low cost ways to learn about money. There are books and magazines at the library and websites out the wazoo that can teach you everything from how to grocery shop on the cheap to Buffet-level investing skills. There’s no excuse for being financially stupid, and employers know it. They figure that if you can’t get and keep your financial act together, they don’t want you working for them. Harsh? Yes. But that’s the real world.

(Photo courtesy of Casey Konstantín)

A Life Without Debt: I’ve Always Been Old

December 29, 2009 By Sadie Morris 11 Comments

I’ll let you in on a secret: I’m really about fifty-eight years old. Mentally, at least. In actuality I’m in my upper thirties. But if you look at my lifestyle, my spending choices, and my account balances, I’m much closer to someone who is nearing retirement. Financially I’ve always been about twenty years older than my real age.

I was always “older” than most of my peers. I was the kid who never rebelled, who always studied, never broke curfew, obeyed my parents, made responsible choices, and made more mature decisions than my classmates. Did this get me teased? Oh, you bet. I was a dork, a geek, a goody two-shoes, you name it. But I couldn’t help it. I was and still am incapable of being irresponsible. When I’m temped to blow something off or act like an idiot, something deep inside always stops me.

Why does this matter? It matters because when I was young and just starting out at eighteen, I was already thinking like someone in their late thirties. I was interested in investing, starting a retirement plan, saving up an emergency fund, and buying a house. I worked my way through school rather than take out loans because I knew it would be painful to pay it off later. I was actively looking for ways to cut my expenses and I already realized that, “stuff” was a pain to buy, maintain, and clean. I never saw the point in consuming like many of my peers in college. Spending on clothes, shoes, electronics, booze, and clubbing never seemed like an effective use of my money or time.

By the time I was in my late twenties, I had the portfolio of someone in their forties. I went through my twenties avoiding the debt traps that so many of my friends were falling into. I didn’t rent or buy beyond my means. I didn’t buy a $20,000 car on a $10,000 salary. I didn’t shop till I dropped or eat out every night. I didn’t bar hop or chase designer labels. I kept myself out of debt and amassed a nice nest egg and emergency fund. I bought a house. By the time I was twenty-eight I was at the point where I could really start to enjoy my money and travel and do other things without worrying about the financial consequences. Most of my peers were so far in debt that any “fun” money had to be borrowed.

Now that I’m in my late thirties I’m financially almost at the point where I can retire and live off some part time work. I never upgraded my starter home, I still have the car I bought at twenty-nine, and my life is not only debt free, but also clutter and hassle free, as well. Too many people my age are just now starting to sort out the mistakes from their youth. They’re just now paying off the last of their student loans. They’re realizing the house costs too much and that maybe they should have bought a used car. They’re just now starting to contribute to their retirement plans. They’re just now realizing that the credit card balances have become overwhelming. Because I never acted young financially, I don’t have a mess to clean up. I just keep moving forward.

Are people who never accrue debt always that much “older” than their peers? I can’t attest to everyone in the world, obviously, but the people I know who have never gotten into debt are all much like me. They were all much older than their peers, both financially and in terms of overall maturity. I don’t think it’s possible to live a debt free life if you are immature. Immaturity is a large part of what drives the “gotta have it now, gotta keep up with my friends” mentality. When you’re mature enough to realize that stuff doesn’t matter and that there’s no sense in trying to impress people you don’t know, you’re well on the way to a debt free life. Unfortunately, too many people don’t come to that realization until they are well into their thirties. And some never get there at all.

Can you teach someone to be old financially? To an extent, I think you can. You can model good financial behavior for your kids and teach them about money. You can teach them about both good and bad consequences for their actions. You can teach them about responsibility in general and you can teach them decision making skills. My parents were excellent teachers and models of responsibility. And, because I knew that there would always be severe consequences for acting like an idiot, I quickly learned how to act right. However, some portion of maturity may just be genetics. Some are blond, some are athletic, and some of us are just older than our peers. But the good news is that my financial old age means that my physical old age is going to much easier to deal with.

Don

April 20, 2009 By Jennifer Derrick 22 Comments

When I was in high school I was a “smart kid.” I got great grades and studied hard. I chose to make school a priority rather than going out partying every night. I got called a nerd, dork, or geek, as well as some other less flattering names. I learned to hide my intelligence and to “play dumb” around the kids that I knew would torment me. I learned to apologize for my intelligence and mastered phrases like, “I didn’t study all that hard,” or “I just got lucky and guessed those last five answers.” When people wanted to talk about my academic success, I would shrug, hide behind my hair, and mumble that I wasn’t that smart, really. While this strategy worked to avoid confrontation and keep me out of the cross hairs of my taunting classmates, it did nothing to teach me to be proud of myself and my accomplishments. It took me years to get over it and to value my intelligence.

Lately I’ve found high school playing out all over again, only this time it’s not my intelligence that’s getting me into trouble, it’s my fiscal success. With the economy in its current condition, I find myself in the crosshairs of people who are not doing so well. Let me state up front: I don’t brag about our finances and I don’t go around actively telling people how much I have or that we haven’t been affected by the recession (knock on wood). In fact, I try to keep as much private as possible. But in a close neighborhood, workplace, or family, people have a general idea of how you’re doing. They know when you take vacations. They know when you go out for lunch. They know when you show up with a new(er) car. They know and sometimes, when things aren’t so hot for them, they turn on you.

As a result of simply living my normal life, I have people coming up to me and saying things like, “Must be nice to be so rich,” or, “It’s coming for you [economic woe], just you wait. You won’t escape forever. And then you’ll have to suffer like the rest of us,” or, (said behind my back, but so that I could overhear) “They’re going on vacation again. I guess they think they’re something special.” This hurts, just like it did in high school. I’m not rich, and I’m not special. I’m merely well prepared and fiscally responsible. For a while I’ve tried to apologize for my comfort and downplay my success. I’ve told people that we’re, “Just lucky,” or that, “We dodged the bullet,” or that, “I’m sure we’re next.” I’ve tried to hide behind my hair again, shrug and say it doesn’t matter. Anything to get people to stop looking at me as though I’m some kind of freak or that I’m not normal just because I’m not suffering economically.

But not anymore.

The final straw came the other day when I was at a neighbor’s house. She was hosting one of those house party things where you are encouraged to buy some kitchen ware, Tupperware, or other stuff. I went to support her because it was her first party. She needed more people to fill the room, so I went. I was being neighborly. I thought if there was something I needed, I would buy it to help her out. When it came time to buy the kitchen stuff she was selling, I looked through the catalog but couldn’t find anything I needed or even wanted. So I said, “Sorry, I’ll have to pass this time.” (I thought it was a polite answer that got me around the fact that everything in the catalog seemed like unnecessary junk, to me.)

She said, “Oh, come on. You’ve got so much money, surely you can spare something to help me out.”

I hemmed and hawed and said that I didn’t have that much money. That we were feeling the pinch just like everyone else, and that I was trying to be careful with money these days. I mumbled something about my job not bringing in as much as last year, blah, blah, blah.

She huffed and walked away and later I overheard her in the kitchen talking to some of the other ladies.

“Please. She’s not hurting. She just got back from vacation, but she won’t help me out by buying one thing. I know she has the money. She’s got everything.”

After I let myself out, I stopped on the way back to my house and thought about it. Why did I feel like I had to apologize for my choices to this woman? Why couldn’t I just say, politely, “Sorry, no. There’s just not anything in that catalog that I need. But maybe next time or I’ll let you know if a need comes up.” Why did I have to hem and haw and act like I, too was suffering when I’m not?

The answer is, just like in high school, to avoid being different. Even if different is good, we don’t want to own up to being different. My financial success or intelligence does not make me superior to anyone, but it does make me different. And in our world, different is to be avoided. In high school it wasn’t cool to be smart. Now it’s not cool to be doing okay financially. So we try to dumb down our success and good fortune to make ourselves seem the same as everyone else. To blend in.

It took me many years to own my intelligence; to be able to confidently answer questions in class and to be proud of my good grades. Of course in hindsight I see that all that studying paid off. I got a great education and many opportunities have opened to me because of it. I wish that I had had the confidence in high school to make even more of myself. I’m not going to make that mistake again.

After I left the party, I vowed that I would no longer apologize for my financial well being. I’m not going to brag about it or even bring it up directly, but I’m not going to dumb it down anymore, either. I’m done trying to blend in. We got to this point in life through hard work, sacrifice, and making good choices. That’s nothing to be ashamed of. It’s something to be proud of. While a lot of people we knew were spending and upgrading, we were saving and downsizing. After many years of hard work and planning, we’ve reached the point where not even an extended layoff or medical emergency would derail us for too long. And that’s something I’m very (and justly) proud of.

So the next time someone wants to make me feel badly for going on vacation or for showing up at work in a “new” used car, I’m just going to smile and either say nothing or say something simple like, “Yes. I worked hard for that.” I’m done trying to hide and feeling ashamed for doing well financially. I created my success and hiding it or dumbing it down only cheapens my efforts.

Do I feel badly for those who are not in the same good place? Yes, absolutely. I know what it’s like to suffer. I’ve done it. And I’m more than willing to help those who want to help themselves. If you come to me with an attitude that says, “I want to know how you afford to go on vacation so often. Teach me,” I will be more than happy to show you how I save money. But if you come at me with a snarky, sarcastic, attitude that says, “It must be nice to go on vacation every other day,” then I’m going to smile and say, “Thanks. It is.”

Personal Responsibility Is The Key to Financial Success

February 4, 2009 By Jennifer Derrick 10 Comments

I think if I hear the words “bail out” once more I might scream. It seems that everywhere I turn these days someone, some company, or some institution is getting bailed out of their bad financial decisions. As someone who has tried very hard to live within the rules and not make bad or irresponsible decisions, this gets to me. When times have been tough for me, I have worked through it, not looked for someone to bail me out. I have taken responsibility for my own financial situation and, when it wasn’t so great, done all I could to make it better. It burns me that those who have been irresponsible are getting their misdeeds reduced or forgiven.

Personal responsibility is a concept that we seem to have forgotten, but yet it is the cornerstone of financial success. Actually, it’s the cornerstone of any kind of success, if you want to get right down to it. Whether you seek success with money, your family, your career, or your weight, you have to take responsibility for the situation you are in and work to make it better. No one can knows you like you do and no one can help you if you won’t help yourself. You are responsible for whatever situation you find yourself in and you are the only one who can be responsible for getting yourself out of it.

Personal responsibility is one of those concepts that most of us know in the abstract. We know what it means to be responsible and we can tell when someone else is not taking responsibility for their actions. Yet it’s one of those areas where we tend to have personal blind spots. We can see when others lack personal responsibility, but it’s often harder to see that we are not taking our own measure of personal responsibility. We tend to deny that we’re at fault for anything and look desperately for someone else to take the blame. We complain that the government has screwed us, that our employer didn’t live up to his promises, that someone, somewhere is out to get us. We will do anything to avoid acknowledging that we are at fault because if we acknowledge that we are the reason why our finances are in a mess, we will have to deal with it. Blaming others means that these “others” have to fix the problem, not us. And when nothing gets fixed, we can say, “See, so and so didn’t do their part and I’m still in a mess so it’s not my fault.”

So for those who have forgotten or don’t know what it means to be personally responsible for your finances, here are some examples. Personal responsibility is:

Admitting that you didn’t save money when you should have and that this is the reason you have no emergency fund
Admitting that you bought more house than you could afford and this is why you are facing foreclosure
Taking another job or selling everything not nailed down when you need more money rather than ignoring your bills
Saving money for retirement so that you are not dependent on the government or family for your existence in your old age
Giving up luxuries like cell phones, cable TV, nice cars, etc. when times are tough
Understanding when you have to improve your skills and abilities in order to get a better job (and thus more money) and then following through
Blaming yourself rather than the credit card companies for getting you deep into debt that is charging 30% interest
Living below your means

Of course there are others and I’ll tell you a story that illustrates just what failure to take personal responsibility looks like. I know a woman who is facing credit card payments of $750 per month, and that’s the minimum payment. She got into this mess by overspending; none of it was “tragic debt” like medical expenses, emergencies, etc. It was all instant gratification. In addition to this, she has a house payment that is about half her take home pay, a HELOC, a $22,000 auto loan on a car that’s worth about $12,000 (older loans were rolled into this one), no retirement savings and no savings in the bank. Her life is like every caller on an episode of Dave Ramsey all rolled into one person. All of her problems were caused by personal irresponsibility. She simply wanted what she wanted right then. She was not willing to save for anything.

Now that the economy is in the tank, everything is blowing up around her and she whines to me about how much trouble she’s in. She blames the lenders for letting her have the credit. She blames them for raising her rates. She blames her neighborhood for making her spend to look like she belongs. She blames the car companies for letting her roll all those loans together. She blames the government for letting housing prices fall. She points the finger everywhere but where it belongs, which is at herself.

So I asked her the other day, “What are you going to do?” I’m hoping she’s going to say something along the lines of, “I’m going to buckle down and get out of this mess.” Nope. She says that she’s going to walk away form the house, stop paying on the credit card, and let the car get repoed. Her credit’s already trashed so she reasons she might as well finish it off. It’s so much easier than trying to dig out of the hole she’s in. She got into this mess by being irresponsible and she’s going to be irresponsible to the end. I don’t know her very well, but I know this about her: She will never succeed at life unless she changes her approach.

I realize that some, maybe most, people will never change; that they just don’t care enough to take responsibility for their lives and their finances. They will live deeply in debt, never getting ahead until they die and never understanding what was wrong with their choices. They will complain that, “That’s just the way life is” and blame everyone else for their circumstances. Then there are the few who are special. They will step up and take responsibility for their choices. They will admit their mistakes and fix them. They will do what they have to do to get ahead, even if it makes their life less fun for a while. They will sacrifice in order to make a better financial life for themselves and their families. They will never complain that something isn’t possible or that it’s too hard. They will never blame someone else for their financial situation because they know that their situation is a direct result of their own choices.

Here’s a story about one of these special people. I know a single mother who lives debt free in a nice house in a nice neighborhood. She drives a nice, but not fancy, car, travels with her kids a couple of times each year, and has a good bit saved for her retirement and the kids’ college expenses. She does not make a large income (about $55,000 now) and the deadbeat dad doesn’t pay child support. How does she do it? She takes responsibility for making her life and her kids’ lives better.

Several years ago she had no income and was living on government assistance. She got a job paying minimum wage and then added another one to that. She didn’t have money for daycare, but she did have initiative. So she bartered with a local daycare provider for childcare in exchange for cleaning their offices. She worked during the day and cleaned at night with her kids doing their homework at the break room table in the daycare. She got promoted at one of her jobs and finally made enough money that she could quit one of the jobs. She wanted to move up but needed education, so she went to school online and at night. Her family lived on the bare minimum for years, clipping coupons and buying nothing that wasn’t a need. She got her degree and got a better paying full time job with benefits. She worked hard at that job and got promoted to a better job. As things came together she began to save some money and refused to spend more simply because she could. She continued to save until she could buy a house. Now she lives a pretty nice life but still keeps things small. She buys a few luxuries now, but is careful to keep to a budget.

I don’t know how she did it, but she did because she knew that she wanted a better life and that she was the only one who could make that happen. Was it exhausting? I’m sure it was. Was it fun? Probably not. Was it easy? Absolutely not. Could she have given up, complained, and blamed everyone from her ex-husband to the government? Sure. Could she have relied on credit and financed her way to a better life? Probably, but then the bills would have come due and left her deeper than when she began. But she did none of this. She took responsibility for her life and finances and changed her own life and she’s now living a modest but secure life. She endured some pain but knew that the payoff would be worth it. This is what personal responsibility looks like. It’s not easy, and it’s not always fun but it’s the only way to achieve lasting, real financial success.