This in the United States of America

I don’t watch Boston Legal, but maybe I should.

Here’s a video clip (Windows Media) from the March 14 episode, titled “Stick It“. A transcript is also available. The clip is of the episode’s closing arguments: the defense attorney is making the case for democracy. Sounds a bit odd for a courtroom drama, I know, but it’s very well done.

The clip is just over six minutes in length. Go watch it. It’ll give you things to think about.

What’s (no longer) in your wallet?

Well, okay, we never actually carried it in our wallets. And we shredded the actual card years ago. But we just wrote the check to pay off our Capital One credit-card balance. And there was much rejoicing.

By the time all is said and done, we will have paid off eight creditors this month. That’s going to free up almost $200 a month that we can start using to pay down other debts. Whee! Combine that with the fact that we got a ridiculously large tax refund (which is a large part of why we’re paying off eight creditors this month), so I’m going to decrease my withholding, which will further increase our available cash for paying off debt every month… and things are looking very nice indeed.

According to my debt-snowball calculator, we’ll have all of our current credit-card debt paid off by December of 2008. And that’s assuming no raises, no tax refunds, no bonuses, no Christmas checks, no nothin’. (Then we’ll be able to move on to the car payment, the student loans, and the house. But hey, you gotta start somewhere, right?)

Unnamed youth finance class: Debt session 1

We’ve done three sessions of our teen personal-finance class so far:

  • Introduction;
  • Emergency Fund; and
  • Debt (part 1).

“Introduction and Emergency Fund” was originally supposed to be a single session, as was “Debt”. So either I’m lousy at lesson planning, or we’ve got a really lively group. Or both. (It’s both.)

Here’s some highlights from the first half of the Debt session.

I wanted to use Dave’s statistic of $1.5 trillion of credit card debt, but then I found out it wasn’t true, and $800 billion just doesn’t have the same ring to it. So I decided to use the real number for total consumer debt (both revolving and installment). And I decided to write it out before I said the number aloud.

That worked. They were already voicing disbelief before I was halfway through writing the number. $2,100,000,000,000 in consumer debt. Got their attention.

In an example on how interest calculations work, I gave the example of a 6% APR, and mentioned that that was the interest rate I’d gotten on loans from friends and family. A couple of the youth were shocked that my family would charge me interest. Two lessons learned from that. #1, I need to be able to explain the reasons behind interest, and why they apply to family too. And #2, some of the other youth had some answers to that question. I should have done a better job of letting them help give the answer.

The last major point I got to was to show four different types of credit-card customer:

  • People who pay on time but carry a balance
  • People who pay late
  • People who pay off every month (bank loses money on these)
  • People who go bankrupt because of credit card debt

I walked through each of those groups, and talked about whether the bank made or lost money on each. I saved the bankrupt group for last, because I had found a great quote about them:

Bankruptcy experts say that too often, by the time an individual has filed for bankruptcy or is hauled into court by creditors, he or she has repaid an amount equal to their original credit card debt plus double-digit interest, but still owes hundreds or thousands of dollars because of penalties. —

But as it turned out, I think I would’ve been better off swapping the last two, so that “people who pay off every month” — the only group of the four that the banks actually lose money on — were last. I want to get across the idea that banks want you to move out of the “they lose money on you” group and into one of the “they make money on you” groups (just look at any credit-card advertisements), and I think that would’ve flowed much better with the “lose money” group last. As it was, the point I was trying to drive toward — credit-card companies are not your friends — kind of got lost.

Live and learn. We’ll tackle the topic again this coming Wednesday, and see if we can’t do a little better this time.

DaveWatch: paycheck-to-paycheck statistics

I was just listening to the Dave Ramsey show from this past Thursday. About fifteen minutes into the third hour, he said, “AC Nielsen just did a survey. It was in USA Today just the other day. 78% of Americans are living paycheck-to-paycheck.”

This is looking like another shady statistic on Dave’s part. I couldn’t find any reference to this study on the USA Today Web site (if anyone can find it, please let me know). There are statistics on AC Nielsen’s Web site, but what it actually says is that 22% of Americans have “no spare cash” (January 24, 2006). The way I read it, that means that 78% are not living paycheck-to-paycheck.

I’m a little surprised; I would’ve thought the paycheck-to-paycheck number would be higher than that. But I’m really starting to wonder who does Dave’s research.

Unnamed youth finance class: Emergency Fund session

We had planned for the first class session to be both an introduction, and a “why you need an emergency fund”. We got to the introduction, and then covered emergency funds a week later.

Here are some of the things that stood out in my mind from the emergency-fund session:

  • Jim McKeeth and his wife suggested some great questions for this session. A couple of the best, in terms of how well they got the youths’ attention, were “How would you feel if you moved out, established your independence, and then had to call your parents to ask for money?” and “How would it feel to know you would never have to ask your parents for money again?” The second got an even stronger response than the first. If you’re talking to teens about money, these are great questions to ask.
  • The visual aids (two Hot Wheels cars: a Mazda Miata and a beat-up hatchback) were a big hit. Especially the Miata — one youth spent most of the class playing with it (but still listening, amazingly enough).
  • When I gave background on the imaginary owners of the two cars (a lawyer and a single parent), and said one was broke and the other was rich, most of them initially figured it was probably the lawyer who was broke, because he spent all his money on a fancy car. (Good answer!)
  • When I brought up the scenario of $800 worth of unexpected car repairs, a couple of them said it sounded like time to buy a new car.
  • As soon as I brought up the idea of the emergency fund, they wanted to know how much money should be in it. The first part of the answer (starter emergency fund is $500, since they don’t have full-time jobs yet) didn’t get nearly as much of a reaction as the second part (ideal emergency fund is 3 to 6 months of expenses, or $10,000-$15,000 for most people).

I gotta admit, I’m with them on that last one; it’s pretty daunting. We’ve just barely managed our starter ($1,000 for us) emergency fund, and we’ve been doing this thing since September.

We got off topic a lot, but we covered most of what I hoped to cover, and they stayed pretty interested through the whole thing. Very cool.

Unnamed youth finance class: what they want

We’ve had three sessions of our youth finance class now, and I’ve barely blogged about it. Partly that’s because there’s been some crap going on that’s really stressing me out, that I’m not sure if I’m ready to blog about yet.

But there’s a lot of good stuff to be gleaned from teaching youth about money, and blogging about it is a good way to sort it out in my mind, as well as maybe helping other people out. So I’m going to try to blog about it more regularly from here on in.

At the first session, we asked what everyone hoped to learn during this class. Here’s the list:

  • Bankruptcy
  • How to manage money better
  • Retirement, CDs, etc.
  • Social Security
  • Financial lingo
  • Opening bank accounts
  • How to deal with money in college
  • Getting an apartment
  • How not to live paycheck to paycheck
  • How to live on a cash-only diet
  • How to do taxes
  • Everything about taxes
  • H&R Block
  • Forms for work (W-2, etc.)
  • Buying a house / car
  • Credit
  • Investing

Financial Peace errata: According to the Federal Reserve Board

Someone in Dave‘s office is playing pretty fast and loose with statistics.

From the Financial Peace University workbook, page 141 (no reference date given to tell us what “last year” means):

According to the Federal Reserve Board, consumers’ outstanding debt on credit cards and other revolving loans has grown continuously over the last decade hitting $1.5 trillion last year.

Guess what? According to the Federal Reserve Board, that’s a lie. Yes, total consumer debt did top $1.5 trillion in October of 2000, but “credit cards and other revolving loans” only made up 43% of that — less than half. So no, “credit cards and other revolving loans” did not hit $1.5 trillion. Even today, with total consumer debt over $2 trillion, revolving debt is just barely over $800 billion, with a long way to go to even the $1 trillion mark.

I say that so casually, don’t I? But man, the emotional impact, talking about that in class, would be huge. Talking about $1.5 trillion, and writing it out with every… single… freaking… zero, would make a hell of a lot bigger impression, I think, than talking about a mere $804 billion. If you’re thinking about how to get teenagers worked up about debt, $804 billion might as well be $1 billion. (Hmm, but maybe I could do something with “three quarters of a trillion dollars” or some such…)

Ah well. I’m at least glad that I checked the facts before I took Dave at his word and used his statistic in class.

Stupid market forces

I was reading Steve Pavlina‘s blog today, and ran across a sentence that I had to stop and read again:

There are a lot more dummies than smart people in the world, and those dummies have credit cards.

It was an angle that hadn’t quite occurred to me before. And I thought, “Oh my God. This explains so much about our culture.”

Because in our modern capitalist marketplace, stupidity is overrepresented. Stupid people (including me, for most of my life) have credit cards and no self-control, and they buy everything that claims to be quick and easy, whether they have the money for it or not. Smart people, on the other hand, really have money, but they don’t spend as much money as the broke stupid people, because they’re smart.

That’s why all the media panders to the lowest common denominator. It’s not because everyone is stupid. It’s because the stupid people spend loads more money than the smart people, because they’re stupid. So stupid people are far and away the more powerful market force.

Scary, isn’t it?

Unnamed youth finance class, intro session

This Wednesday was our first session teaching our as-yet-unnamed personal-finance class to the youth. (They already asked us what we’re going to call it, since “No Matter What” is already taken. We’re all going to think about names.)

We wound up with about ten or eleven people in the class (I should have made a list of who was there, but didn’t think of it till later). They didn’t seem shy about speaking up when we asked questions, even some of the youth who I hardly ever hear from in the larger group, which was really cool.

I was a bit worried about how they would react when we said we were making up our own curriculum, but most of them actually perked up and seemed to get more interested because of that. I suspect it helps that a lot of the youth already know and like me, and know I’ve been to cons. I think it would have been different if I was just someone, who was teaching just some class.

Learned that I’ve got a lot to learn about teaching a class. (Or facilitating, rather. The difference being that teaching is standing on high, passing out information; facilitating is drawing the answers out of the audience.) Facilitating is an incredibly powerful way to teach and learn, but it’s also, I’m finding, very tricky to manage from a time perspective. When everyone wants to give their answer to every question, there’s no time left for the actual class! We got through the class introduction and our first four “opening questions” before we ran out of time.

And yet, the youth were excited about the class, eager to come back next week, wanting to ask their parents if they could stay a little later after youth group so we could make class an hour instead of 45 minutes. Even though we hadn’t even taught them anything yet!

I think there are two big reasons for that. One is that Cheryll was probably dead-on in wanting to limit the class to high-schoolers, though I wouldn’t have realized it before this first session. These are people who have some real-life experience with money. Every one of them has had a job of some sort, even if it’s just delivering papers or babysitting. Several of them have savings accounts. One of them really wants to learn how not to live paycheck-to-paycheck (which is exactly what our first several sessions, especially the first one, are going to be about). They already know that this is something they want to know more about.

The second reason is that we’re listening to them. We spent probably a good ten or fifteen minutes making a list of everything they wanted to learn in this class, because we knew the answers would surprise us. (And they did. Actually, most of the youth are really interested in learning about filing their taxes — not something I would have even thought of.) But that active listening, that taking their ideas and writing them down, really drew them in.

There’s no possible way we’re going to be able to cover everything they listed between now and the end of the youth-group year at the end of April, although the youth are already talking about continuing the class into the summer. Even though we didn’t get past our introduction to the first session, I think I’d consider it a rousing success.

And I hope I never again underestimate the power of listening to a teenager.

I’ll post their topic list later. Gotta go get some exercise before work.