Author Topic: NY Times - Life in the Red  (Read 3186 times)

Honest Abe

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NY Times - Life in the Red
« on: January 16, 2013, 08:00:30 PM »
Interesting article on a person's journey into debt

http://nyti.ms/Y64Pt2

c

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Re: NY Times - Life in the Red
« Reply #1 on: January 16, 2013, 08:19:33 PM »
I was unable to finish that article. I found it very upsetting and a bit frightening.

"The psychological burden of debt not only saps intellectual resources, it also reinforces the reckless behavior" I totally empathize with this.

Another soundbite that stood out was that she was "too busy trying to get ahead to worry about falling behind". That pretty much describes most of my adult life. I feel awful for people who wake up one day to realize that they're in a big mess and don't know how to get out of it. I feel very fortunate that random things in my life lead me to sites like this when it so easily could have gone the other way.
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sol

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Re: NY Times - Life in the Red
« Reply #2 on: January 16, 2013, 08:21:34 PM »
Awesome.  This whole thing is a caricature of American financial idiocy.

Some highlights:

Economic scarcity causes bad decision making:
Quote
“When we put people in situations of scarcity in experiments, they get into poverty traps,” said Eldar Shafir, a professor of psychology and public affairs at Princeton. “They borrow at high interest rates that hurt them, in ways they knew to avoid when there was less scarcity.”

How to decide which way you want to drown:
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Dr. Seefeldt found that the women tended to group their bills into three categories: those to be ignored; those to be paid later; and those on which to make at least partial payments. They continually checked their credit reports and considered bills that did not appear on them safe to ignore. Those that did show up but generated little or no hassle from bill collectors fell into the “pay later” category.

I'm so bad at managing my finances, I decided to get knocked up:
Quote
Ms. Tuggle tracked her borrowing in a large manila envelope and built a portfolio that went well beyond credit cards. In addition to payday loans, she enrolled at Full Sail University in 2009, in the entertainment business department, and got a loan and $3,500 in education grants.

“That worked for a little bit,” she said — until she got pregnant and had to take a leave from school.

sol

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Re: NY Times - Life in the Red
« Reply #3 on: January 16, 2013, 08:21:58 PM »
Personally, I consider myself "in the red" because I don't yet have enough assets to support my current lifestyle without working.  I'm living on borrowed time, because my current consumption obligates me to continue working and saving to grow my stash.  I won't think of myself as "out of debt" until I'm financially independent, because until then I'm borrowing from my own future.

hoyahoyasaxa

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Re: NY Times - Life in the Red
« Reply #4 on: January 16, 2013, 08:52:01 PM »
I feel awful for people who wake up one day to realize that they're in a big mess and don't know how to get out of it. I feel very fortunate that random things in my life lead me to sites like this when it so easily could have gone the other way.

I feel this way too.  I came from what the authors of the Millionaire Next Door call a UAW household (under-accumulators of wealth).  Both my parents made very high incomes (six figures EACH between 1985-2005) yet had the typical mindset that more money meant they could buy more stuff.  So they moved from the modest $250,000 house (in a nice part of DC) to the $1.5 million house literally two blocks away.  Always had a nice new car every couple years, my father was a big collector of everything- toy soliders, stamps, books, baseball memorabilia, etc., my Mom went to Neiman Marcus or Saks Fifth Avenue every weekend, we took a 2 week vacation to Cape Cod every summer, etc. 

Then life happened several years ago- my sister went through a nasty divorce with the lawyer paid for by my parents (they needlessly spent over $200,000 on him and 3 years later, there were no "winners"), my sister's been out of work for three years now while my mother supports her and her two kids, my father went through a slew of health problems and can't work anymore and requires a home health aide, and yet they haven't reduced their lifestyle all that much- they still drive a Mercedes, my father gets three or four new books from Barnes and Noble each week, they eat out for every meal, etc.  And over these past few years, my mother has continually asked me for money (at least a dozen times now), including $10k right after a Christmas where she likely spent $1000 on gifts for myself, my wife, my sister and her two children.  She believes that once she sells the house, they will be in good shape, but I've tried unsuccessfully to convince her that it's merely a temporary solution and that her cash output needs to seriously drop and they need to begin to live a more simple lifestyle to fix the underlying problem of too much spending.

All this is to say I'm very lucky that I didn't turn into this.  My parents are wonderful people who have passed down a lot of good qualities to me, but financial sense was not one of them.  I'm lucky that I met a woman several years ago who came from a family who lived a lot simpler in a small town in New York.  And I'm lucky that I found this blog because even on our fairly average lifestyle (our expenses were about $2000 per month after rent last year, $3500 total), we've still found ways to cut (we cancelled cable and got an antenna so we only watch our favorite shows a couple times a week, I switched my iPhone to an MVNO, we're selling our car that we don't use since we live in the city).  I wish I knew all this stuff sooner (I'm 27 now), but it's a lot better than finding out in 20 years when it would be too late.

marty998

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Re: NY Times - Life in the Red
« Reply #5 on: January 17, 2013, 02:50:19 AM »

I'm so bad at managing my finances, I decided to get knocked up:
Quote
Ms. Tuggle tracked her borrowing in a large manila envelope and built a portfolio that went well beyond credit cards. In addition to payday loans, she enrolled at Full Sail University in 2009, in the entertainment business department, and got a loan and $3,500 in education grants.

“That worked for a little bit,” she said — until she got pregnant and had to take a leave from school.

Wonderful isn't it? Especially the last part:

Quote
“Until I hit it big as a singer, I’m still stretching, even now,”

With a name like LaKeisha she's halfway there. You go girl! Don't let them haters fool you darl.

Fail **rolls eyes**

madgeylou

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Re: NY Times - Life in the Red
« Reply #6 on: January 17, 2013, 04:39:05 AM »
Oh man, that article hurt. It basically described my childhood, though we were a lot more transient...

But I definitely understand the whole idea of feeling reckless when you're already close to the edge. I have been there. You figure you're already fucked, how much difference is it going to be to be slightly more fucked? You don't get more conservative with your decisions as you get closer to the edge -- you get wilder. The stakes don't feel as high, because you feel like you've got nothing to lose. Even though that's not true.

Sometimes I wonder if most human brains are even equipped to handle all the complexity of a modern American's daily life. I'm in the upper quadrants for raw intelligence and ability to focus, but between my insurance paperwork, financial decisions, health problems -- not to mention all the same over again on behalf of my grandma -- I feel like I am barely able to keep it together. It's simply too much to deal with, and I wonder how many "bad decisions" like the ones we read about in this article are actually about the sheer overwhelm of dealing with finances and everything else.

I dunno, this story made me kind of sad, and I don't feel like mocking this woman's decisions. I think it's more important to understand them, and to understand the context in which they were made, so we can figure out a better way.
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GuitarStv

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Re: NY Times - Life in the Red
« Reply #7 on: January 17, 2013, 07:22:12 AM »
There's much that I feel sympathic about in that article . . . but this line rubbed me the wrong way:

"The partial payments went for core necessities: cellphone or car repair payments, for example."

Both the cellphone and the car are frivolous expenses.  Many people don't seem to see them that way though.

tooqk4u22

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Re: NY Times - Life in the Red
« Reply #8 on: January 17, 2013, 07:29:37 AM »
I dunno, this story made me kind of sad, and I don't feel like mocking this woman's decisions. I think it's more important to understand them, and to understand the context in which they were made, so we can figure out a better way.

I agree.  The story is sad and a brief article isn't enough to convey the whole story, but I am not ready to condemn her to the anti-MMM ways prison sentence. She made some bad choices but seems to have made some not so bad ones and fought through it - and to be honest if my world was crumbling and I had a kid to support and racking up debt was the best option to feed/clothe/shelter that child then so be it. 

The commonalities in the article and others struggling are people from low income areas, with low skilled/low pay jobs, possibly young and are getting by but then a dealt with a bout of unemployment or health  issue and it becomes very difficult to recover.  Choices matter a lot but sometimes circumstances matter as much. 

twinge

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Re: NY Times - Life in the Red
« Reply #9 on: January 17, 2013, 07:50:41 AM »
Quote
Sometimes I wonder if most human brains are even equipped to handle all the complexity of a modern American's daily life. I'm in the upper quadrants for raw intelligence and ability to focus, but between my insurance paperwork, financial decisions, health problems -- not to mention all the same over again on behalf of my grandma -- I feel like I am barely able to keep it together.

I'm with you here.  I can't tell you how many times I'm faced with various forms for insurance, tax deductions, federal regulations for grants etc. that I say I have a fucking doctorate and I can't make sense of all this shit!  Or rather, that I just get overwhelmed by all the disparate things I'm supposed to keep track of.  The pathos of describing that woman shuffling through her excel file to keep the best track possible of her really bad decisions was effective.  Even if I can still find plenty to criticize--and can't imagine walking into a payday loan place or being stunned to find a foreclosure notice when I'm 20K behind on payments. I empathize with moments like that. And I have had just about a bazillion more helpful contextual factors and circumstances that have helped me make better choices and I still feel like I'm drowning a lot of the time.

tooqk4u22

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Re: NY Times - Life in the Red
« Reply #10 on: January 17, 2013, 08:12:35 AM »
Quote
Sometimes I wonder if most human brains are even equipped to handle all the complexity of a modern American's daily life. I'm in the upper quadrants for raw intelligence and ability to focus, but between my insurance paperwork, financial decisions, health problems -- not to mention all the same over again on behalf of my grandma -- I feel like I am barely able to keep it together.

I'm with you here.  I can't tell you how many times I'm faced with various forms for insurance, tax deductions, federal regulations for grants etc. that I say I have a fucking doctorate and I can't make sense of all this shit!  Or rather, that I just get overwhelmed by all the disparate things I'm supposed to keep track of.  The pathos of describing that woman shuffling through her excel file to keep the best track possible of her really bad decisions was effective.  Even if I can still find plenty to criticize--and can't imagine walking into a payday loan place or being stunned to find a foreclosure notice when I'm 20K behind on payments. I empathize with moments like that. And I have had just about a bazillion more helpful contextual factors and circumstances that have helped me make better choices and I still feel like I'm drowning a lot of the time.

Another aspect that people fail to acknowledge that goes beyond understanding the complexities of life is the inteligence level of people.  The fact of the matter is that there are people in this world that are not that intelligent (to be clear I mean actual intellectual capacity and not someone who does dumb things), and maybe even average intelligence isn't enough for this, as such I would expect it to be very difficult and not that unusual for these people to struggle with things that we (I'll bet most here are average or better than average intelligence) view as rudimentary. 

Something to think about.

arebelspy

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Re: NY Times - Life in the Red
« Reply #11 on: January 17, 2013, 08:30:56 AM »
I feel for people in tough situations like this.  Often times they are trapped between a rock and a hard place.

That being said, this woman in particular seems to have much more options than I would typically thing.  I think them ending the article with "She still has no cable or air conditioning" made me particularly unsympathetic.  WHY WOULD SHE HAVE THOSE THINGS?

There's much that I feel sympathic about in that article . . . but this line rubbed me the wrong way:

"The partial payments went for core necessities: cellphone or car repair payments, for example."

Both the cellphone and the car are frivolous expenses.  Many people don't seem to see them that way though.

Exactly this.  Dump the car, take the bus or a bicycle.  Dump the cell phone.

Does she have a roommate?  If not, why not?

And, as a comment on that article pointed out: "I just have to ask; why did Ms Tuggle, already strugging financially, allow her self to have a child without seemingly any financial support or prior legal commitment from the child's father?"

This article had the opposite effect on me that was intended, I think.  Many people reading it will agree with it, because it gives them an excuse to continue their frivolous spending.  What they need is a good punch in the face.  I bet there are a bunch of places in her budget that could have been cut before having to go to a payday loan place.

Once you're trapped in that cycle though, it is tough to get out.  You have to go drastic, and people aren't willing to do that.

Personally, I consider myself "in the red" because I don't yet have enough assets to support my current lifestyle without working.  I'm living on borrowed time, because my current consumption obligates me to continue working and saving to grow my stash.  I won't think of myself as "out of debt" until I'm financially independent, because until then I'm borrowing from my own future.

This is a great way to look at it.  Thanks for the perspective.
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madgeylou

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Re: NY Times - Life in the Red
« Reply #12 on: January 17, 2013, 09:12:30 AM »
This article had the opposite effect on me that was intended, I think.  Many people reading it will agree with it, because it gives them an excuse to continue their frivolous spending.  What they need is a good punch in the face.  I bet there are a bunch of places in her budget that could have been cut before having to go to a payday loan place.

Once you're trapped in that cycle though, it is tough to get out.  You have to go drastic, and people aren't willing to do that.

or, maybe there's no one around to face punch you (in the bracing yet kind way we tend to do it around here) ... or you have never seen an example of someone going without a cell phone or a car to shore up their finances for the future. options that you never see / don't know about may as well not even be there.

and this, to me, is the crux of the issue a lot of people are facing. the only examples they see of how to live their lives are dumb ones. or, if they do see some smart examples, they assume that those kind of choices are only available to people who have already got it together.

it's like when someone thinks they have to have their mind really together in order to meditate, or they have to be fit to exercise, or they have to have some financial margin to save some money ... and if those things aren't in place, then there's no way they can be successful. when actually, it works the other way around -- meditating is what gets your mind together, exercising is what makes you fit, cutting back on expenses is what gets you financial margin.

but it's hard to understand that when you haven't experienced it, and when you don't really know anyone who's experienced it. it requires a big change in the way you think, and that type of change doesn't typically happen spontaneously.

i really hope MMM gets his TV show ...
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catmustache

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Re: NY Times - Life in the Red
« Reply #13 on: January 17, 2013, 09:50:46 AM »
This article had the opposite effect on me that was intended, I think.  Many people reading it will agree with it, because it gives them an excuse to continue their frivolous spending.  What they need is a good punch in the face.  I bet there are a bunch of places in her budget that could have been cut before having to go to a payday loan place.

Once you're trapped in that cycle though, it is tough to get out.  You have to go drastic, and people aren't willing to do that.

or, maybe there's no one around to face punch you (in the bracing yet kind way we tend to do it around here) ... or you have never seen an example of someone going without a cell phone or a car to shore up their finances for the future. options that you never see / don't know about may as well not even be there.

and this, to me, is the crux of the issue a lot of people are facing. the only examples they see of how to live their lives are dumb ones. or, if they do see some smart examples, they assume that those kind of choices are only available to people who have already got it together.

it's like when someone thinks they have to have their mind really together in order to meditate, or they have to be fit to exercise, or they have to have some financial margin to save some money ... and if those things aren't in place, then there's no way they can be successful. when actually, it works the other way around -- meditating is what gets your mind together, exercising is what makes you fit, cutting back on expenses is what gets you financial margin.

but it's hard to understand that when you haven't experienced it, and when you don't really know anyone who's experienced it. it requires a big change in the way you think, and that type of change doesn't typically happen spontaneously.

i really hope MMM gets his TV show ...

I totally agree. I think one of the best things about MMM is that it forces you to stop scarcity thinking as they put it and think about new options. Sometimes, nobody is around in your life to tell you can cut expenses by cutting out things that most people, and certainly the NYT, view as essentials.

TheDude

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Re: NY Times - Life in the Red
« Reply #14 on: January 17, 2013, 10:48:23 AM »
This an amazing discussion. I have very little insight. I've never really been poor. I think when I was a little kid money was tight but I dont reamember all that well my mom is pretty loaded now. My dad has never had a great deal of money but he has never been poor either just middle class to lower middle class. The only time I was poor was right during and right after college but I think its such a fake poor because you know your parents will be there if you need it.

I am probably pretty unique in the fact that I kind of like shopping for insurance (although I am having a frustrating time right now with health insurance) and I have started doing some tax planning and I am kind of starting to love doing taxes. I am able to sift through the details becuase that how my mind works. Its unfair of me to judge someone like LaKeisha because I cant related to her. Not the way her brain works or the situation shes be put it in.

amyable

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Re: NY Times - Life in the Red
« Reply #15 on: January 17, 2013, 04:18:03 PM »
it's like when someone thinks they have to have their mind really together in order to meditate, or they have to be fit to exercise, or they have to have some financial margin to save some money ... and if those things aren't in place, then there's no way they can be successful. when actually, it works the other way around -- meditating is what gets your mind together, exercising is what makes you fit, cutting back on expenses is what gets you financial margin.

Amazing post, madgeylou, I can completely relate to this.  We could have been aggressively paying down student debt for the past 4 years, but many times I just thought, we're too screwed, what does buying a $20 shirt matter when we're already $50K in debt?  The MMM website has really changed my perspective on how much I actually DO have control over my finances.

The Money Monk

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Re: NY Times - Life in the Red
« Reply #16 on: January 18, 2013, 10:40:39 AM »
Personally, I consider myself "in the red" because I don't yet have enough assets to support my current lifestyle without working.  I'm living on borrowed time, because my current consumption obligates me to continue working and saving to grow my stash.  I won't think of myself as "out of debt" until I'm financially independent, because until then I'm borrowing from my own future.

I feel the exact same way. Being a slave to debt is the worst, but even without debt if you can't support yourself without a job you are a slave to a job. Not necessarily to any particular job, but a slave to having a job. I won't feel completely free until that is no longer the case.

StashtasticMomo

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Re: NY Times - Life in the Red
« Reply #17 on: January 18, 2013, 01:47:08 PM »
Personally, I consider myself "in the red" because I don't yet have enough assets to support my current lifestyle without working.  I'm living on borrowed time, because my current consumption obligates me to continue working and saving to grow my stash.  I won't think of myself as "out of debt" until I'm financially independent, because until then I'm borrowing from my own future.

I feel the exact same way. Being a slave to debt is the worst, but even without debt if you can't support yourself without a job you are a slave to a job. Not necessarily to any particular job, but a slave to having a job. I won't feel completely free until that is no longer the case.

Absolutely true and applies to myself as well. Reminds me of the guest post by Jim Colins and the importance of building up your stash of F-You Money. Here: http://www.mrmoneymustache.com/2012/05/26/guest-posting-financial-independence-23-years-later/"

I sympathize with this womans struggle. But I do not believe I have to become a single mother to empathize with her challenges. Perhaps if the article added more facts involving her environment and the limitations she faced, we could understand her situation better. However like most of you I was left puzzled, wondering why she didn't CHOOSE to move in with family? Live on the living room floor if truly needed. Obtain food from the food bank? How about ASKING FOR HELP from her family living next door to babysit while she WORKED two or more part-time jobs? Do we know if she asked the child's father for financial assistance? How about SELLING YOUR CRAP? Your car, television, jewelry, dvds, and other useless earthly possessions? How about renting out a room to REDUCE your expenses? Damn if I was a razors edge close to losing my home where my child lived, call me bat shit crazy, but you would see me SELLING EVERYTHING of value including my own blood to ensure my family survived!

I feel many of the financial hardships Ms. Tuggle experienced were avoidable. She made some craptacular life choices. We can all pick out fairly easily the numerous lessons to be learned. No concrete measurable financial plans, little savings, overconfidence, entitlements, no foresight, no discipline, denial, pride, and ultimately, not taking full responsibility for her actions. Rinse, cycle, and repeat. I wonder what will prevent her from repeating this, again? That is the type of information the article definitely needed to include.

Hopefully this article in the New York Times will serve as a much needed PUNCH IN THE FACE to the general readership. If not, I am sure we can send around the mobile MMM team to gladly help out, free of charge, of course! And I too support the idea of MMM hosting his own television show. Or at the very least a pod cast. Until then....
« Last Edit: January 18, 2013, 03:13:50 PM by Stashtastic Momo »

Mrs3F

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Re: NY Times - Life in the Red
« Reply #18 on: January 18, 2013, 06:59:24 PM »
“When we put people in situations of scarcity in experiments, they get into poverty traps,” said Eldar Shafir, a professor of psychology and public affairs at Princeton.

That line rings really true to me.  Yes, it is easy to pick at the subject's poor decision making, but the reality is that most of us here approach financial planning with a completely different mindset from a completely different plane.  Most of us are fortunate enough that scarcity is artificial.  So we treat it as a game:  Can we put off grocery shopping for a week?  A month?  How long can we survive on one tank of gas?  One gallon?  Car-less? 

For us, each "sacrifice" yields an emotional high as it brings us one step closer to FI, to total freedom.  For people like the subject of the article, all it means is that she survives the day to face the same struggles tomorrow.  It's grinding, instead of rewarding.  And that perspective makes all the difference when it comes to motivation and decision-making.  What's the difference between a good decision and a bad one when all outcomes are poor?  Of course it is possible to climb out of a bad situation, but it seems to me the energy and willpower required is much, much greater. 


Gundy

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Re: NY Times - Life in the Red
« Reply #19 on: January 19, 2013, 09:55:01 AM »

After two years, it felt like Ms. Tuggle had finally broken her fall. The load was lighter, she had some income, and by September of 2011 an air of relief had entered the house.

She was getting ready for church one morning, blasting music, singing along, when she saw though the front window a neighbor from across the street, gesturing toward her front door. She pulled the door open and there was a foreclosure sign on it, “huge, practically as big as the door, with that duct tape,” she said.


I don't understand how she felt better about her situation if she was ignoring her mortgage payments. And, the first page of the article completely threw me off. It showed a picture of her taking a cab to work because she couldn't afford a car???