Sunday, November 16, 2008

Stupidity At Its Finest

I'm a huge Suze Orman watcher and personal finance book enthusiast. Every Sunday morning I watch the previous evening's show that I've DVR'd . This most recent episode definitely takes the case for shock value.

The first guest Dawn was from California. She and her husband make a combined $9,000 a month, but have living expenses totalling $19,000. They have more than $230,000 in CREDIT CARD DEBT. That's more than doctors have in student loans from medical school! When Tim and I heard that number, our jaws both dropped. Tim was so disturbed by that, he had to excuse himself to have a cigarette. I was incredulous. More information on Dawn: her family bought a home for more than $300,000 and now have a mortgage and home equity loans for $900,000.

Dawn loves vacations and openly admitted a jewelry addiction. She'd sent in a home video of her remodeled lavish home that she and her husband have no right in owning. She has a 7 year old daughter who has no idea mommy and daddy are lying about their lifestyle.

Suze's advice to Dawn was to 1) sell the home immediately with everything in it 2) move into a small 2 bedroom apartment 3) she and her husband should both get second jobs 4) paying off creditors as quickly as possible 5) saving up more money and eventually buying another home they can afford.

Dawn's reaction "I don't think that's gonna happen. I'm not ready to give this up."

This woman also seemed to think that having an upside-down home she can't afford is better than paying off the credit card debt.

What a moron. That's really all I have to say.

Although I have to add that we've all made financial mistakes, but that we need to own our decisions and the consequences.

My student loans are particularly a sore spot for me. I should not have student loans anymore. From 2000-2004 I attended a small private college which cost about $10,000 per year including tuition, room and board. My parents are divorced and my father helped me out every year.

Here's where I went wrong. Because I received financial aid, I only needed to borrow $6,000 to $8,000 per year in loans. However, my father would write me a check for 4-5,000 as a gift. Really, I should have taken out a loan for $2-3,000 per year. Instead, I maxed out my student loan allotment and used the money from Dad to live on. Was I careful with it? Yes and no.

Since age 16, I worked as an office clerk at an engineering company. My first wage was $5.25 an hour. During summers through college I had temp jobs at a bank headquarters, as a waitress, and interning at a TV station in West Virginia while working at a dry cleaners. My checking account had a healthy balance at all times from then until now.

Thinking back, I could have lived quite a bit more frugally. I made quite a few trips to the mall to pick up nice clothes, bought electronics like fancy cameras, and ate out more than I should have. Had I saved that money and taken out less in student loans I would be debt free today. My college buddies all thought I was comfortable, as I always had cash for Eat 'N Park and going out to Ben's on Thursday nights. At one point, my ex-boyfriend saw that I had $11,000 in my checking account and saw me as a gift horse. I have no idea where all that money went. That scares me.

If I could give myself a grade on money management in my teens and early 20s it would be a B- . My student loans are pretty manageable, even though out of college I paid $300 a month which is difficult for someone making $1600 a month. I really should have taken about $15,000 in loans instead of $30,000. Last year I was able to net $15,000 with the condo sale so that leaves me now with $8,000 left to go. Imagine if I had only taken out $15,000 in loans. I'd be out of debt. Hindsight really is 20/20.

Lucky for me, my debt is manageable and the payments are well within my budget. Dawn's is much more serious. Dawn, you need a reality check. You need to listen to Suze.

Suze, just to let you know, my favorite food is also hot dogs.


la persona said...

I think most grovers who went regularly to eat 'n park lived the same way. I had a full scholarship, no loans, no outside assistance, so I was kind of strapped and at best remember ordering Victor Lee's maybe like a half a dozen times in my college career. On the other hand, eat 'n park is where good friends were to be made, so if you think about the social benefits, maybe you came out on top? Still, I didn't know $230,000 in credit card debt was even possible!

(Now, let's not start talking about GRAD school debt. Puras prestamos. . . Loans I may have with me for the rest of my life. Was it worth it though? I would say so.)

Jennifer said...

Joey, that's a good point! The friendships from Grove City are the rare kind that will follow me through life.

I'm thankful that my loans are manageable and thankful for my job.

As for your grad school loans, you're fulfilling an educational dream. Dawn bought jewelry and other junk.

that guy said...

thanks for this post.

hearing about that crazy ho Dawn makes me feel a lot better about my minor CC debt, most of which i racked up buying furniture and eating out at way too many restaurants. life's pleasures...

next month my student loan deferment expires.

am i scared? yes.

am i dramatically changing my lifestyle? no.

Jennifer said...

You should read Suze Orman's book "The Young Fabulous and Broke". It's very helpful and simple, and makes a lot of sense for us twentysomethings.

Marianne said...

I have some student loans from grad school that I am determined to pay off asap. I'm horrified that I took loans to live on/pay for my three study abroad experiences. I should have just lived on ramen and stayed in the library like most* other grad students (the ones not in my department!)
I think you're pretty money savvy overall, Miss Jen! You'll be free and clear soon enough. And those eat n park nights were sometimes so necessary!