Posts Tagged ‘debt’

Student Loans, A Generation of Wage Slavery

For the first time ever, the amount of student loans taken out last year exceeded $100 billion.

For the first time ever, Americans now owe more on student loans than on credit cards! This having been reported by the Federal Reserve Bank of New York.

For the first time ever, total student loans outstanding will exceed $1 trillion this year.

Reported on ZeroHedge.com, “It’s going to create a generation of wage slavery”. “So… debtors know it’s a bubble, lenders know it’s a bubble, everyone knows it’s a bubble, yet it is growing faster now than ever before.”

What explains this insatiable demand for this kind of debt? Well, it’s cheap, it’s easily accessible (the collateral is education), and a student can take out a loan, yet use part or all of the balance for tangential purchases (that iPhone 4S sure would make me cool). But this, like every other debt, comes at a price. A generation of wage slavery.

Young people are entering adulthood more in debt than ever before. They have an expectation that the tens of thousands of dollars in student loans for a college education will turn to gold as they enter the workforce. The problem is… ‘what workforce?’ Good luck with your expectations of immediately landing that Sr. Manager or Director position. After all, your educational pedigree is stellar, right? Particularly in today’s economic environment, this thinking is delusional.

It may be a false notion to believe that every young adult must obtain a higher college education degree in order to fulfill the young adult’s capacity to perform to their optimum ability in today’s modern society and workplace. Not everyone’s DNA is meant for college either, although most parents today assume that their ‘junior’ must attend.

It is unfortunately an employers market today, and a college degree is often a required prerequisite. However, there comes a point where you wonder if spending the big bucks on a burdening loan at such a young age is the best thing for the long term outlook. I suppose that one could consider a less expensive school while still earning a degree, or perhaps finding a way to enter the workforce early while building on-the-job experience before others do (which is another prerequisite for most jobs in a particular field… e.g. 3 to 5 years experience in ‘xyz’).

There are no simple answers to the dilemma of determining the most frugal but effective way to assure one’s-self a decent job while entering the workforce. However I do question the automatic assumption that every kid needs to go to the fancy big-name school and burden themselves with enormous debt while only in their late teens or early 20′s. Ouch.

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Understanding the Quantity of Cash Money

As cash money and what you can tangibly hold in your hands disappears and is replaced with digital numbers on statements or computer screens, so too is the fading understanding of the value of money. Too many people are overwhelmed by numbers and don’t see something as being gone unless it was physically there beforehand. Case in point, the elected leaders that still cannot grasp the concept of an enormous debt that is just too much for them to handle.

To those who are responsible, and understand debt and the frugal concept of spending too much, using credit is not much of a problem. To those that spend excessively and don’t see or understand responsible debt management, this can be a very big problem. Credit limit or debt ceiling is a notion that lots of people still don’t understand.

Credit has its place in society, as it enables people to own a home, businesses can borrow to expand, and other responsible uses. Frivolous abuse of credit however destroys lives and makes paupers out of potentially successful individuals. One of the main problems with credit for the abusers, is that the quantity of money is not seen or felt, or understood.

There are some people who have managed to get out of debt and balance their finances without credit counseling in very remarkable fashion by getting back to the basics of money related transactions by using cash money for almost or all of what they purchase and pay for. This seeing and touching currency helps them retrain their minds to what they were hopefully taught as children, that you buy only what you can afford.

Here’s a plan to start the road to recovery and someday be debt free for those people who cannot to seem to stop the credit monster from consuming their lives.

First when you get your paycheck, withdraw it to cash (or as much as you can). A checking account and or debit cards will work for some, but many still do not see what they actually have unless it is right in front of them. Many people also still bounce checks because of improper accounting practices. Instead, use cash money for your living expenses. It is there to work with and to be fully visible and understood.

When paying bills use money orders. Money orders only cost around a dollar or so. Not only do you see and feel just how much the bills actually cost, which can help and motivate you to cut back, but you are using what you actually have to work with and not building up debt. The cost of the money orders and inconvenience of mailing them will be vastly made up in the long run.

Get rid of the services that automatically take out money from your bank accounts that are subject to change. The SET monthly bills that are the same each month are not a bad idea, as they leave you with a set amount to work with. However things like utility bills that do change, or phone bills that can change vastly, pay them using money orders. Helps to curb over usage of something that can be cut back, like over electric use for example.

Pay for everything when you go grocery shopping and other shopping with cash. People will often get something that they feel they need at the time to later find out they should not have. Take only the cash that you will need, no more. Having a set limit of cash in your pocket is an excellent way to purchase only the necessities. This teaches people to look for the best prices to (and to add).

Avoid going back to the bank for withdrawals of more cash unless you absolutely must for items or bills that are strictly pending and important. It will be difficult at first to go lean with spending, but after awhile it should kick in and become more of a habit. This is the most difficult part of it as it takes willpower to go without some of the items that people have taken for granted and accustomed to, that they don’t really need.

Do not use the credit cards that you have for any reason other than emergencies. Pay the balances on these credit cards with money orders each month. If you can pay more than the minimum, that is good, if you can’t, at least you will not be adding to it each month.

If anything catastrophic happens in the world, cash money may be the ONLY way to purchase anything as the credit cards might be useless, methods of electronic communications may be down, and banks may be closed. There is an advantage to having cash on hand.

One little advantage to paying with cash is all the coins that you get back. Putting these coins in a jar until it’s full is a great way of saving some fun money to splurge with, or maybe applying it to pay off some of your debt. Coins add up surprising quickly.

This overall method WORKS, I have seen people go back to the days of using only cash money and they get a grip on their finances because they see and feel real currency. While currency is fiat and does not really have much to back it up, it is still physical and can be held. Even the old time Monopoly game works with fake currency but teaches the concept of careful buying and selling. People understand something better when they can see it. Cash money is certainly not the only solution for those plagued by overspending and credit, but it sure helps as an excellent foundation for people getting a much better visual hold on what they actually have to work with.

Thanks to ‘Be informed’ for some of the ideas and statements made in this article.

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The US Debt Ceiling Compromise Simple Truth

The US Debt Ceiling Compromise:

Adds at least $7 trillion to our debt over the next 10 years. The deal purports to “cut” $2.1 trillion, but the “cut” is from a baseline that adds $10 trillion to the debt (you see how they do this? It’s all smoke and mirrors and BS ‘white lies’).

This deal results in a BEST case scenario of still adding more than $7 trillion more in debt over the next 10 years. That is sickening.

Even if you believe cutting $2.1 trillion out of $10 trillion is a good compromise, surely we can start cutting quickly, say $200 billion-$300 billion per year, right? Wrong.

This plan so badly backloads the alleged savings that the cuts are simply meaningless. Why do we believe that the goal of $2.5 trillion over 10 years (that’s an average of $250 billion per year) will EVER be met if the first two years cuts are $20 billion and $50 billion (this is only several ‘days’ worth of federal spending – each year!).

There is simply no path in this bill even to the meager savings they are alleging will take place.

In summary, after weeks of main-stream-media coverage and hype, pitting one political party against the other, the ‘gang’ has won once again. They’re apparently going to spend at least $7 Trillion more!

According to Michael Savage, ‘you’re being hoodwinked again’. Apparently Rand Paul agrees.

We are not espousing one political leaning or another (we happen to believe they’re all mostly corrupt), but rather pointing out what appears to be information that cuts through the BS.

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US Debt and Default Talk

Jim Rogers:
The US is the biggest debtor nation in the history of the world. This cannot go on forever. Eventually, the creditors are going to say “no more, that is the end of the line”.

If you think the problems are bad now, you wait till we do not have any more credit, you wait till the currency collapses, interest rates going through the roof, inflation going through the roof. It`s not going to be a pretty picture. There is going to be social unrest. It`s going to be a mess.

The sooner we deal with it, the better.

Marc Faber:
“Yes, I’m sure there will be an agreement, but it doesn’t solve the fundamental problem of excessive debt and of further, very substantial deficits. They’ll iron out something with lots of compromises and with spending cuts that are backloaded, in other words they won’t happen immediately. As we go along say in three or five years’ time when these spending cuts should occur and when the tax increases should occur, nothing will happen in my opinion.”

Martin Armstrong:
Being the world reserve currency is something that obviously Congress does not comprehend. About two-thirds of central bank reserves are in US treasury paper. What is going on in Washington right now demonstrates the total lack of comprehension of what is the role of the dollar (i.e. the flight to Swiss & gold).

This also illustrates my point that the world cannot afford the dollar to be the reserve currency anymore because we are plagued by internal political conflict with no real hope in sight. What is going on in Washington now seems to be a strange secret ritual centered on a mystic suicide cult or a plot for the Manchurian Candidate

Jim Sinclair:
Financial TV actually has a countdown clock to the day of Default. I still feel that a compromise at the last moment that offsets the default but does not do anything meaningful in the over the top debt problem will come.

There is nothing going to happen that is going to offset the borrowing demands of the US Treasury in a significant way. Rating Agencies who have not hesitated to downgrade everything Euro cannot hide from the sloppy process going on now in the Senate and House.

IMF Chief Christine Lagarde:
…has warned overnight that the global reserve currency status of the dollar is at risk due to the “worrisome” US debt debate. “One of the consequences could be a decline of the dollar as a reserve currency and a dent in people’s confidence in the dollar.”

Robin Griffiths:
Strategist for Cazenove Capital …you “have to own” gold. He said that the real inflation adjusted high from 1980 (using the more accurate RPI) was over $8,500 per ounce and gold could reach that level in the coming years. He said that silver was volatile but would likely outperform gold. Fiat currencies are being “printed into oblivion,” and so not owning gold is “a form of insanity.”

Chris Martensen:
On one hand, I am glad that Washington DC is finally (!) talking about the unsustainable borrowing and spending habits of the United States. It had to happen sooner or later; better now than never.

On the other hand, the tenor and substance of the dialog and proposals reveal just how far up the creek we really are and just how hopeless it really is to plan on something sensible emerging. After trying to make sense of the various proposals I think I can summarize them all with a single phrase: You’d better be ready.

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People are Owned and Consumed by their Possesions

A recent post comment got me to thinking about how so many people today are truly “owned and consumed by their possessions”, as recently stated by an observant M.S.B. Reader. This ‘condition’ is arguably one of the core root causes attributing to the high stress of modern day life.

Don’t get me wrong. Who wouldn’t like to have more than just the necessities of life, or bigger and better versions of those same necessities. Who wouldn’t enjoy having nicer ‘toys’ to play with. In fact, there is absolutely nothing wrong with the possession of such things in my opinion, provided that you are not owned or consumed by them!

Here’s what I mean…

A possession that owns you may mean that you owe someone or some institution to have possession of that possession. You have it, but don’t own it, and are under contract to pay for it under the agreed terms. Therefore, the possession really owns you.

You are consumed by a possession or possessions when it or they expends you, or uses you up. How? By either the debt that you owe for it or them, or by the emotion, ‘greed’, – the ‘keep up with the Joneses’ syndrome.

For whatever reason, probably my upbringing, I have never been overcome with the emotion of ‘keeping up with the Joneses’, or the mentality of leveraging nearly everything I earn so that I can ‘appear’ to own possessions that are beyond my means. As I have lived life, I have been astounded at the acceptable notion of many that are younger than me, that it is OK and normal to leverage what they earn to purchase possessions that are way beyond their means.

Some may argue with me that this is a ‘bad thing’, since they are perfectly capable of paying their debt each month when the bills come… however they are missing a few extremely logical and important points. What are they sacrificing for having these possessions now (rather than later – or at all), and what if their ability to earn the required sum to pay the bills is taken away from them.

The point is, when you owe, you are a slave, even though you may not feel like it right now. I just heard a news report today that many Americans will now have to ‘work’ into their 80′s before they can retire! Are you kidding me?? What kind of retirement is that???

It used to be that people would live within their means, meaning they would not borrow more than what they knew they could pay off in a reasonable time. Better yet, save the money, forgo the instant gratification of having it now, and pay cash for it later. No debt, and therefore not a slave to the system.

When borrowing money, the interest you pay on that money, over time, will amount to an extraordinary sum… a sum which could have been in your pocket instead.

Don’t fall victim to feeling like you have to keep up with your friends or neighbors who have nice things in their possession. Just know that most of them really don’t own them, and are sealing their fate by burdening themselves with excessive debt and a long life of slavery.

Instead, just smile, and know inside yourself that you will likely build real net worth by simply remaining frugal and happy with the things that you can afford. Your life free of debt will be truly rewarding, and you will have a reasonable chance of retiring at a reasonable age.

…just a thought

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