Job Loss, Debt, and Lower Salaries: Why We’ve Gotta Do What We’ve Gotta Do

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Just recently I read a couple of disturbing articles in the New York Times about debt. Helaine Olen’s January 2nd opinion column suggests that the reason we’re in debt and can’t save is because of unaddressed social policy issues -— things like flat-lined salaries and higher health care costs.

spinning wheel

Credit Image: tehbieber on Flickr

Then on January 14, Benedict Carey paints us a picture of spiraling debt behavior based on job loss and the hopelessness and downward financial spiraling that often attends it.

And while each writer has a point, I beg to differ with the premises. Carey’s article features folks who have been on the brink of disaster and who have been playing credit card roulette, and there is the strong temptation while reading it to say to ourselves, “Whew! Glad that’s not me,” or worse yet, as the comments page demonstrates, demean people who are in trouble and reach out for social services supports. And while lobbying for more salary increases as a policy, as Olen suggests, and petitioning our legislators to really DO something about rising health care costs is noble, it doesn’t do anything to help us with the day-to-day of debting and paying for our living expenses right now.

I use that word purposely -— debting: the active verb of running up debt. I want to state this loud and clear: We are not victims of circumstances regarding our train-wreck finances. Yes, there are factors that have jacked up the actual cost of living -— say, compared to our parents’ generation. But many, many families and individuals who don't look quite as desperate as the ones featured in the Times article are playing the same kinds of debt-roulette games to keep the balls in the air. It’s not a select few. There are millions of us playing the board game of debt. The intense borrowing against real estate in the last decade to cover high credit card balances is the quintessential example.

The research group Demos found that 40% of middle- and lower-income families are using credit cards for daily needs -- not luxuries, but daily needs. And, 44% of small business owners use credit to fund their businesses. The issue this brings up is much, much larger than what's alluded to in a quick and personal view of one person’s job loss.

But don’t get me wrong. I’m not criticizing the personal angle of specific writers. What I’m saying is that the issue of personal debt is much more immense than we’re ready to admit. We are in debt, we're in deep, and we keep running up credit lines. And we’re talking about the “reasons” in the press as if our own personal behavior had nothing to do with it. As if forces outside ourselves (the crash, depressed property values, lower salaries, higher housing costs, job loss, etc.) are forcing us to run up balances.

The truth is, we feel entitled -— to everything from $200 haircuts, to a mindless $300 buy at Costco or Target, to swanky beauty products, to a quick $600 dropped for the latest i-something, to an outlet shopping trip on the credit cards, to trips we can’t afford. We’re putting our kids’ camp costs, our coffee bar habits, our dinners out, and even our boutique grocery buys on the card. When did we get the idea, by the way, that on a middle income salary, we should be able to buy wild salmon at $26 a pound at the boutique grocery? Or spend $275 on eye glass frames? We did this -— it’s not an abstract policy issue of diminished salaries. We invented every high-end specialty item we could think of, from gourmet cookies to designer shoes, and we’re buying them on credit. Many of us can’t even bring ourselves to buy a loaf of bread that costs us less than $8 a loaf. That’s our doing.

Read any article on college debt and you’ll see the same no-personal-responsibility angle: rising tuition costs, increased college housing, etc. But we’re not addressing the elephant in the room. College students are using credit lines to fund their living expenses -— everything from clothes, to food, to concert tickets, and yes, for tuition, too -— in hope of a better day: that is, the day they get that high-paying job. It’s a prequel-type of spending and tons of students are doing it.

Truthfully, a huge percentage of our citizenry is doing it. We’re pre-spending, with no concrete timeline for a “payoff, with some vague hope of increased equity, a better job, an inheritance or a rescue. And when we lose a job we often keep living the same way we’ve been living with an income -— with maybe a few downsizing options -— but we’d rather live on credit than make the hard choices to keep us out of debt. I was there -— I made all of the credit mistakes of running up debt, living on credit when my business downturned, and kept doing it until I crashed. And I know it’s a death-trap, a stress pressure-cooker, and a nightmare of angst for our families and our marriages.

So whether our debt is 1) up to half our income, 2) more than half our income, or 3) more than we earn, the skill we need to be talking about is the ability to learn to live on the cash we earn -— no matter what.

That means we need to learn tools to live on cash income, so that if our income drops, we have a skill under our belt to manage on less. And we can use this skill in order to do things that are meaningful to us, too. (I downsized my own spending plan by more than half in order to write my book and it was totally worth it.)

Where job loss is concerned, we have to -- sorry to put it so bluntly -- get real about what we need to do to survive. Have I been unable to find a job myself at times? Absolutely yes, and it was excruciating. But if I had to temp for $1 an hour, then that's what I had to do. Part of the trouble with running up credit without having a downsizing plan is that we're deferring, again, to that so-called “better" day -— and that’s a timeline that we're hoping for but not privy to. So when we’re out of work and run up debt in the meantime, we’re essentially just gambling, and it’s a dead-end, no matter how we justify it.

So whether we're college students pre-spending against that upcoming post-graduation big-ticket job we're counting on or couples leveraging the house for everything from vacations to swanky colleges for their kids that they can't afford, or those who've lost a job who are counting on things "getting better soon" and living on credit in the meantime, we’re really just deluding ourselves and causing stress and strain for ourselves and our families. Dealing with what's happening now and learning to live within our means -- no matter what that is -- is what's going to bring us peace.

And when we do that, no matter how humble the living, we keep ourselves out of the hand-wringing masses who are stressing themselves and their families into a nightmare of debt and pressure. We've got a plan. We're living within our means. And we're doing whatever it takes until things improve, and taking every opportunity to help them improve.

JoAnneh Nagler, Author

The Debt-Free Spending Plan:  An Amazingly Simple Way to Take Control of Your Finances Once and For All


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