Confessions of a Laid-off Lawyer

Just Your Average Joe Blogging Away His Debt—In One Year or Less

Back to Basics

with 4 comments

Total Black: $88.80
Total Red: $230,621.20

The focus of this blog has strayed a bit afield of late.  I started on this path with two goals: to eliminate my debt in a year and to blog about debt, my efforts to get out of debt, and all things debt-related in general.  Perhaps I’ve let the blog devolve into a bit of an online journal.  That isn’t the focus.  While chronicling my efforts to get out of of debt are a component, I started the blog as a means to an end, not as an end in itself.  I need to keep that at the forefront because I think I’ve found myself slipping into the blogdom a bit too much lately.

Debt is frightening.  For nearly all of us.  I think that’s partly because few of us get any sort of education or money-management training on spending wisely or budgeting properly.  I never took a business class, other than business law classes.  And the core mathematical elements are not taught there.  So, where are we supposed to learn basic financial literacy?  It’s not a required component of any mathematics course.  Geometry and algebra don’t help to understand a balance sheet.  And if you’re not interested in business or accounting, you may not learn about potential risks and pitfalls awaiting you.  For example, I admit that I still have a foggy understanding of a credit card’s APR.  And why not?  A quick glance at Wikipedia’s annual percentage rate page and you’ll need that algebra to understand what’s explained.

Most of us understand that credit cards allow us to satiate a desire now and then pay for it over time.  But few of us really grasp how we end up paying double or triple the amount because of interest and fees.  It’s clearly not a one-to-one ratio.  You don’t buy a sweater for $24.99 and then pay back $24.99.  That would be a charge card like American Express offers, not a credit card.  But few of us understand the real ramifications of borrowing.  The financially-savvy haves seem to assume that because they know how to manage money and budget properly, their financial-savvy have-not friends, family, and colleagues are just refusing to do the same.  We’re fiddling while our financial Rome burns.  That’s reflected somewhat in one of the recent comments where a reader wrote, “it’s tough to have sympathy for highly educated people who have borrowed themselves into a financial nightmare.”  The assumption, of course, is that the “highly educated” have been educated about money and finances.  That because you’re highly educated you know how to manage money.  I don’t know if that’s a correct assumption.

My parents were, and are, blue-collar folks who believe in hard work and making life better for those who come after you.  At the time I went to college my parents didn’t think to use their savings to help pay my way, so I borrowed like nearly every other American student.  My best friend also comes from the same area and from a similar blue-collar background, with one significant difference: her father was a high school teacher.  Her parents paid for her entire college tuition at the University of Scranton—a Jesuit university and therefore not a cheap ride.  Did her father’s higher education help her parents understand they should do everything in their power to ensure she didn’t leave school with massive debt?  Probably.  There does seem to be a correlation between higher education levels and higher financial literacy.  In later years my parents came to view their money differently.  They decided they’d rather give their children their “inheritance” now when they need it most—and can see us enjoy it—rather than later on when they’ve passed on and we’re already established.  That’s why my mother is a bit freer now with money than she ever was.  I suppose as she got a bit older she started acting more like the rich who gift their wealth to their children each year tax-free or set-up other financial networks to shield their accumulations from taxes.

In my case the bulk of my “nightmare” that I’ve borrowed my way into comes from student loans.  56% of my total debt is from student loans = $130,224.43.  That includes undergraduate and law / graduate school debt.  My undergraduate loans were deferred while I served two years in the United States Peace Corps and studied abroad for another year before law school.  In contrast, only 12% of my total debt, $27,858.44, is from credit cards / accounts.  The remaining 32% is owed to the IRS and to my mother, who helped me pay the IRS and helped with rent.  Part of the reason I owe so much to the IRS is because my 2008 law firm bonus and severance package got paid out in the same tax year, effectively crunching me on both ends of the calendar and pushing me into another tax bracket.

So what part of my debt have I borrowed myself into that qualifies as a nightmare?  Only 12% is borrowed in any remote “frivolous” stretch of the imagination.  Even if you assume every cent on every credit card was unnecessary.  You can’t say with a straight-face that higher education is frivolous or a nightmare.  Perhaps the extra year I stayed to earn a Masters Degree was unnecessary, but that year would only be a drop in that bucket of student loan debt.  Sure, I could have been allocating more money to my debts all along, both in the prior six months and in the past two years.  But that’s all part of this process of understanding my debt, how it affects me, how it traps me, and how I handle it, and then get free from it.  See, debt is a dirty word and people who carry debt are diseased.  It’s hard to feel good about yourself when people think you’ve done something wrong, you see.  So then a night out or sitting a spell at a coffee shop to feel like “everyone else” helps medicate that.  But I’m learning to rebuke these claims that I’ve done something wrong.  This blog is an effort to come clean about debt and debt management and to show people how I, like many out there, am a normal human being with strengths and struggles and cravings and character.  My total debt is not entirely mine when one missed payment means your APR sky-rockets.  My total debt is not entirely mine when it costs over $130,000 to attend a state university and a relatively cheap private law school and then quadruples over time because of interest.  But my debt is all mine when I give in to instant gratification and delay paying my bills.  And my debt is certainly mine when I use credit without having the means to pay it back in a short time-frame.

That’s why I’ve sought to get back to basics and have focused on reducing the amount going out and increasing the amount going in, more so on increasing rather than decreasing, of late.  But that’s changing.  It’s one simple starting block of financial literacy that I’m still getting down pat.

4 Responses

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  1. the “journal” aspect to your posting is what makes this blog so good and provides context to your financial situation. keep it up and keep giving it hell.

    a

    January 13, 2010 at 12:34

  2. You need to keep this journal running, so that prospective law students can see what their future will likely entail. (I don’t wish this hell on anyone.)

    You obviously will not pay this debt off in one year – probably not in your lifetime. But it is important to keep this going. Document your journey so that someone else will avoid the same fate.

    http://thirdtierreality.blogspot.com

    Nando

    January 13, 2010 at 12:52

  3. There are 3 things I see that are getting you flamed:

    1) That donation link. Donations arent going to happen. You have more education and earning power than most people in our society, no one feels sorry for you.

    2) The seeming inability to grasp reality when it comes to money. Claiming that “Who knows? maybe ill make 230,000 in one day” is just completely ridiculous. No one, especially in this economy is making that kind of dough in one day or in an entire year. Time to come back down to earth- you got a minimum of 10 years of ball breaking work to get this debt down. Thats reality.

    3) It doesn’t seem like you’re making a serious effort to get out of debt. Cutting back $5 here and there isnt going to make a dent on the principle. If moving in with mom would save you $2000 a month..DO IT and pay every cent of that to debt destruction! Now thats gettin serious.

    Bobalino

    January 13, 2010 at 17:08

  4. students should learn how to handle their accounts well and also the banks should imposed strict policies regarding loans. Student credit card holders must be responsible enough in controlling their purchases using their card to avoid debt problems.

    students credit card articles

    January 14, 2010 at 01:46


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