HJ-ED-DHJHerald Journal Columns
October 1, 2007, Herald Journal

Confessions of a financial idiot

By IVAN RACONTEUR

Money, or the lack of it, colors nearly all aspects of our lives, from our jobs to our relationships to where we live, yet it remains one of the most misunderstood components of our existence.

Money isn’t everything, but, looking back at the times when I have had it and when I haven’t, things seem to run much more smoothly when I have a few bucks in my pocket.

Unfortunately, the times when I have had money were due more to luck than to financial competence.

Over the years, I have done a terrible job managing my finances, and if there were a test to measure such things, I suspect it would reveal that I have the financial IQ of a gnat (I am making the assumption that the average gnat is not very sharp when it comes to money matters).

For me, the mysterious nature of money has deep roots. Money was never discussed in our house while I was growing up.

Both of my parents worked hard all of their lives.

My father spent the last 23 years of his life working in a jewelry store. My mother baked wedding cakes and Christmas cookies, and cleaned houses for other people.

Between them, they somehow managed to provide a comfortable, if not flashy, home for their family, but they never revealed how they did it.

I inherited their work ethic, but they left me no clue about how to manage money, and I never quite figured out how to make money work for me.

When I was young, I delivered papers, mowed grass, swept floors, and shoveled snow for local businesses.

I have had a lot of jobs since then, often two at a time, but I still haven’t managed to amass much of a fortune.

I seem to be cursed with some sort of cash-repellent hoodoo, because greenbacks seem to fly away from me much faster than I can rake them in.

Growing up, I heard occasional references to the importance of saving for the future, but I got very little in the way of practical education.

It is not that I am unwilling or incapable of learning how to manage money; I just never picked up the habit.

I have all sorts of good intentions, but not much discipline.

In school, we learned a lot about abstract ideas and principles, but the curriculum included next to nothing when it came to practical information about managing money, a skill that we would use (or not use) for the rest of our lives.

Every student, by the time he graduates from high school, should be able to balance a checkbook, calculate simple interest, understand a balance sheet, and plan a budget.

It is a matter of simple economics. We are all faced with infinite wants and limited resources. We can have either guns or butter, but we can’t spend more than we earn – at least not for very long.

When outflow exceeds income, there is bound to be trouble.

Unfortunately, many of us learn these things the hard way, and only after it is too late.

Money can create a lot of conflicts in our relationships, as well.

I realize now that during most of the time I was married, I carried on the family tradition of never discussing money.

The subject never came up until there was an issue, and even then, it was generally not a calm, well-reasoned discussion based on a thoughtful exchange of ideas.

We all grow up with different priorities and comfort levels when it comes to money, and these are things that should be discussed prior to two parties entering into any kind of partnership.

Attitudes about money can be quite powerful, and putting a spender and a saver together can be a more volatile combination than sending the PETA people on a cross-country coach outing with members of the NRA.

Apparently, I am not the only one who is financially confused. It seems there are a lot of people who are in worse shape than I am.

Foreclosures are at an all-time high. Consumer spending exceeds earnings. Credit card debt is astronomical, and yet people continue to borrow money to buy things they don’t need and can’t afford.

We are doing an even worse job as a country.

The national debt just topped $9 trillion for the first time in history.

Last year, the interest alone cost taxpayers $405 billion, and this number increases each year.

Even a financial idiot like me can see that this is not a good situation.

The national debt limit is set by Congress. The current limit of $8.965 trillion was set in 2006.

If the debt reaches the limit (as it appears to have done now), the Treasury Department cannot sell any more bonds or other securities.

One difference between government and private citizens is that when the public debt reaches the limit, Congress simply increases the limit. It has done so four times since 2000, when the national debt was “only” $5.727 trillion).

I may be a slow learner, but even I can see that spending more than we earn – at any level – is a recipe for disaster.

If we don’t shape up, both as individuals and as a nation, the whole house of cards could come crashing down around us.

In view of the current state of the national debt, and the housing and credit markets, one can’t help wonder if the collapse has already started.