Weathering the Storm: Keeping Some Control in a Financial Crisis
October 01, 2008
Today's post is from Nan Mooney, author of Not Keeping Up with Our Parents: The Decline of the Professional Middle Class. Mooney's work has appeared in The Washington Post, Slate, The Daily News, The Daily Telegraph (UK), The Seattle Weekly, Women's eNews, and various other publications. Her website is www.nanmooney.com.
These days, whether you're a college student or a retiree, it's pretty hard not to reside on the edge of a financial panic. After all, if mega-institutions like Lehman Brothers and AIG can't weather our current financial storm, how is one middle class individual or family, struggling even before the you-know-what hit the fan, supposed to scrape by?
Though you can feel fairly confident that the government won't be knocking on your door with a $700 billion check anytime soon (that money's spoken for), as members of today's struggling middle class it is possible to hang on to some control over our money and our future.
Get a financial education.
Read the interviews with people facing home foreclosure and all too many of them admit that when they picked up a pen for those mortgage papers, they had no idea what they were signing. These days, money is simply too precious not to understand what happens with every penny. Instead of relying on others to inform us about our financial state, we need to become personally responsible for educating ourselves. We need to learn how the mortgage industry and credit card companies truly work. Ask questions, as many as it takes. Know and understand your payments. Opt for the simplest, most straightforward financing options then calculate how long it will take you to pay them off before you sign on the dotted line.
Don't just educate yourself. Educate your children. Financial literacy isn't more important than social or psychological literacy, but we can't afford to ignore it either. As parents and educators, we can see to it that a high school and college education includes teaching students about handling their money and instills in them realistic expectations about the kinds of salaries and lifestyles they can anticipate.
Don't let debt, particularly credit card debt, get out of control.
When money gets tight it's tempting to pull out your credit card to cover that gap where our paychecks used to stretch. And to some degree — if your water heater conks out or your car breaks down — this is probably unavoidable. But reserve those cards or loans for truly essential expenses. Total U.S. consumer debt (excluding mortgage debt) reached $2.55 trillion at the end of 2007, up from $2.42 trillion at the end of 2006. And as we've seen reflected in the financial powerhouses that used to rule Wall Street, once you get into a hole, it's extremely difficult to get out again.
Lower your material expectations.
Know your financial reality, and know the line beyond which you'll be in over your head. Having to curtail your expectations doesn't mean you've failed. It means that economic circumstances beyond your control have changed and that, until they begin to shift back again, your material life will reflect those changes. If you haven't done so already, now is the time to make a budget and stick to it. It may not be glamorous, but it's an essential financial survival skill.
Find your political voice.
This is an election year and the economy is a hot topic. What better time to make your concerns known? As intelligent, articulate members of the political system, we are in a position to demand more federal support for education, housing, child care, health care, and retirement. We are in a position to say that this is far more than just a financial issue, it's a moral issue about the shifting values and priorities of a country where a staggering number of people cannot manage to get by.
In America today, it's not hard to figure out where the money is. It lies with the top one percent of the population, those making over $348,000 a year, who now receive their largest share of national income since 1928. One of the most effective moves we could make would be to push hard for more progressive tax laws, milking an increased percentage out of the wealthy so there's more to go into the discretionary spending pot. Eliminating just a quarter of the tax subsidies provided by the current tax code would free up $180 billion a year that could be directed to improving education, expanding healthcare, or any of the numerous other areas where middle and low income families struggle now.
Most important of all, don't buy into the "you are what you make" value system.
Begin thinking about what you can do to grow comfortable in your current financial insecurity, to believe — and pass on that belief — that identity equals more than money and to stretch and to fill your life in non-material ways. If you're to find any financial peace, it's essential you truly believe that you, your family and your future are all worth something more.
You might also be interested in Nan Mooney's previous post on Beacon Broadside about economic inequality, her appearance on NewsHour discussing the financial crisis, and this video of Kai Wright discussing the subprime meltdown's impact on black America.