Monday, January 30, 2017

How not to be poor

Avoiding Poverty
It’s true that there are many happy people who are poor, and many unhappy people who are well-off or even rich. But as the joke goes, “Money can’t buy happiness, but it can keep you comfortable and amused while you wait for happiness to come along!”
And grinding poverty, where you cannot pay the bills, or provide the necessities of life for your family, never mind the little amenities that make things pleasant, presents a hard circumstance to be joyful in.
It’s also true that many people in this world are poor through no fault of their own. Perhaps they were born into a third-world country where corruption and the lack of respect for property rights means that the development of affluence for most people is impossible. No one invests in starting a business that gives jobs to people if the government is likely to steal the business from you.
Even in our country and the other wealthy democracies, people can be born into situations where the culture, crime and lack of good educational opportunities make climbing out of poverty very hard. And, of course, “poor” is a changing concept. Many of the “poor” in America have air conditioning, cars and more TVs than the middle class did in 1950. I make a good salary, but compared to Bill Gates, or a Hollywood Star or successful professional athlete, I’m “poor.” So it can be relative.
Some people become poor because they have a disability or disease that prevents them from becoming successful, or they had a father or mother—perhaps both—die when they were young, making it hard for them to get an education.
But it’s also true that many people in our country are poor because they made bad choices. I didn’t make up the following rules; I’ve read variations of them over the years. But if you look at the statistics, there are four ways to avoid poverty:
1. Don’t have babies until you are married, your relationship is stable, and you both have good jobs.
2. Get an education, preferably a college education, or at least an education in some marketable skill.
3. Get a full-time job, work at it, and always work full time (that’s a 40-hour week) when you can.
4. Manage debt carefully; avoid it when you can.
Absent some terrible event, like a tragic disease, people who follow these four rules may not be rich, but they are seldom poor. Unfortunately, following these rules requires maturity, discipline and good decision making when you are a teen or in your twenties—just when these things are in short supply!
Let’s look at these four rules in more detail.
1. Don’t have babies until you are married, your relationship is stable, and you both have good jobs.
No factor is more closely aligned with poverty in America than being a single mother. The vast majority of the children in poverty have no father in the house. Sometimes they are fortunate enough to have grandparents who can help the grandkids have something like a normal childhood. But even then, the grandparents get old, and need to save money for their retirement.
Faced with the costs and time commitment of rearing a child, the young father who promised to love and care for you forever when enthusiastically helping you make the baby, often walks away. Trying to support yourself and a baby—or babies—with no help and a limited education is difficult. Yes, the government will take money from the people who earned it (taxes) and give it to the single mothers who didn’t earn it, punishing those who made good choices and encouraging more young women to make bad choices. But it’s not a lot of money, it doesn’t provide much of a life-style for the kids, and as I write, government is fast running out of money.
Yes, sometimes young women marry men without character, who desert them, putting them in the same circumstances. At least they tried to give their kids a decent life.
The numbers are staggering, especially for minorities in our cities. About 70% of black kids are now born to unmarried mothers. Hispanics and whites are gaining on them. Poverty is more about a culture that leads to bad choices, and government programs that encourage bad choices, than any other factor. In 1950, about 78% of American households were married couples. Now it is down to 48%. Until and unless we can change this culture, we cannot hope to reduce poverty.
The kids grow up without a father in the house, which hurts their development. They also tend to emulate the mother, and have children of their own without being married, passing poverty from generation to generation like a hereditary disease. Single mothers can find lots of dates, but finding a man with a good job who wants to marry them and take on someone else’s kids is much harder.
It is my belief that having a baby without being married puts the child at risk. Don’t do it to your kids.
2. Get an education, preferably a college education, or at least an education in some marketable skill. The last time I checked, the average lifetime earnings was over a million dollars higher for those with college educations as for those with just a high school diploma. Those folks who don’t graduate from high school are in very bad shape, and it’s getting worse. And even in the recent recession, the unemployment rate was much lower for those with a college degree than for those without one.
And when you go get that education, look at how many jobs there are and income levels of people with degrees like the one you want. There is a bitter joke among parents, that goes, “If your kid is majoring in something that ends in ‘studies,’ don’t turn her bedroom into a den. She’s coming home after college, because she won’t be able to support herself.”
There are a lot of popular subjects to study that are fads. Academics—whose own income is protected by tenure—are happy to teach these subjects, and the colleges are happy to take the money the students borrowed to go there. The future employability of their students seems to be no concern of theirs. When you are ready for college, do some research on what fields have the best job opportunities. As I write, social work, education and architecture are among the worst, but this may change. If there are five people with social work or education degrees for every job opening, four of them are going to be unemployed, or working at something else.
It should go without saying, but I’ll say it anyway. Postpone having babies not only until after marriage, but until after you get your education. One of the saddest and most common stories is the young couple who are in love. They get married—or just live together—and decide that he will go to school while she works long hours at bad jobs to support them. Once he gets his degree and establishes a professional career, his waitress wife with two babies no longer seems a suitable partner. He divorces her—if they bothered to get married in the first place—and leave her in poverty, with some child support if she is lucky. He has a good job, a new wife who is well employed, and a nice house and car. The ex-wife and kids live in a crummy apartment. Getting an education and getting out of poverty is now ten times as hard.
None of the tens of thousands of women to whom this has happened would have believed it if you had told them on their wedding day. “He’s not like that,” they’d have said. “We’re in love.” If he really loves you, he’ll wait until you get your degree. If he doesn’t wait—you dodged a bullet.
3. Get a full-time job, work at it, and always work full time (that’s at least a 40-hour week) when you can. Many teens get in the habit of working a part time job here for a few months, another there for the summer, and living off their parents. Unfortunately, some never break the habit and carry it with them into their twenties and thirties. Unless they inherit money or win the lottery, they are always poor.
Working full time, no matter how bad the job, gives you a work record, references and job skills that you can take with you to the next job. It brings in more money than working part time, and usually has benefits, which is an important, though often over-looked part of your income. It makes you more attractive to future employers. And it lets you build up a network of contacts who will help you get better jobs down the road.
And don’t hop around from job to job. I’ve been the hiring manager in my office for 38 years, so I’ve looked at a lot of resumes. When I see one where the applicant had five jobs in seven years, nine months here, sixteen months there, and so on, that resume goes into the “do not bother calling” pile.
4. Manage debt carefully; avoid it when you can. Debt is very tempting. It think it’s unconscionable that credit card companies push credit cards on college kids. They are too inexperienced to understand that a few thousand dollars of debt, to buy that nice stereo or new beach clothes, can take twenty years to pay off at minimum monthly payments and cost ten thousand dollars in interest payments.
I didn’t have a credit card when I was in college. I paid cash or did without. That may not be practical in today’s world, but I recommend it. If you have to have a credit card, make sure you don’t use it for more than you can pay off every month. Interest payments on credit cards are high. They help the bankers have nice life styles, but do nothing for you but make you poor.
Many kids run up debt so high they just default. That is, they don’t pay. That sticks the banks with the lost money, but they get it back by charging higher rates to those who do pay to make it up. So when someone defaults on a credit card, they are really stealing money from everyone else who has a credit card, and who pays the bills.
Bad use of credit, such as defaulting on payments, or even being late on payments, also gives you a bad credit rating.
Having a good credit rating helps you avoid poverty, for several reasons. First, it helps you borrow money when you do need it, for something big, like a house or a car. Your Grandmother and I have a credit rating over 800, which is very good. It means we can be trusted to lend money to, because we always pay our bills on time—or often in advance. So when we wanted to buy our condo in the Chicago area in 2009, in the midst of the credit crunch, we were able to borrow the money.
As I said earlier, having a bad credit rating also hurts your chances of getting a good job. Employers check them to see if employees are trustworthy. People who are behind on their bills or over their heads in debt are not the people you want in your organization, especially handling money, because they are more likely to get desperate and steal from you.
So being poor often means people misuse credit, get bad credit ratings, can’t get better jobs—and get even poorer.
Just because someone will lend you money doesn’t mean you should borrow it. A lot of people bought the biggest house they could get a mortgage on, paying only the minimum every month. Then when the housing market collapsed in 2007, they ended up owing more than their houses were worth. The saying is, their mortgages were “under water.” They were drowning in debt.
My dad was a school teacher, who worked two jobs to support the family. All the college support he could provide was a roof over my head, and food—if I was there at meal time. Yet I came out of college with my degree and no debt. I had the GI bill, which folks said made me “lucky.” But I didn’t notice any of them behind me at the Marine recruiter trying to get “lucky” by going to Vietnam with me. I went to state schools, which were cheaper (then), and have been well enough employed since to pay it all back and more to the states I’ve lived in through my taxes. And I worked 20 to 36 hours per week in college, which carrying a full load—or more—of credits and a good GPA. Debt is a killer.
One of the reasons your Grandma and I aren’t poor, is that we always settled for smaller houses and cheaper cars than we could afford, and we paid more than the minimum payments, so we’d get ahead. We also don’t charge more on our credit cards than we can pay every month, so we don’t have interest payments making us poor.
As I write this, we owe only one debt, $98,000 on the condo we bought two years ago for $160,000. We put $16,000 down and paid off more over three years. With that kind of payments, we could have had a much larger and nicer condo, paying twice the mortgage, but we would have put ourselves at risk of being poor if something went wrong.
Following these four rules takes discipline and maturity, but they will help you avoid being poor. You must be willing to settle for less than you want, less than you can get right now, for having a more comfortable lifestyle in the future.

Excerpt From:

Advice for my Granddaughter: For When I’m Gone
Advice for Boys: From an Old Marine by Robert A. Hall
All royalties go to charity.

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