Wednesday, December 27, 2006

Debt Analysis: Someone Else's

I was sitting at work, not having broken my book out of my bag, and found the Money section of the USA Today. They seem to be running a series this holiday season called Young & In Debt. I'd definitely like you to read this article because there are some points that the writer Mindy Fetterman leaves out.

Finished reading it yet? Alright. Yes, it's a really sad situation that Dana is in. She charged about $15,000 to credit cards while in college. (That seems to happen a lot.) She has $12,000 in student loans. Then she gets in a car accident which cost her $16,000 in medical bills (although, I'm unsure if the $2,000 to fix her front teeth were included in that) and is now paid down to $3,400. Sure, she makes $64,000 a year as a bartender but at 24 years of age, that's a lot of debt. Heck, her boyfriend and her both make the payments on the car. Anyhow. I'd like to address a few of these issues.

  • Credit cards should only be given to college students with jobs. In other words, they need a way to pay it back before being given a line of credit. In the article, she mentions that her father helped her out while she was in college but she would see a shirt while shopping and charge it. This seems to have become a habit as $15,000 in clothing later she is having issues. It is later noted in the advice that she stop spending $850 some months on clothes... hello!! You got a shopping problem. Learn to sell some of those on eBay. They'll even teach you how... after you fix that computer.
  • $12,000 in student loans isn't abysmal. I just wonder. With a degree in Fashion Marketing from Indiana University, why is she tending bar? She had a job managing a Ralph Lauren store and at least that was using that education wisely. Yes, at 24, she might have discovered she went for the wrong degree but, then again, there is a little hope in something mentioned later about her working for a friend that is starting a clothing line. This could become that step in the right direction as she could help market this line. With the experience and contacts made there, she could really start her career.
  • They were pretty vague about the accident causing the medical debt. "She was in a car wreck." Was she insured, at fault or under-insured? Was the other driver insured? The direction of the article points to her not having medical insurance as being the culprit here but if the other driver was insured and at fault... those medical bills would be paid and the settlement would have paid off some of those credit cards. What I believe happened here is that she was at fault, was paying liability insurance only, under-insured or the other driver wasn't insured. One or several of those. Medical insurance is still extremely important but I kept waiting for something to pop up in the article saying, "this never would have happened if she was in Canada."
Anyhow, the article irked me and I feel I've gotten it off my chest now. The advice given in the story is very important. I just think that our kids need to better understand insurance, credit cards, shopping moderation, career direction and many other things prior to entering the 'real world.'


David Amulet said...

You're not the only one irked--this kind of irresponsibility amazes me.

-- david

Ken said...

This reads like an example of "poor little rich girl" who had too much freedom too soon. It is the parents responsibility to help teach their children how to survive in the real world. Not the schools.

I agree with you Martin that it's not just having coverage, but having enough coverage.

Lucy Stern said...

Your last paragraph says it all Martin. Too many parents don't teach their children anything about money. They give them allowances, pay for clothes, cars, gas, insurance and most everything else.

I grew up poor, grateful to have a roof over my head and food on the table. We didn't have many extras at all. I got baby sat as early as I could and earned extra money. I got a job at the age of 16 and started buying my own clothes, school supplies and movie tickets. I put all my money in the bank and only spend baby-sitting money for my needs. I taught myself to sew and started making my own clothes. When it came time for college, my parents let me live at home and I used my saved up money to attend Jr. college. When I got marrried at the age of 21, my husband and I got our first credit card. We used it for emergencies only. To this day, we only have about $300.00 in credit card debt. I'll pay that off in January.... I have worked hard to teach my children the same principals....So far it has worked on 2 out of the 3.

I can actually say that I am grateful for being raised poor. I learned so much and am grateful for all that I have.

Anonymous said...

You wanna fix my debt? I'll let you. Seriously. No really. Quit laughing.

LoraLoo said...

I'll be the first to admit I enjoy spending money wayyy more than I should. But I understand credit debt, and kids need to know the consequences... I also think it needs to be something focused on in school. I remember taking a required course about careers - one 9 week course; consumer math was an elective if you didn't want to take calculus. Finance needs to have more importance, in school AND at home.

BeckEye said...

I didn't read the article because I'm sick of thinking about money. I was raised to know the value of a dollar, but sometimes shit happens. I've gotten myself in and out, in and out of debt over the years and it's amazing to me how easy it is to have a bad run and end up in a giant hole.

Fred said...

When I worked for Capital One, the market for the college crowd was exceptionally good. It always bothered me.

Have a Happy New Year, Martin.