Oh Honey...My Opinion About Credit and What Really Matters from 2007

Of course every little girl dreams of their fantasy wedding-Cinderella’s dress (the size of a small planet), a giant church or beach at sunset or whatever, and the perfect man. HAH! And for the stereotypical view of the dreams of all little boys (as I was not one but have three brothers, I can only semi-accurately tell you this)- cars! Big cars, little cars, trucks and every Hot Wheels model created between 1985 and 1998. Then we grow up and turn ten. We realize that to have all of these private beaches and amazing cars we’re going to have to earn it. We have to go to college. And where else go to college than the best of the best? Harvard, Yale if we for some reason don’t get into Harvard, and maybe, maybe Princeton as a back up. But that’s only if the first two fall through, which probably won’t happen. Everyone knows that college costs money…except ten year olds who’s parents pay for everything because their little hands are to small to work in big American factories and make their own money (Joking! Sorry, was that outrageous? Good.)

Fig. 3

Then we turn eleven and grow up. We learn to appreciate the value of money so much more, although some more than others. The way I see it there are two ways to live. There is the “I want it so I’m going to get it and deal with the consequences later” way to live and there is the “yeah, I really can’t afford that now so I’m going to own up, realize that stuff doesn’t define me and secretly laugh at the rest of society for being so ignorant” way to live. I am currently the first one, trying to learn to be a balance of the two from my brilliant mother whom I have finally come to admit that I will be more than happy to turn into one day. The point I want to make is that people send themselves into debt for the “better option” every day
and although some find these debts necessary, it is possible to avoid that “greedy debt” of wanting what we can’t have. I want to explore the idea that through downsizing by way of our reasonability and ability to be aware of consequences, managing spending and debt is very possible and can become quite the healthy habit.

First I want to address the brilliant idea of cutting back. Society tells us that only people who cannot afford the best, or “poor people” must cut back. This is stupid. Millions of Americans from every social class every year spend hours upon hours cutting coupons; it’s just that nobody wants to admit it because not having money or being cheap in our society is a sign of weakness. The majority of people go into debt trying to make themselves look good to society, wanting to fit into a world that nobody can actually afford, or having standards for comfort that are so unreasonably high that it captures them in a downward spiral that’s a pretty uncomfortable living style in and of itself. Three of the largest unnecessary debt creators in America today are college tuition, improper use of credit cards, and over spending on weddings. These three things are underestimated in their power and ability to drive people into debt for the rest of their lives.

Although it seems as though a college degree would help us to avoid our inability to pay for things that we want daily or large things like weddings, we find ourselves completely broke after college, having barely started working at a job besides summer camp and already owing the government money. Great. As of the end of my sophomore year, at Cal Poly, a state school I will remind you, I will owe over $30,000 in loans and am not very happy about it. Now, at this point most people would be saying, “Well you know Charlotte, you can find grants and money to help everywhere. It’s out there and nobody ever uses it.” Yeah except that that money is saved for kids in the lower class whom it’s a miracle they even got this far. Now, I don’t want to take away from any of their success, and it really is great that America is sending more kids to college every year from a larger spectrum across the board. I am really happy for the kids who said “no” to drugs, “yes” to high school and walked away with their shiny diploma when nobody else in their class did. I really don’t want this to sound like I hate poor people, or that I’m a spoiled brat and deserve everything, but when a kid from a crappy neighborhood who was supposed to get shot before he finished high school comes out of college with no debt because of grants and scholarships and I have $33,000 hanging over my head at age nineteen, I think there is some injustice to that. No matter what type of college graduate I am, it’s not going to be easy to pay off that student loan. It makes sense to give to those who have none (yeah I could probably pay for college with very little outside resources) but by the time we graduate college and are paying back those loans, we are all on the same platform in our educational background and ability to pay for our student loans and whatever else. As an undergraduate I can get all the loan money in the world, but I can’t get anything that doesn’t charge me with interest up the wazoo from the FAFSA-which sucks.

         One way that students and families struggle to over come this confusing problem is by working while going to school.  If students are able to manage their time then this can be a very successful option. If they can’t manage their time, then this option usually hurts the student more than taking out millions of loans would. The summary, At What Cost? found that “ the average grant award per student, as a percentage of average tuition and fees at a typical public four-year institution, has dropped by nearly one-third since 1982 and the typical student now graduates with $16,928 in federal student loan debt” (Bannon). This sounds to me like sending more kids to work every year. Unfortunately this same study found that “nearly half of all full-time working students are working enough hours to hurt their academic achievement and the overall quality of their education” which means that working is probably not the best option. Along with a student working to support himself, problems of class scheduling, finding time for studying, and not wearing ones self out come into play (Bannon). Students shouldn’t have to work and the government needs to do something about equally bringing aid to anybody who is working hard in college. But I don’t really see that happening right now, what with the shiny gold state of the country’s economy and all. So how can we avoid this awful debt?

Harvard Shield

         Luckily, the average level of college debt is going down in America. This average drop is attributed to the increased attendance at public universities which then causes more money to be sent to those schools and causes an overall improvement in that state school system. These schools have a much lower tuition and because of raised attendance, the value of education they offer is increasing.

Harvard Shield

Amongst all of the financial aid frustration shines yet another beacon of hope in the university world for students. Since 2004 Harvard University has made motions to decrease the spending and debt that their undergraduate students must endure year after year. In 2006, the Harvard University Gazette reported that “beginning with the class [of 2010], parents in families with incomes of less than $60,000 will no longer be expected to contribute to the cost of their children attending Harvard. In addition, Harvard will reduce the contributions of families with incomes between $60,000 and $80,000” (Longbrake). One of the reasons Harvard began this avant-garde financial aid program was because this great education was available to such a small percentage of the population that they realized it couldn’t stay that way forever. Now, more students are encouraged to apply and a new level of diversity has developed on campus. Now hundreds of students who really deserve to be there are able to find the education they deserve.

If your family is like my family, you get really confused about paying for all of your huge bills that pop up out of nowhere at the beginning of the freshmen year of college so you just charge it to a credit card. Luckily my financial aid was given back to me in a fat check so my mom was able to pay back what she had spent on the credit card (over $3,000) very quickly. Credit cards always seem to be an easy way out. It basically consists of spending, getting, and not paying until much later. It is important to “keep in mind that every time [we] use a credit card, [we're] borrowing money” (Sharrod).  It’s like free stuff! Except that it really isn’t free stuff. It’s more expensive stuff because it builds up interest because we want what we want, whether we can afford it or not. While making the film, documentary director of Maxed Out, James D Scurlock found that “credit card fees have gone up 160% over the last five years” and that “the average American household has over $9,000 in credit card debt and spends more than $13,000 a year on interest payments.” This makes me wonder why people use credit cards on things they can’t pay back quickly. Of course something like medical bills is understandable but that flat screen T.V. ?  I’m not sure if the average American weighs convenience with the insane interest rate that can often cause that flat screen to cost twice as much as though it were never on sale. I have to laugh at this.

            The Documentary Maxed Out presents to the audience, an old woman who was forced to pay her house payments by credit card after her husband passed away. She admits, “If I read the fine print they were right, you know, I did sign my life away” (Scurlock). These are the unfortunate circumstances that thousands of American’s find themselves stuck in every year. Maxed Out also reveals that “this year more Americans will go bankrupt than will divorce, graduate from college, or get cancer.” This seemingly available “invisible” money that creates the use of credit cards is spent, in large part, by people in the lower classes who might not even have money for necessities such as food and rent. Chart 6 shows the highest increased credit card use by the two lowest income quintiles from 1989 to 2001. More and more of the lower classes are getting credit cards—credit cards that are less likely to be paid off in full on time because of their economic standings, thus more interest.

There are too many people and not enough love (and by love I mean money) to go around, which is why credit cards work so well for so many people. (Wait, I thought credit cards made me lose all my moolah in the first place? Oh! I get it! The world hates me. Fan-tastic.)

As much as I personally hate credit cards, my gracious, loving mother laughed in my face when I told her I never wanted to have to get one. She told me that I needed it to build good credit and that I would use it once I got it. Yeah, because I pretty much have the worst spending habits of all time. But using a credit card well and being responsible about it, turns out, can actually be a good thing.  In the article Steps to Building Good Credit, I found that by following a few simple guidelines, a credit score can really sell me to investors if I ever want to put all my money into something that’s really worth keeping. Apparently, “setting up revolving debt credit cards like Visa, MasterCard, American Express, Discover or any department store credit cards is important to [my] credit history because it's a self-managed account and [I] know [I] have to pay an installment at least once a month” ( Anonymous). This shows that I am responsible and meet my financial obligations. Unfortunately, the world is not a perfect place and people often spend more than they realize and are then unable to pay their credit card bill in full. This leads to minimum payments. But never fear! There is a way out of that deep dark debt-y hole. It’s called Responsibility (gasp). “Develop[ing] a debt-reduction plan, or seek[ing] help from a nonprofit credit-counseling agency, preferably one affiliated with the National Foundation for Credit Counseling” can help us get out of our nasty debt (Sharrod). If you can completely avoid the debt before you even get a card that is probably the best way to go.  “It's smart to shop for the best deal-- a card with no annual fee and a low APR (annual percentage rate)-advises Pat Martin, a financial consultant at Ryan Martin Associates in New York” (Sharrod).  A low interest rate can change our world and being able to feel good about keeping no balance on credit cards can do the same. So if it’s possible to build a bridge over that big dept-y hole, I say let’s spend healthily and avoid the trouble that isn’t required of us to deal with. Being able to balance healthy spending habits is the closest thing to getting the best of both worlds. The trick to having a credit card is responsibility. It is important while charging to “think of credit-card debt as a high-interest loan” (Sharrod). That way, we will all be more likely to keep our invisible money on our tiny shiny plastic and not put it in the “I-O-U” vault of sadness and debt-y darkness.

            As bad as credit card debt is, wedding debt also plagues a huge percentage of the population. Wedding debt causes newlyweds to be in debt for years because of one special day. As we all know the fictional character, Bridezilla, we must assume that part of the reason she is so angry all the time is due to the fact that she will have exactly $8.42

in her bank account at the end of her honeymoon to spend on food and rent for the next month and a half—not to mention all the credit card bills and thank-you notes she has to follow through on.

But it really is a special day and there can be a lot of wonderful moments. But those wonderful moments are now coming at a higher price than ever. Reported by “the Wedding Report, a research firm that compiles stats on the wedding industry, the average cost of an American wedding rose to $28,732 in 2007, as the festivities have grown increasingly elaborate and personalized” (Lee). Society has come to see the definition of a wedding as something more elaborate and intricate than ever before and couples’ standards have increased, along with their budgets, because of that. A real life example of this increased budget can bee seen in “the Virginia Beach Country Club wedding of LaToya and David Griffin [. They were] left a lifetime of memories, but the couple's $11,000 bill has yet to vanish" (Nash).  There is a lot to think about when planning a wedding and every single thin that the bride and groom have to think of or plan has hundreds of different options. What kind of dress? What color? Centerpieces, flowers or shells? Big flowers or little flowers? The options are endless. But the bank account isn’t and sometimes that’s hard to remember when the invitations that are twenty times cuter are only $100 more. No matter how big or small, if the bride and groom don’t think about the consequences it’s going to cost. As common as wedding debt is, it’s really almost that easy to avoid just by scaling back and remembering what is really important (love or a consumer economy?).

The trick, as with college debt and credit card use, is to find a healthy and moderate balance. Luckily, many couples have also found loop holes in expenses. Kelly Collins and Paul Hilcoff wedded on a Friday at Nashoba Valley Winery in Bolton, Massachusetts.  Although a Friday wedding may seem a little out of the ordinary, it’s something these two are willing to deal with when it saves them enough to buy a new refrigerator (or something like that). “All this will cost $4,500, or $1,500 less than it would on a Saturday” (Lee). They also purchased the centerpiece flowers wholesale and bought their wedding favors through a teachers catalog. “Rather than a wedding gown, Collins will wear a $200 ivory bridesmaid dress. The couple made their own invitations with $75 worth of materials…The final bill: $9,000” (Lee). These two were able to have a successful wedding and they were able to spend wise by finding alternatives to normal wedding gifts like a teachers catalogue. It is possible to scale back and still have the things that everyone wants.

My mother, Judy Cashell, speaks of her wedding expenses from 1987, “Some of it we charged to credit cards. Well, we didn’t own a home so it was like buying a house. People told us not to spend so much money on the wedding. The rings were more expensive but your dad doesn’t regret it. We tried to cut back here and there.” There are many other ways to cut back on the big day. Judy also looked for discounts when it came to the number of guests by inviting only their good friends and not taking a limo from the wedding to the reception (the buildings were across the street). Another bride used her family’s heirloom as a ring and was able to find catering from a local farmer so everything was seasonal and there was no middleman (Lee). Bottom line, if a cheap nice wedding is desired, a couple can cut corners and leave out extreme extravagances to attain it. If a giant production is what the couple wants, that can happen too. Couples just need to keep in mind what they are getting themselves into and that they will eventually be paying everything back.

Debt has come to rule peoples lives. Through college expenses, credit cards or weddings, people find themselves trapped in a sometimes life-long commitment that they signed up for without reading the fine print. But cutting back and only buying what we need is possible, if we are determined enough.  I’ll still tell my mom that I don’t want a credit card until I have to get one, but the fact is that the greater America is running on credit and debt. It is important that we learn healthy spending habits. Whether it is finding a cheaper university that offers just as good an education, paying our credit card bill on time, or going for the simpler wedding, America ca  improve its spending habits and become a place to grow a healthy strong economy-- because an economy on credit and debt isn’t going to last us very long. So maybe that Cinderella ball gown will only get to be the size of the moon, and those cars will be simplified to singular car, although still nice. We can still be happy with what we have just because it isn’t as good as what Wilson has over the fence. Healthy spending habits will last a lifetime, it is up to us to get them going as early on in life as possible so that one day we are not the ones losing everything we had because of one tiny piece of plastic.

Works Cited

Anonymous. "Steps To Building Good Credit." Jet. 05 Jul 2004. 46. eLibrary.        Proquest CSA. Cal Poly San Luis Obispo. 30 May 2008.            .

Bannon, Ellynne and Tracey King. “At What Cost?”. April 2002. 8 June. 2008.             .

Cashell, Judy. Personal interview. 1 June. 2008.

Jeninne Lee-St. John. "To Love, Honor and Save Money." Time. 02 Jun 2008. eLibrary.                Proquest CSA. San Luis Obispo. 30 May 2008.         .

Longbrake, John. “Harvard Expands Financial Aid for low- and middle-income     Families.” Harvard University Gazette 30. Mar. 2006. 7 June. 2007 

< www.hno.harvard.edu/gazette/daily/2006/03/30-finaid.html >.

Maxed Out. Dir. James D. Scurlock. DVD Magnolia Home Entertainment, 2007.

Nash, Sheryl Nance. "GETTING BACK ON TRACK." Black Enterprise 38.7 (Feb.                      2008): 80-81. Academic Search Elite. EBSCO. [Library name], [City], [State        abbreviation]. 29 May 2008             .

Sherrod, Lena. "5 WAYS TO GET CREDIT-CARD SAVVY." Essence. 01 Sep 2004.     122. eLibrary. Proquest CSA. Cal Poly San Luis Obispo. 30 May 2008.         .

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