Enslaved by Consumption author, Dominico Johnston, sits down and discusses his newly released work. Engage your mind and your pocket book.
Available at Amazon.com in late July 2015…
Enslaved by Consumption – How frivolous consumption fueled by debt is leading to your voluntary enslavement
Whether we are young or old, with debt or without debt, each of us has the power to guide our financial futures toward the goals we seek to achieve. To sail toward and reach our financial goals, we must have discipline.
Today’s personal finance topics are often composed of recipes. Financial advisors are paid to insist you save $X per year and invest in the market in order for you to achieve the life goals you have set before yourself. This advice is well and good, but only scratches the surface of the introspection that needs to be had amongst the majority of society. It is not that we lack the knowledge of what needs to be saved; the problem is we lack the will to save, the will to defer consumption, the will to say no to frivolous debt.
To cure our affliction we must understand the root causes of what is enabling detrimental patterns of behavior to shape and control our lives. To break the chains of enslavement, it is necessary for us to know how we arrived at this point in history, what is causing the problem to perpetuate itself and how we each can take action to reverse its progression. Breaking the chains of frivolous consumption must be done one-by-one, to not only create a better future for ourselves, but a better future for our entire society.
Enslaved by Consumption goes beyond the standard personal finance playbook and explores the underlying streams of thought that are causing us to compromise our future and voluntarily enslave ourselves. Whether you are looking for financial advice or are seeking to understand what is driving our nation of debtors, Enslaved by Consumption will take you on a journey that will lead to a deeper introspection and an understanding of the financial landscape that surrounds us all. It’s time you invest in yourself.
Earlier this week the sad news broke of actor Robin William’s suicide. Since the announcement of his death, various information has been released to explain what might have caused his depression to spiral out of control. What is very apparent to me when reading these stories is the personal finance subtext that is woven into many of the explanations to his depressed state.
Mr. William’s, at the end of his life, had become wholly enslaved by consumption. So enslaved that he came to the point where the only hope he saw was to exit this life through suicide. This is an extreme example of one losing control of their finances through their own will. As with examples, it’s often the extreme ones that are able to drive the moral home.
It seems impossible that an A-list actor and successful comedian could arrive at the point of bankruptcy by the age of 63. This is what Mr. Williams was facing. Why? It was not for the lack of money earned. He had a very successful acting and comedy career, which put him higher than 98%-99% of the entire population in terms of lifetime earnings. His issue came from his inability to control his spending habits.
As a result of out of control spending, he found himself in a dubious situation. His need for money led him to return to roles that apparently did not help his mental state. It is reported that he was in the process of forcing himself to take the lead role in the sequel of Mrs. Doubtfire. This role is reported to be one that he dreaded having to take because it would have a negative impact on his mental condition. Yet, it would help him stave off bankruptcy.
At the end of Mr. William’s life, he had enslaved himself to his master. His master was consumption and he found that the funds used to fuel consumption did not answer to him; they owned him. This led to the escalation of his depressed state and it arrived at a point of inflection where he could not continue life and chose to end it.
What is living? Is it consuming to the point where debtors bring you to the knees of bankruptcy? Is it having more and more stuff? For Mr. Williams the laughs and jokes were not enough and whatever was missing in his life was ultimately not filled by his consumption. In the end, the consumption didn’t close the chasm, but tore it wide open.
I’m currently working on a soon to be released book titled, Enslaved by Consumption. Look for its release toward the end of 2014.
In the latest sign Americans are increasingly comfortable taking on more debt, auto buyers borrowed a record amount in the first quarter with the average monthly payment climbing to an all-time high of $474.
Not only that, buyers also continued to spread payments out over a longer period of time, with 24.8 percent of auto loans now coming with payment terms between six and seven years according to a new report from Experian Automotive.
Ten years ago, it was just four years and two months.
We’re living high on the debt hog.
I encourage you to read the New York Times piece about a recently published book titled, Paying for the Party by Elizabeth Armstrong and Laura Hamilton.
The study is a great example of how the misuse of debt can be extremely detrimental. It’s even more concerning because this is yet another cycle in play that drags young adults down and hinders their ability to thrive.
For students that are not from fiscally well-off families, keeping up with the college Jones’ can be a disaster. College is expensive enough, but when you add the frat/sorority fees, spring break and other trips, bar tabs and other forms of entertainment that go along with running with the ‘in crowd’, the results can be financially disastrous.
Using debt without a clear and sound directive can be a poison to any person or business. When it happens to a young adult straight out of high school, it’s a sure fire way to create disillusionment and stunt ones full potential to thrive in the ‘real world’.
Over at The Economic Collapse Blog, an entry caught my eye. Below are 17 recent news stories that are aren’t the rosiest. Actually, they are pretty shocking in a bad way.
These facts speak to the contention that many observers have regarding the patchiness of this economic recovery. Many areas of the country that were hit hard by the recession aren’t necessarily falling further, but are not bouncing back. It’s sort of like a fighter that has been getting punched a lot. Now that they aren’t getting hit over and over they feel a heck of a lot better than when they were getting smashed, yet they’re not in a state where they’re playing offense.
Here’s the list…prepare to be blown away…
#1 The homeownership rate in the United States has dropped to the lowest level in 19 years.
#2 Consumer spending for durable goods has dropped by 3.23 percent since November. This is a clear sign that an economic slowdown is ahead.
#3 Major retailers are closing stores at the fastest pace that we have seen since the collapse of Lehman Brothers.
#4 According to the Bureau of Labor Statistics, 20 percent of all families in the United States do not have a single member that is employed. That means that one out of every five families in the entire country is completely unemployed.
#5 There are 1.3 million fewer jobs in the U.S. economy than when the last recession began in December 2007. Meanwhile, our population has continued to grow steadily since that time.
#6 According to a new report from the National Employment Law Project, the quality of the jobs that have been “created” since the end of the last recession does not match the quality of the jobs lost during the last recession…
- Lower-wage industries constituted 22 percent of recession losses, but 44 percent of recovery growth.
- Mid-wage industries constituted 37 percent of recession losses, but only 26 percent of recovery growth.
- Higher-wage industries constituted 41 percent of recession losses, and 30 percent of recovery growth.
#7 After adjusting for inflation, men who work full-time in America today make less money than men who worked full-time in America 40 years ago.
#8 It is hard to believe, but 62 percent of all Americans make $20 or less an hour at this point.
#9 Nine of the top ten occupations in the U.S. pay an average wage of less than $35,000 a year.
#10 The middle class in Canada now makes more money than the middle class in the United States does.
#11 According to one recent study, 40 percent of all Americans could not come up with $2000 right now even if there was a major emergency.
#12 Less than one out of every four Americans has enough money put away to cover six months of expenses if there was a job loss or major emergency.
#13 An astounding 56 percent of all Americans have subprime credit in 2014.
#14 As I wrote about the other day, there are now 49 million Americans that are dealing with food insecurity.
#15 Ten years ago, the number of women in the U.S. that had jobs outnumbered the number of women in the U.S. on food stamps by more than a 2 to 1 margin. But now the number of women in the U.S. on food stamps actually exceeds the number of women that have jobs.
#16 69 percent of the federal budget is spent either on entitlements or on welfare programs.
#17 The number of Americans receiving benefits from the federal government each month exceeds the number of full-time workers in the private sector by more than 60 million.
The unquenchable quest for material wealth and perceived status more often than not creates an abysmal situation. The erosion or negation of savings and the reliance on debt to sustain spending habits creates a cycle where planning for the future becomes impossible and the fixation on getting by day-to-day is heightened. Such situations are not only bad for the individuals and families afflicted, but also for society as a whole.
To understand the dilemma we face, it is important to understand that two warring philosophies are in play. One philosophy perceives the physical demonstration of material wealth through things (cars, homes, clothing, vacations, other recreational toys…etc.) as the primary indicator as whether one is wealthy. The other philosophy perceives material and non-material investments and resources as the primary indicator of wealth. The former view has overtaken much of society as truth. At the base of this philosophy is that the greater purchasing power one can exhibit, the greater wealth one must hold.
Is purchasing power a reasonable measure of one’s wealth? The answer is yes and no. If the world was ending in a month and everyone had equal incentive to leverage their ability to consume goods and services to the highest degree, then purchasing power would be a great way to differentiate degrees of wealth from one another. Until this end of the world scenario is upon us, the ability to know the finances of a person or family to such a degree as to understand how much fiscal strain a purchase has caused is a pipe dream. Purchasing power would be a great measure, but it is only a guessing game once you get outside of your own finances.
The ultimate problem that comes from fixating on purchasing power is analogous to being in love with a house that has a shoddy foundation. At your fiscal base, do you have the foundation to sustain what you currently have and what you want in the future? This question is paramount, yet the fixation on purchasing completely bypasses the thought of sustainability and growth.
Constantly spending all or most of your disposable income creates a situation of dependency. Using debt to increase your ability to spend creates a situation of servitude. Financial freedom becomes a filthy concept in either situation because it is in direct opposition to the idea of purchasing power as the measure of wealth. It is comparable to the way selflessness and vanity seem to stand juxtaposed to one another.
The alternative to purchasing power as a wealth indicator comes from investments. Investments are at the base of lasting systems that generate wealth. In this context, investments mean human capital gained through education and experience, savings and equities, land and other items that appreciate overtime and can be easily sold. This capital doesn’t eat, but feeds its host whether through regular wages, dividends, rent income, or other means. In contrast to the former philosophy, this personal finance system is geared towards sustainability and growth.
Each of us has a choice in life. We can either strive to be fiscally independent or dependent. Our philosophy has a lot to say in shaping the path we choose. Collectively, the path we choose will have ramifications. More dependency, whether on public or private streams of support, means something must be given up. What’s the opportunity cost? If we must depend more on the public dole or on private loans, then the capital that is used to fund such initiatives cannot be used for the thousand other possibilities that exist. The greater the dependency, the greater the ultimate drag created on the individuals life, family and cumulatively society, as well.
We don’t live in a vacuum. Bad personal financial choices are almost never isolated events, as was all too apparent in the last decade’s economic collapse. If all we can do is focus on how much we can spend given today’s amount of income we earn, then we’re doomed to be enslaved by our consumption. If we can see beyond this quick-fix high, then we will mature beyond our current state, negate a number of preventable problems in our future, and open more doors of opportunity in our own lives than our prior myopic self could image.
You may be working on various ways to tackle your financial obligations and shore up your credit worthiness. Though you have several choices to make in order to become debt free, yet you need to smarten up your plan of attack to take on those troublesome debts effortlessly. For that reason, it is important that your approach to debt repayment is practical and an effective one.
Are you aware of your credit?
Prior to creating a debt repayment plan, it is important that you get a stronghold of your credit reports and credit scores. These are what will make or break your efforts to become debt free. Here some of the justifications for you that establish the importance of tracking your credit:
- A good head-start – According to the debt experts, most of the debtors like you have misconceptions regarding the total amount of outstanding balance owed by them. However, if you want to become debt free, then it is best to list all the details of your loans as well as respective creditors in an organized manner.In this case, your credit report will come in handy since they’ll contain all such financial information that you may require to create a smart debt repayment plan. For instance, you can locate any collection account that you’ve forgotten or find out the recently added outstanding balances that you owe through your credit reports (it can be from Experian, TransUnion or Equifax).
- Better credit awareness – Though you may believe to have a good credit rating after making regular monthly payments, yet the reality might be something very different. On the flipside, the amount of outstanding balance you owe may be the cause of a slumped credit score. However, it is difficult for any of you to decipher and analyze the actual financial condition through a credit report.Simply put, your credit report will only provide you with information related to all the credit accounts that you have, their balances and your payment history. Additionally, you can easily make out the impact of your debts on your credit rating through your credit scores. So, the moment your outstanding credit card balances approaches the set credit limit, from then on your credit score will start to suffer.
- Improved credit report – Usually, it takes a considerable amount of your time and commitment to repay all that you’ve amassed over the past few months or years. Just remember you aren’t going for a sprint, rather debt repayment is a marathon and so, you’ll have to be strong in your resolution to become debt free and agile with your budget to cut down bad expenses as well as build up an emergency fund.You must find your own sources of inspiration and stick with the repayment plan till you have no debts to repay. Another important thing that you shouldn’t forget is to monitor your credit report and this applies even if there is no financial obligation for you to take care of. This is one of the best ways to keep yourself motivated and manage your debts with ease.
Once you have become disciplined and have been paying off your dues on time, all these activities will be reported to the credit bureaus and that’ll show on your credit reports. As a result of a widening gap between credit limits and your outstanding balances, there is are high chances that your credit score will also improve. However, if you had opted to settle your loans or file for bankruptcy, then keeping a tab on your score can at least assist you in monitoring your development as you put in all the efforts to rebuild your credit and ultimately your life.
In its most basic term, a debt matures only when it becomes due. However, depending upon the financial condition of a company, loan terms can be modified or structured in such a way so that they have a different maturity period. This process of debt management is known as debt maturity structure.
Modes of structuring debt maturity
Here are few ways that a company can structure their debt obligations in order to stay current with their loan repayments:
- Trade-Offs – According to some financial experts, long-term maturing debts do not enjoy much importance as compared to debts with shorter maturity period. In other words, shorter-maturing debts are superior to long-term ones. Due to this fact, a lot of lenders prefer to work with those companies that have shorter maturity structure of debt. This happens, even if longer-term maturity debts cost higher in terms of interest to the borrowers.
- Ladder – Multiple notes of varying maturity period listed in the form of a structure is called a ladder. These loans can be arranged in accordance to their increasing maturity deadline. As a result of this mode of debt maturity, companies can lessen their burden of making the loan repayments all at the same time. Actually what happens in this regard is that, the total loan balance doesn’t become due straight away.
Major factors of debt maturity structure
It is the responsibility of the financial managers to keep their company’s credit account current. For this reason, they continuously pursue the process of debt maturity structure to help themselves meet their company’s financial liabilities with ease. However, no financial manager of a company can afford to work independently on this subject. Instead, these professionals manage their company’s finances with the help of accountants and corporate treasurers.
Here are some of the factors that financial managers have to consider while creating the maturity structure of their company’s debts:
- Regulatory compliance – One amongst all the important factors that are crucial in case of debt maturity structure is rules and regulations related to them. In this case, financial managers will have to comply with the law of the land governing such deals. This is all the more an imperative issue for industries that command stringent government control. Suppose, a financial institution must follow all the rules that speaks of the necessary amounts of regulatory capital while contemplating long-term debts over shorter-term loans.So, it’s the duty of the institution to borrow loans without hampering its capital ratio needs. Alternatively, an insurance provider should opt for such a debt maturity structure that has been done in accordance to the solvency constraints set forth by the National Association of Insurance Commissioners (NAIC).
- Corporate solvency – Corporate solvency refers to the amount of money a commercial organization is allowed to stack up and whether or not the saved amount is substantial enough to fuel its growth or improve its value proposition. Though cash flow analysis is said to provide an overview of an organization’s financial solidarity, yet solvency evaluation is a much better way to understand the company’s financial health as well as its strategic growth in a given time-period.Take for instance, two types of solvency ratios – current ratio and working capital. These ratios help the financial managers to determine whether or not there is enough cash to repay short-term loans, get back receivables or put up inventories for sale.
In addition to that, financial managers keep a close watch on the credit market factors and evaluate them prior to their selection of a definite debt maturity structure. Actually, it’s a categorization of corporate financial liabilities either in terms of maturity or expiration deadline.
In my spare time, I sometimes hop around different personal finance and other related blogs on the Internet. It’s one subject that I enjoy writing and reading about. Today, for whatever reason, I came across a few blog entries that discussed cars as an extension of person’s personality. Here are a few thoughts that I felt compelled to write.
(Note – Regular visitors might notice a pattern. The pattern is that I can get fired up about the topic of cars. Why does this occur? The primary reason is that they one of the biggest items people ‘splurge’ on. By splurge I mean go further into debt for no practical reason. They also are costly in that no one pays only 1 large lump sum of money for a car. Insurance, registration, routine maintenance and fuel are all regular expenses…I didn’t mention debt payments, which is part of the list for most car buyers.)
A person that consciously thinks that a car (by car I mean automobile) is an extension of his/her personality must feel willfully inadequate. A car is a chunk of metal, or maybe fiberglass, affixed to four wheels with a few seats, which is ultimately powered by an engine. A car is a tool that is made to be purposeful and useful.
Now, I understand wanting to drive and be seen in a ‘nice’ car. This is no different from wanting to be seen in nice clothes. Yet, most people would probably agree that you can dress in a very fashionable way by going to Kohl’s or JC Penny’s. You don’t have to depend on Nordstrom’s. Why does this not apply to cars? For example, why do people side with a BMW 3 series when it’s a much better financial decision to go with a mid-size American or Asia sedan? Why do people buy quasi monster trucks rather than a regular truck or another more reasonable option?
Feelings of inadequacy can cause us to do some pretty interesting things. Unfortunately, most of those ‘interesting things’ equate to detrimental acts. Buying a car in an effort to demonstrate ones financial status, when the act actually strains ones finances, is irrational. Buying a vehicle that makes you feel macho or sexy is ultimately a distraction from a personal issue that goes beyond the realm of transportation.
Do not fall into the delusional trap that your car is an extension of your personality. Have more self-worth than to depend on a vehicle to prove to the world that you’re tough, sexy, or wealthy.