Magic Measuring Stick

In a theoretical sense...

What if there was a magic measuring stick that could tell us the percentage of people in the US who were financially irresponsible? The stick could differentiate between people who work hard at low paying jobs who struggle with moderate expenses and those who are at medium paying jobs who entertain with high expenses they cannot sustain. The stick could measure the amount of abuse of credit an individual is incurring for by being generally irresponsible or just generally gullible. The stick could categorize people into groups, like: (1) Responsible, (2) Struggling (3) Irresponsible and (4) Wildly Irresponsible.

….then, what if the stick measured that 50% of the people in the US were Irresponsible and another 20% were Wildly Irresponsible, in terms of their use of credit and living within their means? What if the stick measured another 20% of people who were struggling? What kind of reform would you legislate to deal with the struggling and not overly boost the wildly irresponsible? What percentage of the irresponsible do you help? How do you make new rules or enforce old rules when the majority of the people in the nation will neither understand nor follow them? Even if the above percentages are way off of the mark, the problem remains and the numbers are still staggering. The reality is that there is no stick, but we probably don’t actually need one to measure the size of our financial ineptitude.

What constitutes irresponsibility? In my opinion, the following could be considered financially irresponsible:

1) Maintaining a balance on a credit card month to month for no good reason. Zero is the only correct balance to maintain on a credit card.

2) Cashing out equity in a home to purchase unessential items or making unessential home improvements. In the event you must sell the home or make room for an additional relative, that is another story. This isn’t a piece on being a responsible family member.

3) Going to college or university with no financial backing, i.e. no cash and no scholarship. College is NOT for everyone. There should be no shame in becoming a tradesman or performing a job that does not require college.

4) Buying an expensive car because you think you deserve it, i.e. ignoring what you have “earned”. We may never break the unfortunate egos that exist in the world to correct this one.

5) Juggling multiple loans that require consolidation due to high interest rates. How do people get into these messes?

6) Not knowing, at least at a glance, monthly household income and monthly household expenses. Guessing doesn’t count. Your income plus your spouses income plus interest on savings minus everything else that requires your involvement with money.

7) Over drawing a checking account by accident. You have to make an effort to not pay attention to this.

8) Not knowing the cheapest way of accessing/using your savings or checking account monies, i.e. ATM, writing a check, wire transfer, VISA, etc. If it costs you 2 dollars to get money from an ATM, get cash from the teller. Convenience equals laziness equals wasted money.

9) Spending more than you take in on a regular unchecked basis. This is probably the most common fog people are in.

10) Not planning for purchases. Planning to purchase items seems an irrelevant concept to most people. People seem either flush with money and can buy at their whim, or are strapped and buying nothing. How about a plan, people?

How about wild irresponsibility?

1) Paying a credit card or other debt with additional credit. You should have your credit cards taken away and never get another one.

2) Engaging in a mortgage with no money down or in terms that are affected by the changing value of the supporting asset, i.e. equity increase through property value increase. This is so absurd, that anyone in the room when the deal was signed should be checked for a pulse.

3) Not saving money as a part of normal life. No one is talking about this. Why not?

4) Purchasing something large that you cannot afford to buy. Do these people even care whether or not they understand or can spell the word “afford”? Probably not.

5) Not understanding that credit is not your money. I was thinking of making this a trait of the irresponsible. However, the simple knowledge of this concept could be the back stop that the wildly irresponsible truly need. Thou shall not kill and thou shall not spend money that doesn’t belong to you. Just because it isn’t considered stealing in the short term…

People, who are struggling due to an unfortunate circumstance not caused by any of the above, sometimes have to engage in unwanted credit or poor credit use to sustain their lives. I would put these people in the struggling category. Around the office, these people are considered “credit worthy” people who are struggling. This seems to me like a ridiculous way of describing someone who is responsible but struggling. Credit worthy is a worthless designation in my opinion. “Down on their luck”, the old adage, also leaves something to be desired. How about calling these people “victims of economic misfortune”? The economics could be their own or that of the place they live in.

So…the magic stick divides the types of fools up. What next? How about a rap across the knuckles of the irresponsible?