After publishing, Financial Independence: Maybe You Don't Want It Bad Enough, most of you agreed that paying back your debt is the right thing to do. The post has some tough love because it doesn't support those who just blame the system or someone else for their problems. We should own up to our financial mistakes. It's much better to find solutions and highlight effective examples to show people the way.
After all, if you want something bad enough, you'll do everything possible to make it happen. If not, then be at peace with your circumstances. And let other people who have what you want to also be at peace. Certainly don't try and shame them for their efforts. And try not to let other people pay for your mistakes.
As someone who really enjoys hearing lots of different perspectives, I want to address a comment by an ex-Financial Samurai reader Mrs. Whipple. She says I lack compassion for putting the onus on the debtor to repay. Then, I'll share eight solutions on how to get everyone but you to pay for your debt and financial mistakes.
Let's do this!
Overcoming A Cold Heart
Mrs Whipple writes,
Why on earth are student loans the only kind of loans subsidized by laws that make them impossible to default on? Why aren’t the banks required to face the consequences of their stupid decisions to loan money to students who aren’t good candidates for loans? Why are they allowed to reap all the reward without having to face any of the risk? It’s absolute madness.
The idiocy is in the society that sells the dream of a college education to kids who can’t afford it, and the price we pay is a whole generation of graduates who are left digging themselves out of a hole instead of building wealth in the first decade or two of their work life and a slumping economy as all of our extra dollars are poured down the mouths of the banks who gave out stupid loans.
The system is set up to make us take financial mistakes. You prattle about hustle and side gigs as though everyone in America should be willing to work eighty hours a week to get out of a negative net worth, as though it’s normal and not at all a system problem of inequity that’s been getting worse and worse as time goes on. You’re wrong.
I’m a high earner, self-employed, frugal, as bootstrappy as you can get, and still it makes me sick to read stuff like this that puts the blame everywhere but on the people in power that let things get this bad.
It’s not the seventeen year old kid to blame who doesn't know any better about going to college.
It's not the kids' parents to blame for wanting their kids to go to the best and priciest schools.
It’s not the twenty-two year old graduate who sees the reality of crushing debt and is grasping at straws to get out from under.
It’s not the millennial who wants an iPhone (because forgoing an iPhone will solve the 50k loan debt, right?).
It's not the person's fault for buying a nice car and getting tricked into taking out a loan. We all deserve to drive a safe vehicle.
And it's certainly not a young couple's fault for buying a house with the little they have down and then seeing the economy turn south.
Push frugality and hustle all you want, but don’t make the mistake of blaming people for problems that are so overwhelming and systemic that they have erased the wealth building capabilities of a generation. They are not to blame.
Banks and cutthroat corporations who constantly cut benefits are to blame.
And it’s people like you who publish this yay-boostraps propaganda that ignores the real problem in favor of placing blame squarely on the people who have been hurt the most by the systemic issues in banking and education. Because if we can blame the students, we don’t have to face the real issues that are staring us right in the face, and we sure as hell don’t have to stand up to anyone in power and tell them that they’re doing things wrong.
I hope you find compassion within your lifetime, but you’ve lost a reader today.
Find Solutions To Your Problems And Financial Mistakes
After spending 10 years writing over 2,000 posts focused on helping people think about and resolve financial issues, it's tough to hear that I lack compassion. I believe in finding solutions to problems, especially financial mistakes no matter how difficult a pill the solutions are to swallow.
Let's forget about all the free articles I've written, the time I spend responding to comments and e-mails, my eBook where all proceeds go towards helping an organization that tries to keep our youth off the streets, the six figures in income taxes I've paid each year for over a decade, and the private time and money I spend at an organization I never talk about because who cares.
I fully accept that I am to blame for other people's problems. I was put on this Earth to try and fix financial mistakes. Despite tirelessly writing posts advising against spending so much money on a depreciating college degree, I'm not doing a good enough job getting through to the American people. Here are some posts to review:
Public University Or Private University? Depends On Your Fear And Guilt Tolerance
Would You Accept $1 Million To Go To Public School Over Private School?
What If You Go To Harvard And End Up A Nobody?
I owe it to you to continue working tirelessly to help you make better financial decisions. But just in case I can no longer keep writing, I want to focus on how we can get other people to pay for our financial mistakes because we've all made them.
Below are eight steps you can take right now to lessen your financial mistakes and create a larger safety net.
How To Get Other People To Pay For Your Financial Mistakes
1) Live in a non-recourse state.
Creating a “heads I win, tails you lose” situation is always ideal when it comes to creating wealth. If you plan on buying a place, then I highly suggest living in one of the 12 non-recourse states: Alaska, Arizona, California, Connecticut, Idaho, Minnesota, North Carolina, North Dakota, Oregon, Texas, Utah, and Washington. If you foreclose or short-sale, the government can't come after your other assets. How nice of these states to pay for your financial mistakes.
For example, let's say the bank lent you $500,000 when your house was worth $600,000. When the house's value drops to $300,000, you decide to stick it to the bank by no longer paying your mortgage. Even if you have $1M in stocks, the bank can't recover the $200,000 it's losing after you've handed them the keys. Just be wary of the taxes you may have to pay on the debt forgiveness.
After one too many customer foreclosures, the banks will raise their lending rates, lower their deposit rates, and raise their standards for who can borrow. Only the best creditors will be able to borrow money. But you don't care because you got the debt forgiveness you wanted. Screw your neighbors like me who kept paying their mortgage through the downturn. And screw future borrowers who have to pay higher interest rates because of you. If the law says there's no recourse, then you have every right to break your promise if it suits you.
2) Strategize on how to get your parents to pay.
The Baby Boomer generation is the wealthiest generation ever because they've been able to save and invest the longest. With the stock market and real estate market close to record highs, Baby Boomers are the largest practitioners of Stealth Wealth. Your parents are far wealthier than they let on, which is why you need to strategize on how to extract your inheritance from them before they die so you can live a better life.
Perhaps you realized too late that paying $150,000 in tuition for a Fine Arts degree wasn't the smartest choice because companies like Fivver and Upwork have drastically lowered the cost and access to functional art.
If your parents allowed you to borrow/spend that much for an Art degree in the first place, then it is HIGHLY likely they also have the money to bail you out. They had to co-sign your loan, after all.
I know so many Stealth Wealth parents who disapprove of their kids' career path. “Go into engineering or computer science!” they want to say. But because they just want them to be happy, they let them make expensive choices for the off chance they become self-sufficient. Deep down they know their kids will fail. But like the IMF, they are ready and able to solve all their kids' financial mistakes once they've learned their lesson.
See: How To Get Your Parents To Pay For Everything As An Adult Child
3) Do public service.
The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on your Direct Loans after you make 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.
Employment with the following types of organizations qualify for PSLF:
- Government organizations at any level (federal, state, local, or tribal)
- Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code
- Other types of not-for-profit organizations that provide certain types of qualifying public services
- Serving in a full-time AmeriCorps or Peace Corps position also counts as qualifying employment for the PSLF Program.
The drawback with the PSLF is that you've actually got to focus on service, instead of how to make money for yourself. Public service helps rid you of any entitlement mentality you might have and enables you to appreciate the government more.
4) Marry rich.
You can work your way to the top, or you can marry your way to the top. Tom Branson was a chauffeur, and now he's part of the wealthy Crawley family in Downton Abbey.
To marry rich, you need to work on your physical fitness, speech, vocabulary, mannerism, personality, and knowledge. Because rich people tend to have more choices in a spouse, it's imperative to focus on your appearance. Look at all the hideous wealthy men out there with attractive women and vice versa. Competition is stiff.
Once you've worked on your looks, read autobiographies by wealthy people in order to understand how they think. Listen to podcasts about politics, economics, and business. Thoroughly understand both sides of every story. Finally, hang out where rich people hang out. Finding a wealthy spouse is a numbers game. If you can marry one, they'll pay off your debt in no time.
For more insight, please read: How To Get A Rich Person To Be Your Spouse
5) Encourage your spouse to work more.
If you don't snag a rich spouse, it's imperative that you encourage your spouse to work more for the both of you. After all, the more your spouse makes, the more you make. Be supportive, loving, doting. Do the chores around the house. Give massages. Tell him/her how awesome he/she is every day. You are your spouse's biggest cheerleader.
I know one early retirement blogger who no longer has to work a job he hated largely because he's been so supportive of his wife's work. He's been able to convince her to work 10 more years as he lives a life of freedom. I know another fellow who grew up dirt poor, but married the daughter of a tech multi-billionaire and lives in a $50M house here in San Francisco. Once you experience a nice lifestyle, it's difficult to go back. Support your life partner to the maximum!
For more information, please read: How To Get Your Spouse To Work Longer So You Can Retire Earlier.
6) Start a GoFundMe campaign to fund your financial mistakes.
More than 110,000 educational GoFundMe campaigns are created each year, raising a total of over $15 million. Follow the trend. In the past, we had to painstakingly call or ask people in person for donations. How difficult and embarrassing.
Now, thanks to the internet, we can share our story, post a picture, and make it easy for people to give. Asking for money is another reason you should start your website. I can easily put a Paypal donation button on this site if I want. But I don't expect many of you to pay me for the hours I spend writing each post. Will you?
After the Powerball jackpot rose to $1.6 billion one year, a woman by the name of Cinnamon and her family claimed to have spent their entire savings on Powerball tickets. She threw up this GoFundMe page below asking for $100,000 to replenish her coffers so she could try the lottery again.
7) Vote on a president who will aggressively redistribute wealth.
When it's election time, it's important to vote on a candidate who will give you the most amount of freebies possible. The top 0.1% income earners truly have gotten egregiously wealthy at the expense of others.
It makes no sense for there to be billionaires while hundreds or thousands of people in the billionaire's own city are starving and living homeless. Nobody needs that much wealth. And to hoard so much wealth while there is so much suffering locally is unfathomable.
For redistributing wealth, look at candidates like Elizabeth Warren and Bernie Sanders. I believe in education. And they want to make all college education free and forgive debt for those making under $100,000. The only thing is that education is already free thanks to the internet.
There's nothing more empowering than being able to vote for a law that takes money away from one minority group and unconditionally redistributes the money into your own hands. The majority always rules. Therefore, during a revolution, it's best to be part of the majority!
See: The Average Net Worth Of Presidential Candidates.
8) Start a revolution to fix your financial mistakes.
As of 2021, there are over 614 billionaires in America alone. To live a good life, nobody requires so much wealth, especially when there are people starving on the streets. Some six million people between the ages of 25 and 64 are still out of work, despite a raging bull market. I'm not sure how billionaires can live with themselves without doing everything possible to give back.
There are over 320 million of us non-billionaires in America. Therefore, we outnumber billionaires +500,000-to-1. If we formed 600 armies of 500,000+ people and stormed each billionaire's mansion, we could hold the billionaire and his/her family hostage and demand that they return the money to the people of this great nation! We would will be more lenient with those who signed Warren Buffet's giving pledge to donate at least half away to charity. Bill Gates would also get a free pass for all he's done to help eradicate disease and poverty.
I can volunteer to be in charge of commandeering the homes of San Francisco's billionaires if you believe I'm suitable for the job. I would need some trusted advisors who have expertise in reconnaissance, hand-to-hand combat, and strategic warfare. Bonus points for those of you who've seen the movie, The Purge, and know how to smoke people out of their homes. With over a million people reading this site each month, surely I could recruit a General from each major city to lead the revolution!
Related: A Sit Down With Warren Buffett And Bill Gates
Check out: Billionaires: They're Just Like Us
Take Action: Virtue Signaling Doesn't Help Anybody
Doing work that's “beneath” you based on the education you've received or your family status is embarrassing. I wrote about it in Spoiled Or Clueless? Try Working A Minimum Wage Job As An Adult. But sometimes, you've got to swallow your pride and do whatever it takes to survive.
It's also understandable that working more than the arbitrary 40 hour workweek can be bad for your health. A lot of my physical ailments went away after I left the workforce in 2012 while consistently working 60-80 hours a week for 13 years. But sometimes, you've got to recognize that many who are blazing ahead are actually putting in way more hours than standard.
We all know life is not fair. Some people are born rich and get to go to private school fully paid for by their parents. I could never afford to attend commenter Mrs Whipple's alma-mater, Harvey Mudd College and pay the current $55,000 a year in tuition (~$75,000 total cost a year). Nor was I smart enough to get any grants from a school as good as hers.
I made $4.00 an hour working at McDonald's and my parents were regular government employees. So I made a choice to go to The College of William & Mary, a state school instead of go to an expensive private university.
Is it so wrong to try and hustle with gig economy work to just try and catch up to people who were born wealthy? I don't think so. I think it's an honor to do the best we can with what we've got. After all, this is America, baby!
Related: Creating Child Millionaires Is No Longer Necessary To Pay For Education
Fix Your Financial Mistakes With Personal Capital
Wealth-building recommendation: Control your spending, work on multiple income streams, have a financial plan, and start tracking your net worth with Personal Capital so you know where all your money is going. You can analyze your investment portfolios for excessive fees and also give yourself a real retirement checkup all for free. That which you can measure, you can improve.
Complaining doesn't do anybody any good. If you don't want to start a revolution, then simply follow the seven other steps in my post to help improve your financial situation. And if you don't want to follow those seven steps, please just pay back what you owe.
Updated for 2021 and beyond.
117 thoughts on “How To Get Everybody But Yourself To Pay For Your Financial Mistakes”
The funniest and most entertaining post I’ve read in a while. Love it Sam. Keep up all the great writing!
I wish I was as privileged and wealthy as Mrs Whipple to attend Harvey Mudd College at $55,000 a year in tuition and $75,000 a year all in.
Then I could virtue signal all day long why rich people like herself and institutions should pay, while not doing anything about it.
Why is it always privileged white women who are the loudest virtue signalers?
“We must all suffer from one of two pains: the pain of discipline or the pain of regret. The difference is discipline weighs ounces while regret weighs tons.” – Jim Rohn.
and my own 2cents: The cost of a kind word is less than a breath of air, the cost of silence is only that of perception, and the cost of anger multiplies by the second.
The thoughts and ideas posted are priceless, but have cost nothing until acted upon. The 8 points counter a plethora of attitudes that display scorn towards personal accountability and responsibility.
Yes, it is the 17 year old kid, the college starstruck parents, the pricey iPhone owner. Why must a nice car and a safe car be mutually exclusive Mrs. Whipple?
Should I ever depend on a BENEFIT, provided by banks, corporations, or government for that matter, so much so that the pursuit of happiness is impeded – the oxygen I use would be put to better use elsewhere. Back to my own 2cents written above, I should have found more kind words. Hidden in the the pursuit of happiness is the individual definition of what the pursuit is, not others.
“Vote on a president who will aggressively redistribute wealth.”
This is the worst idea for our country, I’m so surprised to hear this is your perspective. Wish you wouldn’t mesh politics into your blog, but what do I know… Disappointing ☹️
Are you for or against the redistribution of wealth?
I think politics is definitely important because politics aside taxation, redistribution, spending, and our economy. To ignore politics in a 2020 presidential election would be foolish.
Don’t be afraid of politics.
“Then I’ll share eight solutions on how to get everyone but you to pay for your debt……Let’s do this!”
I had missed reading this article the first time. I spit up coffee when I got to this line. Coffee up the nose in the morning reminds me of victory!
Mrs Whipple sounds like a barrister defending a four-time felon caught with a gun and ounce of heroin during a traffic stop. Those are not his pants, its not his car, and he was holding the black tar substance for a friend. He might have held the gun but, it certainly is not his.
Im turning your quote into a t shirt.
You had an opportunity here to meaningfully engage with Mr. Whipple on an important topic. I wish you had decided to take it.
Feel free to engage. I’m hoping more people in the community will share their opinions.
I don’t think it’s an either/or issue.
At personal level, by all means, take a look around you, count your pennies and if they turn out to be less than you though, get up at the crack of dawn and start hussling.
At society level, figure out that you have created an untainable situation, where upper education cash money is being squandered on useless degrees that activelly harm the students who take them, leaving them with a mountain of debt that they signed for when they were 17. Their age is important. Everyone is an idiot at 17. I really think that nobody should be allowed to take on debt of any kind if they have not been working for at least 2 years.
Both those things are important and putting emphasis on only one of them is wrong. It’s not just husling or changing society, both of these things need to happen in order to have a more equitable situation.
Just so you know, having a revolution is not the right answer. Having lived through one I can attest that a revolution rarely manages to achieve its target or improve the living conditions for the masses. Just like war is always bad for the little guy, irrespective of who wins, so are revolutions.
Nevada (for most residential mortgages initiated from October 2009 onward) is also a non recourse mortgage state.
In defense of Mrs. Whipple, there really are systemic issues that need to be addressed with respect to higher education in this country. I do not feel that she was looking down on anyone for choosing to have a side hustle. She was merely pointing out that it should be possible to pay for a college education in this country without a side hustle–especially given that most jobs offering a livable wage and benefits require a college education. Harvard sociologist William Julius Wilson writes extensively about the effect of deindustrialization on the working class. The stable, low-skills factory jobs with guaranteed pensions that created much of the middle class in the Northeast and Midwest and were available for people in my parents’ and grandparents’ generations are mostly gone. I agree that it’s important to find a way to navigate through obstacles, but it’s also necessary to recognize that obstacles exist. It seemed to me that Mrs. Whipple’s goal was to point out that there is a lot more at play in the push for a student loan bailout than laziness or entitlement.
That being said, I am a graduate of an Ivy League school and growing up, I was definitely the kid who finished my exams early and earned A’s with little studying. School was never really a struggle for me. Even though my grades slipped a bit in college due to a few health challenges, they recovered in graduate school. While I do have a lot of student loan debt, I always planned on having a side hustle because I’m passionate about too many things to settle on one career.
As a policy researcher, I have a few potential solutions to propose:
1. Make changes to federal loan forgiveness / repayment assistance programs. Right now, the Public Service Loan Forgiveness program and the myriad of income-based repayment programs require enrollees to claim the forgiven loan amount as income. That creates a huge tax burden–especially for people with high student loan debt who are ineligible for the Public Service Loan Forgiveness program because their loans may not be forgiven until after over 20 years of compounded interest. I would personally suggest lowering interest rates on qualified federal loans and giving enrollees the option of spreading their forgiven tax income across a few years.
2. Create similar loan forgiveness / repayment assistance options for borrowers with private loans. Private student loans are ineligible for the federal government’s repayment assistance programs. Since most private loan servicers do not offer repayment options comparable to those of the federal government, private borrowers are at a severe disadvantage. I would suggest a new policy that would make it possible to borrowers to convert their private loans to federal loans if they could demonstrate a sufficient hardship. I have classmates who took out their maximum allowed federal loans every year for the purpose of unofficially converting private loan debt from their undergraduate years.
3. Improve financial training associated with student loans. Currently, borrowers have to go through a series of online quizzes to demonstrate their knowledge of the repayment requirements of student loans. While the quizzes are somewhat helpful, borrowers are typically too concerned about having enough money to register for classes to understand the potential ramifications of student loan debt. I would suggest adding seminars on paying for college into the requirements for high school students nationwide. I know it would be difficult considering the Republican pushback against the U.S. Department of Education and the difficulty many urban school districts face with funding, but it’s a start.
I don’t have time right now to figure out how much any of these measures cost, but I would make an effort to prevent them from increasing the federal budget so that taxes would be unaffected.
The problem with your #1 and #2 is doesn’t do anything to address the underlying issue – that is the cost of school today is at record highs despite the fact that cost of knowledge is at all time lows and is rising at a rapid rate. In fact, it actually increases the underlying issue as you effectively push up the demand for student loans (and fed grants) – which pushes up the cost of school. There is nearly a perfect r-squared with the rise in student loans and the cost of school. Additionally, those two suggestions don’t do anything for society as a whole – it simply shifts the cost of young adults to the taxpayers at large. We need solutions that don’t involve student loans or massive costs to the taxpayer.
#3 I think you overestimate how much the average 17 or 18 year old cares or even understands. That being said, no problems with further requirements for student loans.
Agree. This is basic incentives stuff. We need to incentivize learning, not the drawing of and subsequent default of massive loan amounts.
For the record, my main goals were to come up with a few policy recommendations to make student loan debt more manageable and to increase financial literacy. I am well aware of the structural issues that need to be addressed. However, designing the kind of complex policy that would adequately address those structural issues would take more time than I care to invest at the moment considering this is just a conversation on a personal finance blog that I read while attempting to relax.
I do wish there was some type of meaningful financial course required of high school students before they sign up for student loans and choose majors. But spot on in your response to Mrs. Whipple! I think it is depressing to spend your time blaming the system rather than focusing on ways you can improve your situation, and the situation of others.
Ha! The satire is real.
Request : Could you make a blog post about what people can do as side businesses at home/online? Hopefully something that is actually profitable from the beginning (so not blogging for 2 years before seeing some benefit/getting lucky :P). A side hustle at home. I’m looking into getting a side hustle as I study, but I don’t have the means to get around so easily.
Ah, have you learned nothing from this post? It’s about doing something yourself instead of asking someone else (like me) to do something for you!
I expect a 1,500 word first draft post from you about instant online income by end of this week. Shoot me an e-mail.
Hey! Not nice :P
I’m not asking you to run the actual venture for me, only asking for some sort of first step forward, so I can take the next 99.
Sam, I just wanted to drop a line and say thank you – FS is one of about five blogs that I consistently read. While I do not agree with everything you say, I am an advocate of personal accountability and I’ve picked up so much great practical advice from your site.
So far as alternative solutions to go, I don’t see any silver bullets or a one size fits all directive out there. However, I do think that a number of actionable alternatives are increasingly turned to in the face of expensive college education and stiffer competition for well paying jobs. Boot camps help to alleviate the large time opportunity cost of a traditional degree, and can help successful candidates to land well paying entry level jobs in as little as 10% of the time (someone very close to me just completed one).
Changing financing may also contribute, by tweaking instruments that are underwritten by institutions and individuals. For instance, something akin to an equity stake in earnings may serve as compensation rather than a fixed debt schedule. This could help finance education, but in a way that encourages lenders to “nudge” students toward more constructive choice in major or career. Government backing and subsidization of many existing student loans distorts the market, but I ponder whether the increased potential for returns beyond, say, a fixed 7% rate is enough to incentivize students and institutions to adopt this sort of product. Obviously this is a hot button issue, as excessive equity stake in a person’s product of labor might be considered predatory. This is already being done on a smaller scale, and with some success.
MOOCs and other online platforms (as you have mentioned in posts) do provide a great deal of practicable knowledge, but there is no standardized system that conveys a student’s grasp of a subject to employers. I do believe that certifications and standardized testing for subject matter knowledge will help make independent learning a more legitimate path to well paying work. For now though, the private sector still demands college degrees because they can. However, it seems to be a matter of time before the profit motive kicks in and companies find a way to convince hiring firms that their certifications/tests can predict job performance as well as a college degree or GPA can, thus enabling independent study to better yield job opportunities.
This article is the result of about 40 hours of research on the subject of modern job seeking and employment. It includes a few other approaches that are being tested today. It largely avoids policy prescriptions, since legislation and the political process provide results on a much slower timeline than many of the other solutions available through personal enrichment, internet research, and products/services on the market.
Thanks for sharing your thoughts and reaching out.
I can’t imagine what other things you disagree with me about.
Suggestions for the student loan game are as follow.
If private student loan banks want to be protected from discharge in bankruptcy, then they should have the same interest rates and maximum year amounts as stafford loans. I remember back when I graduated in 1998, they were capped at 8.25% with $5500 being the max/semester for undergrad for freshmen thru junior year. Seniors were allowed to borrow $7500/semester. This really capped the amount a student could borrow.
The max stafford loan/private loan protected from bankruptcy should be capped. Both government and private banks will have to make a conscious decision once that limit is reached. Right now, student loans are almost like guaranteed money for private banks and government.
I think students loans should be able to refinance to a lower rate, even after consolidation. This point is personal. I consolidated 31k in 1999 at a rate of 8.25 (the going interest rate). Five years later, my roommate consolidated at a rate of 2.5%. For those that don’t know, once you consolidate your loans, the rate is set forever. Imagine the envy as I paid my loans month after month, year after year.
I dont know about reliable the source, but Student Aid Policy performed a study a few years ago(2007-2008). Only 1.5% of undergraduate and graduate student left school with over $100k in student debt. Of the students with over 100k in debt, 10% was undergraduate and 90% graduate.
Then, according to a CNN article in 2014, 20% graduate with more than 50K in student debt.
For the super hefty over 100K loans, that affects such a small percentage. I see no reason to address those loans. For 80% of students to leave with less than 50k is remarkable for a government program. A student debt of 50k is not detrimental to finances. Minimum wage side hustles working 15-20 hours a week could knock out that loan balance in less than 8 years.
As for that 20% with more than 50k, hope they enjoyed undergrad and grad school, cause the next 15 years is gonna be work!
These are reasonable stats. And the point I was making in Average Student Loan At Record High – What’s The Big Deal? is that high student loan debt is accompanied with income to pay for that debt.
OF COURSE there are cases where one can’t get a decent job after college and debt. But that is where the hustle kicks in to utilize the gig economy or do some side work, while drastically cutting down expenses.
So just so I’m clear, instead of working hard to get out of a bad situation (whether your fault or not) you should try to put the focus on whose fault everything is?
A lot of things are not out fault and we have to deal with it, as I right this my neighbors are having a party and playing music way to loud. I could just complain about it and try to get them to stop or I could go out with my wife or turn my TV up.
Getting into debt may not be your fault in some aspects or you may not have realized the enormity of the situation when you signed the papers for the loan but that doesn’t mean you can’t work harder in order to get that fixed. Take some pride in yourself and get to work.
Yes sir Tyler! Great attitude.
So many cross currents to discuss:
1. People have a moral obligation to make every effort to pay back loans.
2. Individuals are responsible for their choices and actions in life.
3. College is indeed too expensive. They have relied on the welfare of financial aid, and until now, have had no incentive to change. We are just at the beginning of this issue correcting itself.
4. Outcomes are not predetermined. You can work hard and not do well and you can be lazy and get all the breaks. However, the odds favor those who work hard and can rebound from setbacks.
5. For a look at predetermined outcomes, study the Soviet Union for the downside.
6. Banks who loan money are run by human beings. We have freed built into our DNA. They will take advantage of those who they think can be taken advantage of. Many should have done the perp walk after 08. That didn’t happen and it sucks.
7. #6 does not mean that people have the right to blow off money lent to them. Where does that attitude stop? Out of 100 people who decided to walk away from under water mortgages although they could have afforded the payments, I promise that 90 to 95 will not achieve the type of success that people here have achieved. Some will because some are just lucky.
I enjoy this: “Outcomes are not predetermined. You can work hard and not do well and you can be lazy and get all the breaks. However, the odds favor those who work hard and can rebound from setbacks.”
Believing we can change and improve our situation is such an important mindset.
The FI; how bad do you want it did stir up some lively discourse for sure!
The public service loan forgiveness program is a great opportunity for those interested or working in the non-profit and has the benefit of being able to start making qualifying payments whilst still in training which is helpful for those in residency training to seriously consider if not already utilizing.
#9 invest in your self and start a business that fills a need
Investing in one self is always a good one. And of course, I’m very pro starting a business. Unfortunately, both these items are long term solutions that take a long time to play out. And investing in yourself is what is causing this uproar w/ college. But I hope people can give it 10 years worth of time to see if things pan out, and not panic and give up within the first several years after college.
I have to say I get what Whipple is talking about. I get a sense that your writing lacks compassion and empathy from time to time. I think most of your followers would disagree with me on that one. You are not going to lose me as a reader though… I enjoy your blog. Maybe it because we have so many of the same hobbies and interests.
One poster summed up part of what you believe in as “take ownership over your actions. Educate yourself. Make smart decisions”. I believe in doing all the right things too.
You know how in poker you can have a night (or week) that you seem to make all the right decisions, yet get all the wrong results. Do the right thing and are unsuccessful. It’s hard to take…isn’t it? We know that in the long run, doing the right thing will bring success. Not every day, but overall it did. I found life was kind of like that too. Doing the right thing brought success in the long run and was worth the effort even if it didn’t bring success in the short run.
I think an entire generation now knows that doing the right thing is less likely to bring success than it was for us. Hard work, effort and doing the right thing is perceived as less likely to bring good results than for past generations. I say that perception is correct, others will disagree. But I think we have now crossed a threshold. A generation now says that hard work is no longer worth it. Why work their but off and probably be just as broke as those that don’t put in the effort. Working hard isn’t worth it anymore. I see how this can happen today…can you? Successful people of our generation scoff at them and say I did it…if you don’t then that’s your fault. They are to blame.
I’m starting to think….
Occupy Wall Street was the first wave. It let you know they were out there.
Bernie Sanders is the second wave. It let you know they are series.
The third wave is probably is 8-16 years away. When that under 30 crowd is under 45. That’s when they begin to take control.
I’m probably in the minority (for my generation of folks who worked hard and became as successful as their profession would allow) when I say I get what that generation is saying. I’ll bet you don’t like their solution. I’m not sure if I do… but it’s probably the right one for them.
I love poker. When I receive a bad beat, I recognize that even if I was an 80% favorite to win post flop, I will still lose 20% of the time. It’s either I accept my loss, analyze how I could have played better, and continue playing, or I stop playing. I won’t ask for my opponent to give me my money back or threaten to sue the casino.
Will you join my army of 500,000 strong per billionaire if I start a revolution? I think this is what you are alluding to in your last point.
The question is: what are your solutions for someone with a lot of debt? You can provide compassion and empathy, but what exactly are YOU doing to help them? This is the Financial Samurai mindset I’d like everybody to have. Focus on HELPING OTHERS THROUGH SOLUTIONS, not simply with feelings because unfortunately, no matter how bad you feel for people, your feelings won’t help them if you don’t take action. What are some of the actions you are taking?
You might enjoy this post: In Search For Empathy For The Unemployed. Unfortunately, I’m not so sure how much I helped any unemployed person. Perhaps one of the thousands of people reading FS at the time might have chose an unemployed person for a job over a person who already has a job. I’m not sure.
I’m a poker lover too, and former tennis player before my knee and shoulder limited my court time.
I think I did subscribe a long time ago, you don’t need to start a revolution.
What are my solutions…that is a long discussion isn’t it. If you already have the debt there aren’t very many options. Pay it back, bankruptcy (unless the debt it is student loans), perhaps die right. I think my solutions revolve around changing how the world works. If I was 23 today, I recognize there is no way I could follow the same path I did in the early 90’s. The cost of the same education as compared to the salary I could make isn’t the same. Not to mention that job security isn’t the same either. I think kids today don’t see a promising future using the path that either of us took.
So what am i doing to help them? You went right for the throat on that one. Well, I told my nephew to support Bernie. How’s that for a good deed. :) Okay seriously probably less than you…so who am I to complain? Your point is taken. It’s easy to point out problems, not easy to come up with something better. I’ll continue reading and perhaps your thoughts will inspire me actually do more. I do enjoy your blog. I’ve often talked about your 10% rule on buying a car only to be laughed at by everyone I’ve shared it with. :)
I once watched Guy Laliberte give back ~70-80% of a million dollar pot to pro David Benyamine after the flop when all the money was in. David was getting crushed and got charity. Part of poker is the deal making and you say you wouldn’t ask for it back. If you thought you could get it back…wouldn’t you ask…I’ll bet you would.
It’s funny that you bring this up.
I just started a new job right after college, and I am surrounded by bright new graduates who graduated from great universities and have high earning potential.
One of my coworkers is a big Bernie Sanders supporter. Why? Because he wants to pay off his student loans. Yes, my colleague did attend an expensive school (tuition > $50K/year) for two years of his college education (transferred). I do not know how much of this he had covered by grants/scholarships, but I imagine it was a considerable amount.
Is it not a little much to decide on a presidential candidate only based on one of his platforms?
And as a new graduate with high earning potential and low current living expenses, isn’t it a little shortsighted to place so much weight on the future effect of these loans?
I don’t think about finances the same way a lot of my colleagues do. But when I try to understand how they think and WHY they think this way, I get stuck.
I think we choose a presidential candidate based on how much s/he can do for us. Because I think the majority of us are selfish before we achieve financial independence. It’s totally logical to vote for the politician who gives us the most. This is why politicians pander so much.
“And as a new graduate with high earning potential and low current living expenses, isn’t it a little shortsighted to place so much weight on the future effect of these loans?”
Impatience and fear I believe. Give a new graduate 10 years to earn and save, and financial burdens get better.
I can get behind Bernie wanting to raise taxes on ALL people by 2.2%. I’m for increasing the breadth of taxpayers so that more people bitch in to help our great nation. I’m not sure about his other policies, but it sounds good for those who’ve already made their money or haven’t made their money yet.
This is a truly brilliant post that highlights very realistic things people can do today to not have to pay their debt. I’m not sure casual readers will understand your ability of blending together the serious with the absurd.
Mrs Whipple does not seem to grasp that a bank is different from a person. A bank is a corporation just like millions of other small businesses. Hundreds of thousands of financial service employees lost their jobs as you have said and watch their 401(k) and retirement balances dwindled to nothing because there corporations got crushed. I’m not sure if it is her complete lack of awareness, bias as a wealthy person who makes a living writing, or a complete lack of empathy, but it is clear that plenty of individuals and financial institutions suffered during the crisis.
It really seems like something else is going on with her. Maybe you caught her at a very emotional time. Or maybe she got wronged by a financial institution or didn’t pay back your debt your self. Who knows for sure, but the point to take ownership for one’s actions is so important.
Great post, Sam. Recently, my wife found a house that she reeeeeally wanted despite the fact that we weren’t looking for a house. Furthermore, we aren’t able to afford more than $285k. So, now I have a fire under my ass to make the money that will get her a decent home. So I’m burning the midnight oil and kicking my freelancing into high gear in order to make the money necessary to afford a nice down payment on a good home! There are no excuses; there’s always something you can do.
Love it Kameron! Such a great attitude, and EXACTLY what I think everybody should embrace. Accept our situation, Decide what to do, take Action to get there.
The last 2 articles you have written are some of the best I ever read. I would say 75% of the population doesn’t understand economics 101; there is no free lunch.
Well, I don’t think most people who are foreclosing are really trying to screw their neighbors. I think they are probadly trying to help their families. Also, I did a quick comparison of mortgages in the no fault states to other states and didn’t find higher rates in the no fault states. I compared Texas to Maryland for 15 years fixed and found Texas to be slightly cheaper.
If we all thought about our neighbors, I don’t think we’d so readily foreclose. We think of ourselves first.
Check out the foreclosure rates in places like Miami, Vegas, Vallejo, Stockton.
I’m sorry Sam but you are dead wrong on #7. A close friend explained to me once that if you take the entire world’s wealth and divided it equally among the population, it would still end up in the same hands at it is in now.
Case in point my relatives who are poor and in debt. When I started work, I thought it would be nice to pay it forward and help them out with monthly groceries, etc. even though they had never contributed a single cent to my family (they didn’t have any money and were in debt even then).
What I didn’t realise is that they since they were relieved of the monthly grocery bill, they went out and created credit accounts everywhere, etc. They also developed a deep jealousy of me and my accomplishments and a sense of entitlement which led to our falling out. I stopped being the doormat and now they are drowning in debt.
They have since sold almost everything in their house including the fridge, dining table, etc.
Yes I do feel some guilt because I was an enabler but at the time I had no clue that they were opening credit accounts everywhere. I thought that they were saving up for the last child’s education.
Another friend told me it’s the culture of poverty (including victim thinking) that has them brainwashed. And unfortunately a majority of the world’s population seem to be heading that way. They can’t see beyond wanting to be like the Jones’.
Margret Thatcher was attributed as saying, “The problem with socialism is that eventually you run out of other people’s money [to spend].”
Very interesting story about helping your relatives out who then proceed to open up credit cards and shift their spending elsewhere. Another read was asking me for my help on this situation. She wanted to pay off her mom’s $10,000 credit card bill b/c she financially can (daughter), but fears her mom will just spend more money elsewhere.
It’s as if someone needs to hit rock bottom, before realizing they need to accept their situation and take responsibility.
The sad thing Sam is that their father did the exact same thing. When he died, I think the debt cleared. You’d think the kids would’ve learnt that credit is spending someone else’s money.
As for the fellow reader, she’s got two options, let her mother pay it off or pay it off in installments on condition that for every portion she pays, her mother has to contribute the highest amount she can, prove that she hasn’t been running up a card elsewhere and ultimately pay her daughter back in full (0% interest of course). Most likely though her mother will just run up the cards again once the it’s over.
No good solution there. Having a similar side to my family I do something entirely different and probably nearly universally agreed as rude as all get out. I pretty much have minimal contact with that side of the family anymore, and spent a lot of time building the expectation that I was not going to pay their way for anything. Not ideal, but theyd view me as rich and undoubtedly expect money or other favors, and that just cant happen. Things are pleasant, but I live my life and they live theirs.
Easier to be brought down than to bring everyone else up. Has anyone successfully navigated such a minefield?
I would hazard a guess and say NO! lol. I’ve also adopted the same attitude. You stay in your hole and I’ll stay in mine.
Now that the bank of quantakiran is closed, it’s amazing how little family we see these days, even less than when quantakiran had holes in her school shoes. :D
Whipple had a sugar daddy. Do folks remember WHY u cant get rid of student loans by BR? Bc one of the 1st things students in the 1970’s did upon graduation was declare bankruptcy and wipe away all the loans. “Fresh start” parties. If student loans became dischargeable, loans would be much more scarce, and more expensive and fewer people would go to colege. I think actually that’s the best way to go- but as soon as that decision is made, then whipple will say the change is really a conspiracy by greedy, cruel banks and tea party congressmen to keep underprivileged kids out of college.
I don’t understand the premise of the question: I don’t think wealthy people look down on those that are hustling? Let’s consider that most multi-millionaires didn’t start out that way, they worked their ass off, so why would they look down on others working their ass off? Even if I had never worked a day in my life and had everything given to me, I don’t understand how anyone could develop this mentality?
I think Whippler overreacted just a tad and misconstrued your words by confusing two different issues. I do agree that people should own up to their debt if they so choose to take it on. But I also degree that education in this country is in need of much reform and the same opportunities that were available and abundant before just aren’t there anymore. I won’t whine about it personally, I’ll just find another way. There’s also plenty of socioeconomic reasons that some people have greater advantages in life than others. One would be remiss to ignore the myriad of factors that might keep someone from getting ahead in life. It doesn’t always simply boil down to working hard and being smart. Gender, race, generation, parents, friends all play a role. You can’t choose your parents and sometimes it’s hard to choose the right friends. So many factors that I myself can’t even think of. In general, there’s no sense in complaining though. MLK didn’t complain. Hetook action, even if he didn’t have the same opportunities as everyone else.
The poll’s question was try to try and understand why some people who have wealth or intellectual privilege cannot empathize with those of us who had neither growing up, but who are doing are best through extra work to catch up, or get ahead. Why is a reader washing tables while making $100K looked down upon? Why is driving from 5am – 7am to take advantage of a bonus, profile who the early risers are, and make some extra cash seen as going too far?
Maybe they’ve developed the mentality exactly b/c they just don’t know what it’s like not to be privileged? Like the super genius brother or sister losing patience with their younger sibling for not understanding how to do a math problem after one explanation. Some people just don’t have the same gifts.
Long time reader, first time commentator! What a fun article… With an awesome message! I had a similar coversation with a gym buddy ehi out of the blue tells me that he has been reading a lot recently and that capitalism dosent work (it had its chance and time) and now it time for people like Bernie Sanders to come to power as Socialism is the right way forward. Now I am an immigrant who worked my ass off after coming to this great country and am close to FI… Started out with nothing… And so when I countered that this system enabled me to rise to high levels with sheer hard-work and personal responsibility – you would have thought that I used racial profanities, in the way he got red in the face and told me that it is the “rich” (btw am a stealth wealth practitioner) people like me who just don’t get it… I just got quite and thought to myself – “the key to building wealth is assessing your situation and taking action”
You got it MM. I don’t think a lot of folks born and raised in America realize how amazing it is to NOT have to come from wealth, to NOT have to come from a powerful family and BE ABLE to get ahead on merit. It’s not perfect, but it’s a hell of a lot more perfect that many other countries with a huge wealth gap, with not way up based on merit alone.
We take for granted what we know. We take for granted what we have without perspective.
Thanks for reminding me to go work out.
Thanks Sam! Am grateful everyday that my family status or who I had to “bribe” has nothing to do with success here in America… Just good old-fashioned hardwork! Yes, working out is key – keeps me centered and I hope you made it to the gym or to tennis!
A truly entertaining response. Loved it.
One reason for people to blame others is because it is easy and simple. Life feels better if the bad things that happen to you are the fault of someone else. After all, it is impossible that you are wrong.
I do think that having banks too-big-too-fail is an issue as well. If banks give out loans to people that hardly have an income to buy a house they can not afford, than that is bad as well. Bad from both sides. A lack of financial insight from the borrower, and bad from the person selling the loan to these people. (The big short really opened my eyes on what happened in 2008 in the USA)
Looking at the USA situation, I am lucky to be born and raised in Belgium. We do have a high tax rate and our country is known for a lot of wealth distribution. This makes that most people can graduate without student debt. (I did, my wife did not).
The wealth distribution is far from perfect and some people can use legal – yet obscure – ways to pay little tax. Other people refuse to work and are happy to consider a legal living salary that we have as good enough – and maybe some none declared income on top off. All of this frustrates me, a lot. I try to follow the rules. Then gain, that is my choice. Still, I use all the legal rules I can find.
Good thing all 8 tips in this post are legal! Well, maybe not the revolution part :)
I really hope all FS readers can think of solutions to problems. Complain. Fine. But then come up with solutions and take action.
What are your thoughts of all Americans retiring in Europe, Canada, Australia, or elsewhere for free health care?
I love European life. So wonderful!
Hahaha. Right, so quick health check on my performance against your excellent recommendations:
#1: non-recourse state – nailed it! A+
#2: parents pay up – epic fail. I pay for them. F-
#3:10 yrs fake altruism (public service) – I choose 60 months prison instead. Better company. F-
#4: marry rich – married love, but wife works. D+
#5: indentured wife – I’ll take her cooking over cash any day F-
#6: go fund me – I’m whiteish with a big nose. F-
#7: BURNIE! – Robin Hood…Men in Tights. F-
#8: Revolution! – Too noisy. And camping on concrete is deader than Michael Jackson. F-
Damn! GPA is lower than Euro interest rates. Guess I’m just gonna have to settle with respecting myself.
HAHAHAHAHAHAHA. Oh man, this is so awesome!
“#4: marry rich – married love, but wife works. D+”
GOLD STAR! But she should get at least a C+ for working!
True! I’ll let her know. ;-)
As they say, “Kill it with fire”
She’s definitely not coming back
If you’re not hustling you’re not trying. That’s all well and good if some people want to blame the “system” but the system has the same rules to follow as you and I. I’m starting to blog, i work 2500+hrs a year on my full time job, I invest in income properties, stocks, bonds and more, I try to be frugal where I can but I certainly don’t complain about the system and how it’s unfair. I’m too busy working.
There’s another saying. “If you’re coasting, you’re going downhill.”
Good job hustling! And the more you hustle, the more you will get ahead. And the longer you work, the more you will wonder why aren’t your friends doing the same.
FYI Ms Whiner, you can go bankrupt with mortgages; the bank will take the house back. you can go bankrupt with personal loans, the bank will take your credit and money. Go bankrupt with student loan? what is the bank going to do, take all that knowledge and experiences in school out of your brain? you can’t default on student loans because what you got from school stays with you for the rest of your life. if you could default all those stupid pricks would rack up hundreds of thousands in loans like they are already doing, get the degree so they can get high paying job, then just declare bankruptcy immediately after graduating.
yeah tuition is (really) high and all, but something to that magnitude would likely screw up the education system (not that people like you would care or anything). yeah maybe sam can be a little blunt sometimes, but i admit the guy has a head on his shulders and i side with him on a lot of what he says, people alot of the times get themselves into their own shitty situations and just try to complain their way out of it.
THANK YOU. The part about somehow repossessing a college education was exactly what I was screaming in my head when I was reading Ms. Whiner’s rant. That, and that alone, is the reason that student debts are treated differently from other debts.
Tuition is really high, but it’s still certainly possible to get into a state school, and state school tuition is cheap enough that you can work while going to school and pay your way through, or at least graduate with very minimal debt. There are loads of options out there for kids who have the smarts to plan properly.
What are your thoughts on people who went to very expensive elite private schools marginalizing the efforts of those of us who didn’t, who are simply trying very hard to get to where they are with extra effort?
Can they just not help themselves b/c they were surrounded by other very smart and wealthy students growing up?
I remember some kids in HS who just finished an exam 30 minutes before everyone else and got A’s. Here I was, needing all 60 minutes and triple checking my work b/c I wasn’t as smart. No matter how hard I tried, I could never match the Salutatorian or Valedictorian’s performance.
I think this situation carried over to my 20s, 30s, and soon to be 40s.
1. i think that it’s not worth it to go to a private school if you are paying, unless it is very high ranking, like harvard, yale, dartmouth, etc. With the costs of tuition now a days, and considering the return you get from your degree (do you really think it’s going to matter much to an employer that you went to a public vs private school that academically score around the same ballpark? probably not, unless you are comparing a top 10 private school to your local public university; if they rank somewhat in the same teir, in my opinion it’s better to save money going public). personally, i went to a local public uni; firstly because it allowed me to live at home for most of my time there, and secondly because i didn’t have the grades in HS to get into a really good uni / justify racking up a huge bill. I graduated with no debt.
2. is it the chicken, or the egg?? IMO most people just aren’t financially savvy enough. give them all the education in the world, they still won’t have passion for it.
3. wow sam, i’m actually pretty happy to hear someone else was like this too… i grew up thinking i was pretty mediocre, because all the smart kids were in all AP / honors classes, and here I am finishing my tests the last in the room. it’s not just you man, I’m right there with you. even thru college (I did much better in college than HS, but i worked my ass off), i always felt like i had to put way more work into things to get the same results as other people. IMO the skills that get you thru academia are not necessarily the skills that get you thru the real world and teach you real world skills / money mgmt though. there are plenty of successful people out there that just couldn’t do the whole school thing…
4. i was looking into personal financial metrics for my dashboard today, and came across this article that had some pretty good ideas- https://www.bogleheads.org/forum/viewtopic.php?t=61247
I would love to hear your input on some of the personal financial metrics you think are the most important to track (this might make for a good article if you are open for suggestions).
I don’t know that I have quite the same take on Ms. Whipple’s response that you do, Sam. I don’t see her response as looking down on you for what you’ve done. I thought she was coming from the position that your emphasis on hustling to get caught up is unrealistic for some people. Good that you’re able to do it, but she’s thinking the bigger problem is the system.
Either way, I’m on your team on this one, because I think people should be accountable for their choices. If a kid chose an expensive private school and can’t pay it back, that’s on them. If that kid chose a state school they could afford and worked while going to school, then good for them.
I don’t think we can let the college students entirely off the hook like Ms. Whipple seems to be doing. “They’re too young to know better,” some people say. Sorry, but even at age 17, a kid is capable of working with a budget. Usually kids figure out the “allowance” thing at age 12. Either way, even if a kid didn’t make a good choice at age 17, what about the following year, at age 18, when they signed up for another year at the same school instead of transferring to a cheaper one? Or age 19, or 20? If the kid refuses to look at the reality of their situation, then they need to work their way out of it.
If she thinks the problem is the system taking advantage of kids, she should be committing herself to educating kids to make better choices. The lenders wouldn’t be able to prey on kids if the kids were making better choices for themselves. But her attitude of blaming the system and not providing any solutions for kids with excess student loan debt is the opposite of helpful. At least you’re telling the kids that there’s hope. The hope comes from taking life by the horns and figuring out a plan to tackle the debt. Earn more, spend less, and get your stuff handled.
Nailed it in the head. Nicely written. The past can either hold you back or accelerate you forward, depends how you want to deal with it.
I chose “Other.” Most people, I don’t know what their wealth is. Among the few people I actually have a pretty good idea of their net worth and are what I consider “wealthy,” there are NONE who look down on people with a side hustle (because they either currently have or have had in the past side hustles of their own.)
I didn’t agree with any of the polling options because the question implies wealthy people look down on others.
After reading The Millionaire Next Door and learning how the vast majority of millionaires are first generation millionaires, I shifted my thinking a lot. Wealthy people are not evil and I believe they have better attitudes towards people, since wealth creation requires partnerships, working with employees, dealing with vendors, etc.
I completely agree with pay back your debts, but don’t pay back debt in a rush. The most common example I see is fellow millennials living a Spartan lifestyle to rapidly pay down student loans. To me, they are forgoing the benefits of reducing their taxable income through retirement accounts & they are forgoing the benefits of tax deductible interest. The fear of 5% interest costs them 25%+ on income taxes.
I love this summary near the end, “The key to building wealth is accepting your situation and taking action.” So much packed into one sentence. I think the largest hurdle is accepting the current situation since many people borrow abundance from their future and end up in debt.
The polling question was a result of me and a reader getting looked down upon by another reader who went to an elite private school that costs $72,000 a year total to attend. I want to start a discussion on why people of financial or intellectual privilege turn their noses up against those of us who are willing to hustle more on the side b/c we did not have the same privileges growing up.
Why do you think? Or is it just too hard to relate? I think this is a fantastic topic.
Overall, as a group, I view wealthy people as mostly humble and respectful of the process that took them or their family towards financial independence.
Similar to what you do, I’ve seen plenty of wealthy people donate their time & energy to help others. They respect those who are now in the process of building a better life.
This comes from personal experience so if I met that reader and more like him/her, then my opinion might change. At worst, I’ve seen people just not care, but it has never been a negative view towards those willing to work hard.
This was freakin’ funny, Sam– well done!
The odd thing is, she says, “You’ve lost a reader today,” implying that she’s *just* discovered Sam’s bootstrappy- message. Ummm…. how long has she been reading FS? Sam is ALL about the bootstrap, take-personal-responsibility ethos!
As another poster remarked, she definitely sounds like a limousine liberal to me.
I lost a reader after publishing, How To Get Your Parents To Pay For Everything As An Adult, as well. Just can’t win! But, it is fun.
I’m fascinated with limousine liberalism. Maybe I can write a topic or have a guest post about it. It’s pretty cool to see extremely wealthy people say “the rich should pay more taxes!” when they are paying only long term capital gains tax and don’t volunteer to pay more to the government themselves by cutting a check each year :) Love society and how we think!
Our actions are sometimes very different from our beliefs.
I don’t know whether to laugh or cry. I’ll give you some random thoughts:
1. Yes, you HAVE to have thick skin as a blogger. People can be jerks on the web. When someone is a jerk to me, I simply reply with this link (for the graphic):
2. Yes, it’s everyone else’s fault. There’s no personal responsibility. No, not even despite the fact that the college student decided to borrow $100k and enter a field where the average salary makes it impossible to pay it back. What about THINKING THROUGH THAT ISSUE IN ADVANCE???????
My daughter is in the process of selecting a college and a major now and believe me we are discussing costs versus payouts.
When you select a college based on how good the campus feels and pick a major you “love” despite the economics, you often end up with a financial train wreck. So how is that someone else’s fault?
3. I almost burst out laughing at the Downton Abbey photo! :)
4. I think you are compassionate, FWIW.
Tapping myself on the back for eliciting a dual emotion response from you!
The beauty of a campus is a great recruiting trick. So is love of a person who goes somewhere.
$50,000 a year after some assistance at a private school or $10,000 a year at the state school after some assistance. Which do you choose?!
ESI, good to see you over here :)
Financial Samurai, I really liked this paragraph in particular. I saw a lot of down to earth wisdom in it “If you want something bad enough, you’ll do everything possible to make it happen. If not, then be at peace with your circumstance, and let other people who have what you want also be at peace. Certainly don’t try and shame them for their efforts. And try not to let other people pay for your mistakes.”
I tire of all the complaints the politicians and the CFTB tries to put on all those who work hard and do get ahead as if they are evil for accumulating a level of wealth. Like there is something wrong with that. Many people who have less have simply made lifestyle decisions to spend and live a lifestyle that doesn’t allow them to save and get ahead and provide for a retirement. I’m not saying everyone but i am saying many are just simply enjoying their incomes as they go through life rather than saving at a higher level and accumulating large funds for retirement and to “spend” later in life. Is the saver an evil person for accumulating wealth or deciding to work very hard? Is the less wealthy person an evil person for deciding to forgo that level of saving so they can spend more as they go through life? I don’t think so. But the lesser saver person should also not hold it against the wealthier person for saving more and accumlating that.
Life is lived decision by decision and often you end up as a result of your lifetime of decisions.
In politics, we call people like Mrs Whipple “Limosine Liberals.” If she is indeed a writer who went to an expensive private school, then she is extreme left most likely. But anything extreme is bad.
Loved this post! Sometimes I think that the wealthy purposely try to know us down on the road to a better financial situation for ourselves because, let’s face it, money is a finite resource and greed affects many people.
This is why we should all appreciate honest blogs like Sam’s because that level of honest and transparency is rare in the financial “Blogverse”
Thanks Kevin. The different between blogging and reporting is there’s an opinion associated with blogging, and hopefully some proper analysis and solutions.
Everybody can then choose to read and analyze the conclusion, and make up their own minds or not. Free world!
“The key to building wealth is accepting your situation and taking action.” This is such a powerful statement. If you want to get ahead financially, you first have to know where you stand today and what action steps you need to take to get where you want to be in the future.
As to people with wealth looking down on others, I think it depends on whether the wealthy person grew up with wealth or is first generation wealth. Based on my experience, the person who grew up with wealth over generations has nothing to prove and is more accepting of the person who hustles for a living or they don’t think about the hustler much if at all. I think the person who is first generation wealth is still learning their way around money and doesn’t know how to handle emotions associated with it. They are much more likely to be judgmental of a person. After all it’s not that long ago that they were hustling to get ahead. I can always tell, when I meet a person, which category they fall into based on how they treat the people around them- and yes I grew up with wealth. As my dad always taught us- everyone puts their pants on one leg at a time and don’t you forget it. I never did.
I totally agree with your comment – people who have had to struggle can be more judgemental.
Sam, you worked hard to get where you are, and have the mindset that if everyone worked as hard they could achieve the same thing. People are born different though, and not everyone has the ability to achieve the same outcomes and you don’t take that into consideration.
I am more empathetic to these young people who are struggling, because I am a coaster – in my case, intelligence (not genius level smart, but enough to notice a difference). I come from a low income, immigrant family, so no financial support or employment advice there. What I did notice, starting from school, was that I could get better grades than some of my classmates for assignments I whipped up in half an hour on the day, that some of them may have spent weeks working on. Similarly in the working world, I spend significantly less effort than 40 hours a week (often at home), for six-figures, and can produce better outcomes than some of my colleagues who work long hours and on weekends. At one job, early in my career, after a change of management I disapproved of, I spent 6 hours of the work day playing sudoku until I found a new job and was still worth the salary in terms of the revenue I was bringing in.
The one bad side effect of this, is that I’m incredibly lazy – I will never be a 1 percenter as I don’t care to put in the effort to make that happen. I’m mildly ambitious, mainly because I’ll go to some effort to prove I’m right and don’t like being told what to do.
I don’t judge people for not being able to get ahead as easily. A common theme amongst all financial independence blogs, is that all these people are educated, relatively healthy and managed to start of with high salaries early in their careers. Not everyone can achieve this, either from starting off from a significantly worse position, or from a capability standpoint.
I absolutely agree with you. There is nothing wrong with anybody’s current situation if you are happy with it. I’m not sure why readers consistently ignore this message, as if they have some insecurity about others getting ahead.
Here is a repeat of the second paragraph of this post, “If you want something bad enough, you’ll do everything possible to make it happen. If not, then be at peace with your circumstance, and let other people who have what you want also be at peace. Certainly don’t try and shame them for their efforts. And try not to let other people pay for your mistakes.”
It is weird why someone with privilege looks down on the reader for working at a restaurant and my hustle for driving a car to try and make extra money on the side, and I want to figure out the why bc it fascinates me.
Why do you think that is?
If a lot of people follow through on your statement – “If you want something bad enough, you’ll do everything possible to make it happen.” – they will not get the financial outcome that is possible for someone like yourself by working at it, or dtg by inheritance. This is fundamentally where I disagree with you. No amount of boot strapping is going to get some people ahead, if they do not have the intelligence to gain the skills they need, or the only thing they are good can be done by almost everyone.
I was trying to point out that if it can be so much easier for someone like me than the general populace, on the other side of the bell curve it can also be the same amount harder for someone else. It’s a lot of the middles who have to struggle for everything that I find fail to realise that just because they can (and it was hard work!) everyone can.
As to why some people look down on others – they’re jerks, or have been brought up that way.
I never said results will be equal. That would be impossible. All we can control is how much work we can put in. Thankfully, hard work requires no skill or intellect.
I think the average person lives much Better than they did 100-200 years go. Check out this Atlantic post. https://www.theatlantic.com/business/archive/2016/02/america-in-1915/462360/?utm_source=nl__link8_021216
On a tangential note, why do you think Americand are so much less in shape now than 100-200 years ago?
Great perspective! Thanks. I think you might be write about new money vs. old money. I’m sure things are case by case, but I have noticed those who are extraordinarily wealthy are very kind. I think it’s b/c they realize how fortunate they are and want to give back as much as possible.
The idea that rich people are evil is propagated by the media and politicians.
Hardship makes you stronger. Entitlement is a disease.
If you’ve lived your life without ever losing your silver spoon, you’ll never understand.
And it wont matter either, pretty sure theyd be fine.
Our approach to education needs to change. As a teacher, it drives me crazy when we tell kiddos they have to go to college. Um, no. It’s not the right choice for everyone for a lot of reasons. I also think we must do a better job of helping students consider the logistics and reasonableness of their career choices. If you’re pursuing a pathway that isn’t highly in demand or isn’t highly paying, your approach to tuition and loans should probably be dramatically different than someone who will quickly approach the six-figure mark. But we don’t talk like that for the most part in the K-12 education world. It’s a shame. I’m all for helping people chase their dreams. But I think we also have to arm them with reality.
I wish I had read this post 15 years ago. I could have had it so easy. Getting the popcorn out for the commenters who don’t understand satire.
It’s always interesting to hear privileged people get on their high horse when they probably got all their money from similar ways. HMC is one of the most elite and expensive private universities in the world. Good for her for getting in. Bad for her for not recognizing she is privileged and marginalizing other people’s desire to hustle.
There are opportunities to attend Harvey Mudd with low income parents (as a parent of a high school junior filling out FAFSA forms, I’m becoming more familiar with qualifying for need based aid – both government and university provided).
From the Harvey Mudd website:
About 76 percent of Harvey Mudd students receive financial aid
The average financial aid award is about $35,266, of which about $24,918 comes in grant aid from Harvey Mudd College (not from government sources)
About 47 percent of Harvey Mudd students receive need-based aid
22 percent of incoming first-year students qualify for our merit-based awards (additional 13 percent including Harvey Mudd College National Merit Awards)
69 percent of incoming first-year students receive scholarship assistance directly from Harvey Mudd College
Our policy is to provide 100 percent of every student’s demonstrated need
You should check out the real income distributions of the families of children who attend elite private schools vs public schools or community colleges. Private school family wealth is much, much greater.
Besides, I mention in my article that I didn’t have the smarts to get grants or get into an elite private school. Hence, the remaining decision was to just work harder than average to make up for my lack of intellect and connections.
Yes, I agree with your point about income distributions. However, this data cannot be used to draw a conclusion about a specific student’s economic background.
I, like you, took advantage of in-state tuition. Public universities heavily subsidize tuition for state residents… isn’t this also re-distribution of wealth?
Whatever it is called, I very much appreciate this tax-payer provided contribution to my education.
Tuition and fees for William and Mary:
In-state: $19,372 Out-of-state: $40,516
Seems like Mrs. Whipple struck a nerve.
Fact is, we do have a systematic issue. College has become too expensive. We’ll eventually reach a point where the added earnings you expect to have with a college degree will not outweigh the cost of obtaining that degree. 17 year old kids simply don’t know any better, and can’t comprehend six-figure debt. And even if they do, they all think they’ll be rich by 25. Parents think their kids are special, destined to be 1%’s, making their future debt negligible. Schools and lenders feed off this lack of reality. The cost of higher education has exploded out of control.
Yes, take ownership over your actions. Educate yourself. Make smart decisions. I agree with everything you say.
But to disregard the systematic issue completely is equally as ridiculous as calling for free college for everyone.
I agree college has become too expensive but let’s say that average person works 40 years after graduation (us in the Financial Samurai community aren’t average so we will retire way before then). If a student graduates with $100,000 in student loan debt, that comes out to $2,500/ working year. I realize that student loans have interest and don’t allow you to pay them back over 40 years, but you basically only need to make $2,500 more than you would with out a degree to come out ahead. (I’m obviously oversimplifying the math here and I realize compounding and other factors impact the numbers as well). If you look at it through this lens, it shows that college degrees can still have great utility since making an extra $2,500/year shouldn’t be too hard.
My wife graduated with over $80,000 in student loan debt and was teaching at a preschool making about $12/hour after graduation so I do realize how hard the first few years after college can be with high student loan debt.
Although graduating with $35,000 in student debt sounds like a lot, to gain some perspective, let’s compare this debt to median income.
According to the Labor Department, the median weekly salary for those with at least a bachelor’s degree is around $1,193. Let’s say the median person works 49 weeks a year. That’s an annual salary of $58,457. To be more conservative, let’s round down the figure to $55,000.
If we plug $35,000 of median debt into a student loan repayment calculator using a 10-year payoff term and a 5% interest rate, we get a monthly principal and interest payment of $371.23. Let’s continue to stay conservative and use a 30% effective tax rate on a $55,000 income. We get $38,500 a year net, and $3,208 net a month.
A $371.23 monthly student loan payment is only 11.5% of a graduate’s monthly net income. With over $2,800 a month to live life and save for retirement, unless the person is completely fiscally irresponsible, is his/her student debt really so burdensome? I don’t think so.
See more at: https://www.financialsamurai.com/average-student-loan-debt-is-at-a-record-high-no-big-deal/#sthash.oZnkH0L6.dpuf
Well said, John.
Sam, instead of trying to make light of the issue, how about a more in depth study? Honestly, this post is kind of insulting, and doesn’t address Mrs Whipple’s core argument. Yes, she was a bit emotional in her response, but yours is as well. There is a lot of blame to go around considering the escalating costs of higher education. It’s a bubble doomed to pop.
Any solutions you’d like to offer? Would love for an in depth study from you I can help you edit and publish on this site.
One of the key messages on FS is to accept our situation and find solutions.
I agree with John. The issue is that 17 year olds are making these decisions about debt without any real understanding of the consequences. They’re told to pursue their interests at the college of their choice and everything will work out in the end. That works well when they love engineering and study at the University of Michigan on in state tuition. Not so good when they study basket weaving at a liberal arts school at $40k/year. Guidance counselors, universities, and loan companies fail these students who really have no life experience nor concept of debt.
In many ways, liberal arts degrees are meant for the rich, because the cost won’t matter. Everybody else should get a degree at a state school that leads to a high earning career.
I don’t believe in free college. I do agree with limiting the amount of debt that a student can take based on the expected future earnings of that person.
As a blogger, I love for nerves to be struck! Especially when called lacking compassion. Makes writing easier and more fun. Yes, I agree with you that college is expensive. Any solutions you’d like to offer? Thx
Yes. There are lots of solutions of course.
We could start by making education a priority on the national level, given its overwhelming positive benefits to society long term, its an investment. Maybe shift some DOD money to it. You’d have to find a way to decrease tuition costs greatly/limit loans to more closely follow inflation/reality.
Make all student loan payments tax deductible. This not only encourages paying down the loans, it brings a young person up to speed faster, increases hh formation and makes the consumption start sooner and likely with more vigor. Incentivize the right things.
Build out and make vocational schools a normal part of the US system. We need these jobs, and need them to be competent and timely, and it would relieve a lot of universities of students that arent on the best paths for them.
Some of your posts/comments have been overly passive aggressive, snarky and flat out narrow minded and rude. Its your place so youre in control of the content and themes, but its unbecoming and makes it less enjoyable for most readers for sure.
Im all for not ruminating on these systemic issues and letting that keep you down, but its another thing to act as if they dont exist and acknowledging that they do is tantamount to whining and playing the victim. You can work your butt off and acknowledge the bad in the system, and of course make your voice heard and vote accordingly. That doesnt mean voting for free stuff or Bernie style, just rational proper incentives that are best for society. Obviously, straddling the younger generation with debt isnt good for the economy in general, short or long term.
Thanks for your thoughts. I’d love for you to write a guest post on this topic. Shoot me an e-mail and we can get it up!
Also, I was thinking of removing the comment system like many publications have started to do b/c it takes a lot of time to filter out spam and respond. But I also enjoy the feedback so I can use as inspiration to write new posts. Thoughts?
I get that comment thing, but honestly places like this the comments are excellent and help to make the whole picture more clear. Sometimes I refer people to your comments section!
Im sure there is no end to inspiration in here though.
Allowing student loans to be discharged would be a huge start to lowering the cost of college. Right now, it doesn’t matter if the college actually helps you get a good job to repay their loans or do a good job of teaching you work relevant material. The lenders don’t care that much either because student loans will follow you to the grave and your SS payments. If you make student loans dis-chargeable, lenders will care and force colleges to care.
I’d also change the stafford loan program (federally backed student loans) so the amount available for a loan depends on both your major and your college’s graduation rate. Majoring in sociology in a school with a 25% graduation rate – here is $1k/year for loans. Majoring in business at a T10 school with a 98% graduation rate – here is $20k/year for loans.
Your latest suggestion is intriguing. In fact, that is what a lot of the new fintech lenders are doing. They are analyzing what you majored in, and where you went to determine how much to lend.
The first suggestion would open an AVALANCHE of defaults, and could theoretically take down the US and Global economy much like the housing market did in 2008-2010. Once the defaults start, they gain huge momentum. Not sure many people realize this, or would want this.
Schools arent on the hook for discharges though, us taxpayers are. You’d have to have a mechanism where they were accountable, and in all likelihood that would end up with just a further divide and only offering places to those that can already afford it instead of based on academic ability.
Im for some change but the unintended consequences cant be obvious and worse than what we have.
Taxpayers are only on the hook for stafford loans. Private loans are around half of the total outstanding loans. Those would hit banks and other financial companies.
It would open up a decent amount of defaults but not as many as you think. It also wouldn’t have anywhere near the impact as 2007-2008. There was $15 trillion in mortgage loans in 2007 vs around 1 trillion and some change in student loans. Second, the amount of derivatives on student loans is minor compared to those with mortgages in 2007. If you assumed 10% of student loans were discharged, that would be around 140 billion. Painful – sure – but needed. Maybe you grandfather it in so only new student loans are dischargeable or you give banks 5 years or something. Regardless, if you look at the cost of college since that was passed in the 80s, it has soared astronomically in costs since then.
Maybe, but I think there will be a huge wave of defaults that will shake the confidence of the financial system once more.
The likelihood of default from a student is likely much much higher than a homeowner with equity in his house. There is no collateral to student loans that would prevent you from defaulting and suffering immediate financial loss. This is why banks require 20% down payments on a house before getting a loan. This is why I didn’t default on my loan.
The systemic problem is not that education is expensive and getting more so. The problem is that small for profit universities are incentivized to increase enrollment by federally subsidized loans without any consideration of the borrower’s ability to repay. Zapholds suggestion hits the nail on the head. If your studying communication at Trump University maybe you shouldn’t be able to borrow as much as someone in medschool at Harvard?
Look at the cost of college before and after the early 80s ruling that made it so private student loans couldn’t be discharged
I dont think just setting up a big wave of write offs is the preferred solution or would have great consequences. I also dont think its so big a part of finance that it would cause a major crash, though I dont want to find out either. I’d prefer a better glide path out of the issue than the burn it to the ground side of it.
Just make them 100% deductible, then you have a great incentive not only to pay them off, but work period and no one is on the hook for them per se. Yes the government loses temporary tax receipts, which would come right back in a few short years, with higher consumption to boot. They could view it as an investment.
Some people could probably do with a write off, but the terms would have to be stricter and show some real hardships or that they went to a crap school like Corinthian colleges, which the government had a shot to shut down and did not when they basically knew it was a scam.
Both of my parents were the first in their families to go to college. Each did 2 years a community college before transferring to a regional state school. They worked their way through school. While going this way might not be cash flowable any more or as easy. Full time 2 years at my local community college, $5,000 with tuition and books a year, which with living at home a full time summer job and a part time (10 hours a week) school job. (assuming 12 week summer 40 week the rest of the year) leaves you with $5000 in money you can use for a car or something after two years Assuming you are still living at home other than letting you live at home. Transfer to a regional state university. Keeping you same job, costs rise to $12,000 a year in tuition and books so you are $5,000 short a year again assuming no assistance from you family other than a place to stay. So even if you keep needing an extra $2,500 for other expenses like you had at community college you graduate with $15,000 in student loan debt or if you need an extra year or semester $22,500. Less debt than you will probably take out on your first net car.
Mrs Whipple needs her attitude whipped into shape. You are increadibly compassionate and a brilliant and entertaining writer and PF guru – she doesn’t know what she’s talking about. Going to a private school that costs $70,000 a year makes you seriously out of touch with reality.
I agree with you 100% about taking action instead of complaining. I’ve been working 12-13 hour days this week and nobody has heard me complaining. I’m working hard to build my own wealth and am making my own opportunities.
That gofundme woman’s page about the lottery tickets is ridiculous. The stupid things people do!
According to a great study by Trulia and City Labs, nationally, 10 percent of school kids grades 1-12 attend private schools, and in some neighborhoods, the majority of kids go to private school.
Only 6 percent of kids in households with incomes under $50,000 attend private schools, compared with 26 percent of kids in households with incomes of $200,000 or more.
If you attended a school where the total cost rack rate is $72,000 a year, it’s easier to discredit me for driving from 5am – 7am and my reader for washing dishes at night after finally making 100K a year at his job to try and make extra money. It would take $100,000 a year in gross income alone to pay a year of private school at HMC.
So hopefully, those who are privileged with wealth or high intellect can recognize some of us are not. And the only thing we’ve got is an optimistic attitude and a strong work ethic that will hopefully take us farther.
I found Mrs Whipple’s sentence: “I’m a high earner, self-employed, frugal, as bootstrappy as you can get” revealing. I think Wallstreetplayboys.com once said that if you are indeed a high earner, you’ll donwplay your wealth.
Seems odd that in all her empoweredness she feels the need to qualify herself to you.
I know this comment is 3 years late, but I linked to this piece from a newer one. It made me laugh. Thank you.
One caveat, I went to one of those fancy private colleges on almost full FA (has a struggling single parent). The most prestigious college I got into was also the most expensive but far and away the only one that offered the FA I needed. I had loans but I could pay them because I graduated on time and got a good job even in a very bad employment market.
Later in life, I went back to school at night on my own dime and did some of the coursework at a local community college. I paid cash. But I observed a lot of students who I felt were being exploited by student loans. These kids were never going to graduate. They had received such terrible educations to date they just didn’t have the basic skills and never having had money or seen money management modeled, they seemed to have no clue what they were doing to themselves taking on student debt with little hope of graduating on time (or at all) and getting employment. The school (though public) plays along because they need bodies in the seats and they get students in the door with dreams of a career in nursing. But that program is small and very competitive and so they ultimately
push weak students into weak majors as the semesters pass. But there they were in the store buying sweatshirts and crap to “use up” their loan checks.
It was depressing to watch. I felt like some of these kids really didn’t have the wherewithal to make good decisions because of long term educational deprivation….