DEBT AS SOCIAL JUSTICE

words on justice.jpg Articles like this make me angry when they use a college education as the “carrot on a stick” that makes student loans a good thing:

“Student loan debt is also an investment in your future. Simply put, you will be more employable and earn more with a college degree.”

I believe this is a straw man. The argument for or against a college degree is irrelevant to the structural problems that student debt brings. I believe that student loan debt is a social problem, a social justice problem even, because it is most egregiously harmful to very specific segments of our society.

  • 1 out of 3 student loan borrowers don’t graduate. This immediate invalidates the ‘college is worth the debt’ argument. If as many as a third of borrowers aren’t graduating, they are stuck with debt they can’t get out of and no increased earning potential. There is myriad of reasons they might not be graduating, including being poorly trained for college, health, financial, family instability, substance abuse (yo Madison!), and more. More on that here.
  • If I default, the government will withhold low-income benefits. Because the government is the debt collector, if I default on my student loan debt the government will withhold my tax returns (including Earned Income Tax Credit and Social Security benefits). These social safety nets aren’t a big deal if I’m wealthy, but it’s devastating if I’m poor. Between the socio-economic classes (rich and poor), who is more likely to default?
  • The highly indebted are borrowing even more. We’ve discussed before that there is a bifurcation of healthy borrowers and unhealthy borrowers. The healthy borrowers borrowing is remaining level, but the unhealthy borrowers are borrowing even more than before. Some estimates put these borrowers at around 17% of all borrowers. In my experience, this sounds about right. We know that if you are female, of color, or an older student you are significantly more likely to be a highly indebted borrower.
  • Borrowing to make an “Investment” is extremely dangerous. Quoting a 15% financial rate of return is just lying if it doesn’t take into account borrowers who don’t graduate and the higher interest rates and fees on defaulted student loans. If you can’t bankrupt out of a ‘bad investment’, it can cause decades of pain for defaulted borrowers. High returns don’t mitigate risk. This is why the lottery is a bad investment. A potential 15% ROI doesn’t offset the inherent risks of student loan borrowing.

So to summarize, “it’s okay to have student loan debt!” as long as you’re intelligent (with an aptitude for intellectual studies, healthy family structures, and safety nets that allow you to graduate), are not poor, and are not a woman or minority.

There are a variety of potential improvements that could be made on the legislative level (realistic hard cap on borrowing, lower interest rates, larger Pell grants, allowing bankruptcy), but these are out of our ability to change right now.

Instead, let’s focus on personal behaviors I can change RIGHT NOW to reduce my risk of being a statistic. These include borrowing as little as possible, fully understanding my current situation and risks, and building healthy personal financial habits.

Do Rich People Stuff

The_millioner_mind_bookcoverDave Ramsey is fond of saying “If you want to be rich, do what rich people do. If you want to be broke, do what broke people do.

I was reminded of this on a couple different occasions recently. One friend posted a dumb picture on Facebook and another ordered a “Dewars on the rocks”.

Thomas Stanley in his incredible book “Stop Acting Rich” tried to differentiate between the “Glittering Rich” and the actual wealthy – the “Millionaire Next Door” type.  Contrary to popular belief, the vast majority of wealthy people don’t drink expensive liquor or own extravagant things.  Perhaps the fastest way out of debt is to stop buying stuff we don’t need.

If you want to “Fake it until you make it” with money, you can start right now by living frugally.

Non-Owning

20160917_114549There is an old joke that the best two days of boat ownership are the day you buy it and the day you sell it. I spent this last weekend playing 54 holes of golf and hanging with some cool dudes. This picture is me drilling an 8 iron over water to make a key par.

We were blessed that a family member of one of the players has a large vacation home in the mountains and they let us use it for the weekend. As I was sitting in the hot tub that night, I reflected on this thought: Though I’m not a millionaire, for this weekend I was experiencing all the enjoyment of this huge mountain chalet.

For some reason, I am hardwired to think I need to own something to enjoy it. Maybe this is a result of thousands of advertisements or perhaps it’s just my nature to want to control. I do think there is a strong movement toward Lyft, VRBO, community gardens, bike sharing, and more peer-to-peer.

We have a guest bedroom in our house, so for the past few months we’ve had a young person living with us. It hasn’t been a burden, it’s actually made life better. I wonder if this is what the early church believers were hoping for when they “shared all things in common”.

Paul told Timothy to teach the wealthy (most of us) to “be willing to share”. What things can we share with each other? What do you need that perhaps you could get by with just borrowing? If we reorient our thinking around this, I think it would tremendously reduce our overall debt levels.

Quick Thought

jason dayI taught a small group this morning on “The Long Defeat”. It’s a quote from Tolkien that I came across this week via Wesley’s wonderful essay (which links this from Alan Jacobs) and I think pairs perfectly with this beautiful poem and reflection by Richard Rohr.

One connection I’ll make here: If I’m results driven, bitterness will eventually become the defining characteristic of my life. Instead, I submit the outcome (including the possibility of defeat in my life, my relationships, my projects, my country, all my needs and hopes and dreams) to God and I learn to ‘practice’ living.

This is true of budgeting and raising children. It’s true for world number one Jason Day: “I got addicted to the process of getting better.” It’s equally true for every non-famous person that does their taxes, serves a client, prepares a meal, teaches a child math, or pays off a debt.

Change (Part Two)

grip golfI have been teaching my son to golf over the past few years. Unfortunately he inherited his dad’s aversion to authority so taking direction hasn’t always gone well. Despite the people that want to help him get better, he pushes back. As we have noted, change is hard.

One reason he pushes back: It doesn’t feel right.

The vast majority of golf teachers in the world will tell you that you need to hold the club in your fingers (not palms) with the “V” of your index finger and thumb pointing at your right shoulder. Often Zeke’s grip will get too “weak”, with the “V” pointing at his chin or left shoulder instead of right shoulder.  This is a critical fundamental to hitting the shots he wants to hit, so I’ll reposition his hands on the club and say “Try it this way”.

But he hates it. He says it doesn’t feel comfortable. He won’t be able to hit the ball the way he’s practiced. After I’ve placed his hands on the club the correct way he even re-grips it back to the old way right before he swings.

Of course he’s right. It doesn’t feel natural. It doesn’t feel comfortable. He legitimately doesn’t like it.

But a good golf teaching professional will tell you “what you feel isn’t real”. If you will stick with the change and hit a couple hundred golf balls, the new grip will become your “normal” grip and anything else will start to feel weird. It will become your new normal fundamental.

I don’t need to make the applications to life for you, but I just want to encourage you. If you’re struggling with an area of change – especially around your personal finances – stick with it. It won’t feel comfortable. That’s ok. Trust the process. Hit a couple hundred balls and you’ll look back and not recognize that old crappy golfer.

CHANGE

ODM Logo“Will” has been homeless since he was 12 years old. In the last couple of years he’s made tremendous progress including doing really well at his job. Contrary to what you might assume, housing is usually one of the last pieces of integrating into what you might consider ‘normal’ life. For example, Will got an apartment earlier this year but has continued to sleep outside – Urban Camping – because he feels claustrophobic in the apartment and it’s such a departure and separation from his community and life as he has known it for so long.

That story was told to me last week while visiting Open Door Ministries where I serve on the board. For someone that’s integrated into mainstream society, this story seems impossible to believe. But as I thought about it, I realized how hard I really struggle to make personal change. I’m the same as Will. The reality is, the areas of my life that I’m working on are just less visible and more socially acceptable.

Despite practicing financially healthy habits for years, doing a monthly budget remains one of the biggest challenges for Noelle and me. We have tried any number of different methods, but the busyness of life and lack of urgency causes us to miss self-imposed disciplines that would lead to a healthier life.

Regardless if it’s doing a monthly budget or sleeping under a bridge, change is hard. It takes a tremendous effort to break life-long habits. Let’s do it anyway.

Income Inequality

Rio Opening CeremoniesMy wife loves the Olympics so we’ve been watching a lot of them this week. Yesterday I saw some stunning images like the one on the right accompanying several articles like these.

On a recent Malcolm Gladwell podcast he raised an interesting question about how to solve problems. Is a particular problem a ‘basketball problem’ where teams need to improve the best player or is it a ‘soccer problem’ where improvement comes by improving the worst player?

His point was that some problems have top down solutions and other problems have bottom up solutions.

The image above really provides a stunning portrait of income inequality. When it comes to Income Inequality, almost all the articles talk about it like a ‘basketball problem’. That is they focus on the top .01%. That’s understandable because broke people are always at zero. When the .01% get even more money the Inequality goes up. The reality is that the top 1% of income earners receiving 20% of the pre-tax income is a problem.

But assuming you are not in the 1%, I would suggest that the best use of your and my time is not trying to tear down the 1% but rather work on lifting up from the bottom. Specifically what do I need to do to lift myself and others up from the bottom?

I believe that creating opportunities and paths out of zero is the key. It’s a soccer solution. I can’t lift everyone up, but it’s a lot more impactful to move from destitution to the middle then to move from the middle up or from up to slightly less up.

In today’s world, there are a lot of opportunities, but the traditional paths are no longer clear. Instead, we need to really get creative on how to create and find opportunities to help myself and others into financial stability. I think it starts with a lot of questions:

 

How can I create a financially stable environment to raise my children?

How can I pull one friend out of instability and into financial peace?

How can I create an emergency fund that will take the crisis out of my financial life?

How can I prepare my children for life so they won’t be financially burdened for decades into the future?

How can I help one impoverished person start a business?

How can I avoid and payoff debt?

Do I need to work more or at a different employer?

Are substance abuse issues causing me to stay in poverty?

How can I pay my house off and take back my income?

How would a small business I start create future financial freedom?

If I could earn an extra $500 a month as a freelance employee at night or on the weekends how would that change my life?

If I could cut my lifestyle expenses by $200 a month, what would I do with an extra million dollars in 40 years?

Would something as simple as access to clean water enable a poor person to start working and producing something of value they could sell?

How would personal financial margin create opportunities for myself and others?

What do I need to change to create a path to financial stability?

Do I have a plan?

In what ways to I put a higher value on luxury then on stability?

How do I evaluate needs versus wants?

 

If I am drowning, it’s really difficult to save another drowning person. It takes personal capacity;  savings and extra cash flow to be able to give and be generous. I believe lifting myself out of poverty is step one in helping others do the same and creating greater income equality.

Healthy

judge-mathisRight now I am working on a laptop in the waiting room of an auto dealership while my car is being serviced. On the TV is a daytime courtroom show where a Judge (me looking up) – Judge Mathis – is litigating a string of horrible people who are fighting over ridiculous things, ostensibly for our entertainment.

Do not be misled: “Bad company corrupts good character.”

Don’t have anything to do with foolish and stupid arguments, because you know they produce quarrels.

A troublemaker plants seeds of strife; gossip separates the best of friends.

I’m struck by how much time, energy, and wasted opportunity is being spent by the foolish people appearing on this show. Not appearing on the show – I mean their actual lives. It’s actually heartbreaking. Why do we waste life surrounding ourselves with destructive people?

By the grace of God and to my greatest ability, I will surround myself with healthy people.

Some forms of healthy are easy to spot (meth users), but some are not.  Am I actively seeking financially healthy friends?

Faith?

Faith imageYou gotta have faith!

What does this mean?

God will provide” is another variant of this idea. The idea that “faith” is a fix-all for what we don’t know and understand or a green light to pursue any desire we can dream up.

Where does the role of faith fit into a healthy understanding of my finances?

While I’m not a theologian, I have heard a lot of people using ‘faith’ language around financial matters for a long time. We’ve discussed that some people use ‘faith’ as a reason for pursing a theological education – sometimes used correctly and sometimes used as an argument for non-logical actions. Prosperity gospel teachers have also used ‘faith’ language to create an entire theological worldview where one’s physical blessings and hardships can be the result of their faith or lack thereof.

While there are many definitions of faith, I believe there is one definition of faith that will change your entire financial worldview. Let’s walk through it:

“Now faith is the substance of things hoped for…”

One way I believe Paul helped explain the world was dividing it into multiple “realms”. The physical universe (your skin, bones, DNA, cells, etc.), the spiritual world (the heart, the Spirit, Faith, hope, love, peace, etc.), and the mind or your thoughts.  There are a number of examples of this (Romans 12:1, Romans 7:21-24, Romans 8:5-15, Galatians 5:16-18).

I believe when the author of Hebrews 11 (probably not Paul) is saying that faith is the SUBSTANCE, what they are saying is that it is physical thing – an action in the physical world.  This would echo what James says in the second chapter of his book that faith without deeds isn’t actually a real thing. It’s ‘dead’. Faith is itself an action based on your HOPE. Jesus said calling me “Lord” is pretty worthless if you don’t actually take my teaching and put it into “practice”.  Walt Henrichsen says we take risks in the direction of our hope. Where is our hope? Where are we taking risks?

For example, I think this definition works well with understanding salvation itself. Paul in Romans outlines a process:  Though sinful (Romans 1-3), we have justification for sins by faith (chapter 4). Hope isn’t a wish, but an eager expectation that doesn’t disappoint (chapter 5). Our hope is in Jesus (Rom 5:1-2) who is the Hope of Glory (Eph 1:11-14 and Col 1:27), saved by the grace of God through faith in Jesus (Eph 2:8-9). Salvation comes through the physical actions taken in the direction of our hope. Thus in Romans 10:9 Paul says if you take a physical action in the direction of your hope – confess with your mouth what you believe in your heart – you will be saved. Another way of saying the same thing?  Follow Jesus. Believe he is who he says he is and actually do what he teaches (John 14:15-24).

Back to finances….I believe it’s critical to articulate what I’m hoping for. This will greatly clarify my faith statements. It’s really how the scientific process works. I set an eager expectation when I construct a hypothesis. Then I take a step of faith into the unknown and begin testing (“method”) in the direction of my hope. This is quite literally gathering ‘evidence of things not seen’.

What am I hoping for in my finances?

Having more than $400 for an emergency?

Being a responsible steward of all I’ve been given?

Raising my children without endemic poverty?

Being completely debt free someday?

Going to Seminary without debt?

Paying my student loans off within 5 years?

Sending my children to college without debt?

Allowing my spouse to be able to be a homemaker?

Giving 20% of my income?

Taking a year off of work when I turn 40 to serve the hurting?

 

This can’t be hope as a ‘wish and a dream’, but rather an eager expectation. What Peter called a “living hope”.  Romans 15 calls God the “God of Hope” whom through the Holy Spirit we may “abound in hope”. Peter described hope as something we can “set fully on”. Paul described it as a product of suffering, perseverance, and character. Solomon said without it the heart grows sick.

We need to land on a specific goal, a firmly embedded hope in our heart. Then we can start by taking actions in the direction of our hope. This is an act of faith – a risk in the direction of my hope.

It can be extremely unglamorous. I have a strong hope that raising children in a stable home and remaining married to my wife will be worth it in the long run. The reality is that this isn’t the easiest or most self-gratifying way to go through life. The reality is that I don’t know what life will be like in 20 or 30 years. But I have an ever present earnest hope that my life will be better in the future if I love my wife and serve my children in the present. And so in an ACT OF FAITH, I change diapers and go to work each morning. It is an act of faith – an action believing that it will be worth it.

It’s not an exaggeration to say doing the dishes is an extraordinary act of faithfulness. This is the kind of faith that breaks down generational cycles of fatherlessness, poverty, alcoholism, and abuse.

What is my financial hope? Do I want my spouse to be able to stay home with our children? I understand it isn’t possible right now. Step one: Set my hope on that outcome. Step two: Take a physical step of faith in that direction. What can I sell? Can I work a 2nd job? Can I downsize our house or car? Can I cut our food or entertainment budget in half? Can we payoff a credit card in the next 60 days if we live on nothing?

Do you feel called to go to Seminary without incurring a crushing debt burden? That is a noble goal. Set your hope in that direction. Next, start taking steps in the direction of your hope. Have you applied to Seminary? Have you applied for scholarships? Have you applied to 10 better jobs then you have now? Have you tried doing fundraising? Have you shared your vision with 20 people?  They all won’t work, but that’s ok. We don’t know what act of faith will work unless we try. Finding out what will work or watching God reshape our hope in another direction all together – that is the miracle of the divine crashing into my finite time and place. And it will be your unique story of how God provided and your faith will be strengthened because you will have your own personal “evidence”.  “And I say unto you, Ask, and it shall be given you; seek, and ye shall find; knock, and it shall be opened unto you.” It always starts with an action in the direction of your hope.

When it comes to finances, I’ve often had someone tell me “you can’t do that”. The truth they are telling me is probably “I can’t do that.” I understand these are wildly taken out of context, but there are instances of Jesus being amazed by unbelief. He is saying “Why aren’t you actually doing anything?” We say “Well, because we can’t control the wind and the waves.” Apparently that isn’t a good enough reason.

Conversely, Jesus was amazed by the faith of an outsider who took action when his servant fell ill. I believe a lack of faith is refusing to take steps into the unknown in the direction of my hope. You might believe it’s impossible to pay cash for your next car. Have you considered selling your expensive car that currently has payments? Have you read any books or articles on how to do it? Have you considered driving a crappy car for 6-12 months? Have you considered what you could sell to raise the money? Have you considered driving a car with hail damage? Have you considered going with one car for a significant period of time? Have you bought a car with significantly less features for a lot less money?

I know you can because my wife and I have done all of these things. I’m happy to say we have two beautiful, paid for cars. It took my wife and me a couple of years, a string of ugly cars, several breakdowns, a few arguments when we only had one car, and an ’04 Kia with hail damage I bought for less money than I was making per week, but we did it and we’ll never go back.

I have had people use spiritual language around a financial event that causes me to wonder. They say God “blessed” them with a new car (and car loan) or God “provided” the financing for the house of their dreams.  The reality is I don’t know, maybe He did. But I do believe “The blessing of the Lord makes a person rich, and he adds no sorrow to it.” I wouldn’t want the blessing of your car if it came with your car payment.  My deepest desire is a greater Hope for you. I want a greater faith in the direction of that hope.

The message for me, as well as you, is that we wouldn’t settle for good enough. The good news of the gospel is that we can participate in the Kingdom – how the world ought to be. Let’s set forth with Kingdom hope and then take audacious actions in that direction.  When someone says “You gotta have faith”, I trust they have survived suffering, produced perseverance, developed character, and nurtured a hope that is deserving of that faith.

And I hope they have enough faith to take courageous action in that direction.

Emotional reaction to financial risk

Recently while driving I glanced back in the rear-view mirror to see the familiar sight of a police car merging behind me in traffic. Police rearviewEven though I was pretty sure I was breaking the speed limit by the socially acceptable amount, my heart still raced.

Why does that happen? Why does our “fight or flight” kick in at the prospect of a very affordable traffic ticket?

The bigger question: Why doesn’t our heart race the same way when faced with a financial risk over 100x greater – taking out a car loan or $40k in student loan debt?

The short answer is that we are very poorly designed to properly calculate risk.