Tuesday, June 24, 2014

Are We Heading Back To The 50's?

My mother and grandmother

If there's a silver lining in the Great Recession (and the loss of so many higher paying jobs and the nearly 16% unemployment/underemployment rate among recent college graduates) it's that we may be heading back to the 50's. A time when less was more. Where one parent stayed home and the other brought home the bacon. Because there just might not be enough good jobs to go around anymore.

Mom in her garden in our backyard

Research from the 1950's showed that people were not just happy, they were very happy. (Check out Top 10 Reasons Life Was Better In the Fifties - http://listverse.com/2013/02/27/top-10-reasons-life-was-better-in-the-fifties/.) 

One significant difference between now and the 1950's is that today more women than men graduate from college. So it's not that far-fetched that it will be the women who work outside the home. Unfortunately, I have the feeling that women will also wind up doing most of the cooking and cleaning. Even so, it could be such a nice change for children to have one parent home after school to help with homework, orchestrate play dates, schlep kids to and from activities. Family life must be significantly less stressful when you don't need to rely on daycare or nannies. And according to Elizabeth Warren, we'll have more spending money if we go back to having just one-parent work outside the home.

"The Two-Income Trap: Why Middle-Class Parents are Going Broke" was written by Elizabeth Warren along with her daughter, Amelia Warren Tyagi. One of the most eye-opening statistics in the book is that a two-income family earns 75% more money than its single-income counterpart from a generation ago, but they actually have 25% less discretionary income to cover living expenses. And it's not because of overconsumption. The book noted that two-income families are twice as likely to face financial hardship since either parent could have a medical setback or lose their job. At least in the case of a one-parent working family the other parent could step up and hopefully find employment that could help support the family. This is a great book and I highly recommend it to anyone who wants to learn more about the underlying research.

One key to replicating the financial stability of the 50's is that we really do need to scale back our expectations. We need to spend less and save more. This was easier in the 50's when credit cards barely existed. Living large back then was going to a movie for twenty-five cents. Now it costs closer to $10 and that's without any snacks. A cup of coffee in the 1950's cost around five cents. Today, a latte from Starbucks costs around five dollars. A smaller home was the norm for most families. Now it's unthinkable for a family to live in a 983 sq. ft. home. But think about how much money can be saved on taxes and utilities if we downsized? People are having fewer children now so it's not such a terrible idea to think small.

Another book worth reading is by Sheryl Sandberg and Nell Scovell called "Lean In: Women, Work, and the Will to Lead." The authors encourage women not to leave the workforce just because they have children. One theme in the book is that women are needed in leadership roles because we offer a valuable and much needed perspective in the workplace and in government. So true. It's kind of interesting to note that you can't find a woman named in any Top 20 List of Dictators in the world. In fact, I can't think of any woman who was ever considered a Dictator. (I know, men around the world are rolling their eyes, my husband included.) It makes you kind of wonder how the war in Afghanistan would have gone if we just armed their women. Maybe world peace would have a chance if women around the world ran the show. Anyway, as much as I agree with Sheryl Sandberg, I'm still of the mindset that to each her own when it comes to career vs. family. We don't need anyone heaping guilt on us for our choices. And that's actually a sentiment Ms. Sandberg expressed in her book.

In my perfect world, I love the idea of having it all. Capable women leading a peaceful world along with access to great part-time jobs where the hours happen to coincide with school hours. Corporate America, take note. There is an enormous untapped talent pool of super bright moms (and dads) capable of contributing to your profitability if the hours are family friendly. A happy employee is an outstanding employee. And while world peace seems so elusive (and off topic) we shouldn't give up.

At the end of the day, all I know is that the world as we know it is changing. I'd like to think it's ultimately going to be for the better. And maybe the challenging economy and questionable job market is going to lead us down a path that turns out to be ok. And I really do love the idea of women taking on leadership roles. Maybe we'll actually see a woman become President of the United States during my lifetime. I hope so.

What do you think?

Taking a margarita break from cooking and cleaning with my sister, Gay Wood-Albrecht

Sunday, June 8, 2014

Borrowing for Consumer Spending is a Good Thing?

As reported in yesterday's Wall Street Journal, "Consumers revved up their borrowing in April, with growth in credit card debt accelerating at the fastest pace in more than a dozen years....The sizable climb is an encouraging sign for the economy, suggesting that consumers are confident enough to boost purchases by borrowing." If this is supposed to be good news then why does my stomach hurt? Sure, consumer spending can be great for our economy. Our purchases help employ a whole lot of people. It's not the concept of spending that's making me feel ill, it's the suggestion that consumers "borrowing" money to fund their purchases is seen as a positive sign. It's not. Racking up more credit card debt to fuel consumer spending is a terrible idea. Einstein's definition of insanity is doing the same thing and expecting a different result. We shouldn't have an economy built on the backs of people who can't afford it.

What do you think?


Sunday, June 1, 2014

What Does Weight Have To Do With Money?

December 1999

December 2000

Ok, unless you're blind (or too nice to say anything) you probably noticed that I gained a lot of weight between the time these two pictures were taken. But what you can't see is that I also lost of ton of money. What could one possibly have to do with the other? And could there be a correlation between our country's skyrocketing debt and obesity rates, and our plummeting personal savings rate? 

Actually there is. Check out the following graphs and you'll see what I'm talking about.

I started to wonder about the correlation between debt, weight, and savings rates back in 2006 when I was working on my first book, "Wealth Watchers - The Savings of a Nation." Hard to believe that going into the 1950's consumer debt was barely measurable. Today it stands at more than Three Trillion (yes...Trillion with a capital T!) Dollars, and that figure doesn't include mortgages. In the early 90's our country's obesity rate was close to 10%. Today more than 34% of our adult population is obese. Our country also had a long stretch of time when the personal savings rate was close to 10%. We had a somewhat reasonable safety net if something went wrong. But no more. Our personal savings rate has been next to nothing. What happened?!

My first book signing! At Anderson's Bookshop in Naperville, IL 2006

My guess back in 2006 was that millions of people in our country were simply making bad choices, including me. But I had a great excuse. I suffered a brain injury in March of 2000 and lost much of my income and a lot of my common sense. To make matters worse, something happened to my metabolism. I went from being one of those lucky people who was always thin, to gaining so much weight that overalls became my go-to outfit. Anna Wintour would have been rolling in her grave if she were dead.

Style choices aside, it seemed that a significant number of people around the world were following in my footsteps. It took me years to fully understand why this was happening. Sure, many people were making bad choices, but that wasn’t the whole story. What really happened during the time frame when consumer debt and obesity rates began to soar was something else. In both the financial services world and throughout the food services industry the products that were offered to consumers changed dramatically. Easy access to credit and convenience foods entered into the mainstream. At the time we didn’t begin to understand the ramifications. We simply didn’t know what we didn’t know. We over borrowed and we took advantage of processed and prepackaged foods. We also forgot to maintain a steady pattern of saving. The common denominator between food and money became convenience. Who knew that convenience would carry such a high price tag? We've wound up with skyrocketing bankruptcy and foreclosure rates combined with astronomically high rates of diabetes, heart disease, and strokes. And we did it to ourselves. 

Given the ever increasing costs of health care in our country it should come as no surprise that medical setbacks have been cited as a leading cause of personal bankruptcies in the United States. Another remarkable statistic came from Dean Ornish, Founder of the Preventive Medicine Research Institute who stated "Seventy-five percent of the $2.8 trillion in annual health care costs in the United States is from chronic diseases than can often be reversed or prevented altogether by a healthy lifestyle.” I haven’t seen anyone place a number on the financial ramifications of being bad with money but it’s probably safe to say that number is also more than a trillion dollars.Thankfully, we have the power to reverse the damage by making more informed choices and taking action. And the first step we can take is to set and track our goals. 

I learned the importance of tracking while participating in the Weight Watchers® program. At Weight Watchers you set and track a daily goal for eating. Access to solid information combined with group support and tracking has turned Weight Watchers into a billion dollar brand…because it works. It turns out those same principles can be applied to money as well as other aspects of our lives. The reason tracking is so important is that we don’t know what to change if we don’t know what we’re doing wrong. If it weren't for tracking I would still be wearing overalls and I'd still be overspending and setting a terrible example for my children.

Over the past several years I’ve heard some remarkable stories about the impact of tracking when it comes to money. Students have told me they couldn't believe how much money they were wasting by eating out too often. Several students have told me they quit smoking after realizing how much money they were spending on cigarettes. One student told me he didn't know he had a gambling problem until he started tracking his spending. But my favorite comment was from a young man who said he had no idea how much money he was spending on his girlfriend and therefore came to learn that girls are very expensive. Well, value is in the eye of the beholder and some things are worth it. But many times when we look back on our spending we have regrets. And that doesn't feel so great. Ultimately there’s nothing quite like the reality check of seeing something in black and white to open our eyes to the power of a day and the impact of a choice. You can easily find out for yourself by testing the theory. But here's a great tip for you. You need to track as you go. It doesn't work if you wait until the end of the day. You'll miss out on that "think before you ...." moment.

So how can we do our part to reverse these trends? Our country has always been very resilient and we've always been able to overcome adversity. Maybe it’s because in a sense, our country is like one big family and at the end of the day, like it or not, we’re all part of the same team. So as a member of Team U.S.A. we can all take better care of ourselves. Everyone wants to be healthy, right? And everyone wants to be wealthy, right? Hard to imagine that anyone starts the day wanting to make themselves sick or broke. So let's be more careful about what we eat and what we do with our time and money.  Each of us has the power to make better choices and it starts by taking on every day and every decision as though it makes a difference, because it does. 

Attending the awards ceremony for the Books for a Better Life Award in New York in 2011

Thanks to my work in the field of financial literacy and the publication of my latest book by Simon & Schuster called “Wealth Watchers – A Simple Program to Help You Spend Less and Save More” I’ve been fortunate enough to meet some fairly influential people who are in a position to create a national financial literacy and wellness campaign. But the most important person will be you. Since no one answer works for everyone it seems logical to put a spotlight on a wide range of information about nutrition, exercise, financial literacy, and while we’re at it, improving our minds. Thankfully our country has one of the best library systems in the world and we can take advantage of their resources for free.

The Naperville Public Libraries became the site of a pilot program called “Healthy, Wealthy, & Wise.” It’s such a simplistically brilliant idea. The library puts a spotlight on a variety of books, DVDs, and programming which already exist in the field of nutrition, exercise, personal finance, and improving our minds. Library personnel then partnered with several community groups and organizations to make the most of the financial literacy and wellness programs already taking place in the community. Rather than reinvent the wheel, “Healthy, Wealthy, & Wise” simply highlights what’s already out there and everybody wins. I love that the phrase “Healthy, Wealthy, & Wise” is a quote from Ben Franklin, the founder of our country’s library system.

The City of Naperville Proclaimed 2013 the year of "Healthy, Wealthy, & Wise"

When it comes to reaching students around the country it’s hard to imagine a better partner than school librarians. They know their school community and they know where there might be an opportunity to introduce something like “Healthy, Wealthy, & Wise” to the students and faculty members they serve. I’ve met with school librarians from every grade level including college librarians and the response to bringing this program to their schools has been overwhelmingly positive. One thing that surprised me was that each of them had a different idea for how it could work in their school community. One elementary school librarian told me that she thought it could be tied to their anti-bullying campaign. One of the high school librarians thought it might be picked up by the P.E. teachers as part of their anti-obesity campaign. And another high school librarian thought the students could promote the “Healthy, Wealthy, & Wise” message through their daily video announcements. One of the college librarians thought it could be integrated into freshman orientation and then followed up by creating some type of health fair as well as offering ongoing “Healthy, Wealthy, & Wise” programs throughout the school year.

As much as libraries can give us the tools we need to be “Health, Wealthy, & Wise”, my hope is that we’re able to convince celebrities to get behind the initiative. We need their help if we’re going to create a national cultural shift where we all do a little bit more to be healthier and smarter with money. The key to a successful campaign depends upon people we admire using their star power to promote the cause. Why celebrities? Because we notice them. We buy products they endorse because in some way, shape, or form we want to be like them. And their ability to influence our actions extends beyond our purchasing decisions.

Some of you may be aware that there is a national debt clock in New York City. Wouldn’t it be nice if we also had a similar public display for our consumer debt rates, our obesity rates, and our personal savings rates along with a healthy target for each of those categories? It would be so helpful to have a highly visible measure for the success of a national financial literacy and wellness campaign. Essentially, we just need to move all of those statistics in the right direction. So let's do it.