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Communities
Live Well on Less Than You Think: All About D-E-B-T.
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I loved this chapter of Live Well on Less Than You Think, because it was all about debt and frugality, my two favorite subjects. As I read through this chapter, I found myself impressed that Fred Brock really has a handle on how debt negatively affects one’s ability to be frugal.
The chapter started off by differentiating between good debt and bad debt. Good debt, of course, is debt like mortgages, which have a fixed interest rate and are used to buy something that appreciates.
Bad debt is debt used to buy something that depreciates, and that has an interest rate that can change. Credit card debt is the obvious example of bad debt, but other bad debt includes auto loans and excessive amounts of student loans. Excessive would be when the student loan was more than could possibly be paid off by the student’s chosen career field.
In 2004, around the time this book was written, the average household in America was carrying $8900 in credit card debt. 1/3 of households were either behind on their payments or over their limits, a grim statistic, indeed. Brock says,
The average household that’s carrying credit card debt month to month is making in interest payments the equivalent of a car payment on a car they don’t own. p.23
When you think about it that way, credit card debt really seems like a stupid thing to accumulate. And I don’t say that to judge people. I’ve obviously had my share of credit card debt in this lifetime.
Fortunately there’s good news. Members of Generation X tend to learn from their mistakes. After learning the hard way that credit cards will burn them, Gen Xers stay far away from the perils of credit card debt once’ they’ve been had.
One thing I found very interesting was a prediction Brock made. Keep in mind that this book was published in 2005. At that time, Brock said,
Few doubt that the high levels of consumer debt will exacerbate our problems as inflation builds. In fact, some economists expect steep inflation to come roaring back because of swelling federal budget deficits. p.31
How familiar does that sound? Lately I’ve heard some predictions that unfortunately inflation is right around the corner.
I really enjoyed this chapter, because it wasn’t all doom and gloom. Brock pointed out that Generation X seems to be wanting a change from the ways of their Baby Boomer parents. This generation wants to take control of their finances and prepare for the future, rather than pay for yesterday’s expenses today and well into the future.
I also found myself saying a loud “Amen” as Brock explained how frugality can enhance one’s lifestyle. When you step away from consumer debt and start saving your money to buy things you need, rather than charging things you want, you put yourself on firm financial footing, both for today and for the future.
This is the life I want to lead. I don’t want to pay interest on that purchase at Target 3 months ago, when I can’t even remember what I bought.
At the end of the chapter, Brock summed up the very reason I love being frugal:
Remember, when you reduce expenses – including interest and debt – you increase your income. p. 32
Did you hear that? You increase your income! You have more money working for you and your goals! So stay away from bad debt!
Now that we’ve learned how debt can negatively affect your ability to reach your financial goals, we’re going to look at how where you work and live impact your financial situation next week.
Previous posts in this series:
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Live Well on Less Than You Think
Welcome to my new book review series, covering Live Well on Less Than You Think by Fred Brock. We’ll be covering a chapter a week until we get through the book.
The first chapter of Live Well on Less Than You Think is an introduction. There aren’t any money saving tips here, but Brock gives us the financial history of three generations: The Matures (1909-1945), the Baby Boomers (1946-1964), and Gen X (1965-1978).
This was an interesting chapter to me, after just having finished (Not) Keeping Up With Our Parents by Nan Mooney. In contrast to Mooney’s interviewees, who seemed to feel entitled to spend, spend, spend, Brock presents a Generation X that is focused on frugality and financial independence. It was a refreshing change.
Brock asserts that each generation’s lifestyle management system is directly influenced by the generation before. The Mature generation was frugal out of necessity, having lived through the great depression.
The Baby Boomers were the first generation to experience the widespread availability of credit. They have a more laid back approach to money than their parents did.
Since they grew up in an era when it was common to stay at one job for a long time, they assumed their jobs would last forever too. Because of this, they didn’t worry about juggling debt, and tended to not plan for retirement early.
The Gen X generation grew up seeing the beginning of widespread job layoffs in their parent’s generation. Because of that, the Gen X generation is skeptical and self sufficient.
Gen Xers tend to change jobs every 5 years or so, tend to think a fulfilling job is more important than job stability, and tend to have a more entrepreneurial spirit than their parents.
Gen Xers also tend to be more frugal, but not out of necessity like the Mature generation. They tend to be frugal, because it helps them live the lifestyle they want. They can afford to work a fulfilling, but low paying job, because their lifestyle allows them to.
As a sociology major, I found this chapter of Live Well on Less Than You Think very, very interesting. I realize that there are many exceptions to all generalizations, and not every baby boomer, for instance, is a spendthrift.
However, I did find the generational studies, especially of the Gen X generation, very thought provoking. I identify with a lot of the qualities that Brock presented about the Gen X generation. My husband, however, who is on the very tail end of the Baby Boomer generation, behaves more like a Gen Xer when it comes to finances. I wonder if that’s my influence on him? 
Stay tuned for chapter 2 next week, when we talk about my favorite subject: Debt.
Do you notice any generational behavior when it comes to finances? Do you identify with the examples Brock gives, or do you consider yourself an exception?
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