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193,345.59 Take a look at that number. Roll it around in your head for a bit.

I thought I had kept pretty good track of my expenditures throughout the years. I always carried a debt, but until yesterdays mail delivery I had no idea just how much debt I've lived with.

193,345.59. Yesterday I received the final account investigation from an account I started when I was 16. This from a request I sent out almost a year ago. A year ago at this time I decided to get serious about paying down my debts (down 10K this year to a grand total of 54,000 secured/unsecured not including mortgage.) and I started wondering just how much I've paid out in debts since I started it all. How much of that was important to me at the time and no longer around?

193,345.59. From such modest beginnings is mighty oak grown. My siblings and I grew up as "working poor." Our heroic single mother worked very hard to make her paychecks stretch just that extra day to make it to the next payday. When I think of the effort she had to expend to do that I look back in horror on my behavior both before and after that fateful first account was opened. "Hey mom, can I get 5 bucks?" You would think that we would know the value of a dollar, but no, none of us learned a damned thing. A combination of personal and parental responsibily, whatever it just never happened. It wasn't until just the last few years that I've actually learned about money.

193,345.59 That first account was amazing. Someone would actually give me a piece of plastic, run it through ker-chunk and out I could walk with whatever I wanted. Friggen awesome! Ka-CHING! Bills are something that come in the mail later. Who needs to worry about those?

193,345.59 I actually managed to graduate from high school without too much trouble. I had a good-for-my-age job that allowed me to pay the bills and I was headed off to college. No, I'm sorry son we can't give you a scholarship. Your grades aren't good enough and you don't fit into any of these tight little molds. You could take out some Pell grants and student loans though. Don't worry about the debt, it can always be refinanced, forgiven, or hardship deferred.

193,345.59 I flunked out of college after a year. My heart wasn't into it at all. Who needs college? RAGE AGAINST THE MACHINE! I was going to be an artist anyway. Never mind that I can't draw, sing, write, or paint. I knew what I wanted to be, and I hung around in the low rent districts with all sorts of unsavoury types. I couldn't lose! My lottery ticket was going to come in anytime now and then it would be cash cash cash! Oh crap, rent's due and the paycheck is next week. Hey what's this? A Payday loan? Cool, and it will only cost me $25. Not a bad deal.

193,345.59 Well, I've been working for a while. Gave up on the idea of being an artist. Seems like people are looking for "talent" in their artists. Pfft. Well, I've always loved computers and the University is hiring in the Biomed department for pc guy. Oh, I have to be a student? Hmmm....no problem, I'll get a student loan and take a few easy courses.

193,345.59 Wow, I was suddenly making more money than I'd ever seen before. $250 a week? Sign me up for that new tv, and I'm too tired to bike home tonight so I'll just get a cab. No cash? No problem. Cabs take AMEX. I'll just pay it off before the bill is due and won't pay any interest. Oops, forgot about that TV didn't you? Well, AMEX didn't and they want their money. Wait, what the heck is a "charge-card?" I thought I could just pay this off over time?

193,345.59 A couple of years down the road now. Thoughts of college are forgotten. Turns out that I really didn't need it. My career path has led me from lowly PC tech to Software Specialist for a major business phone system vendor. I make good cash. Of course, I'm still paying off my debts from a few years ago, but hey it's not that bad right? I've managed my debts well over the years and nothing has gone to collections or is still hanging around longer than 5 years so kudos to me.

193,345.59 I turned 35 last year and took a good hard look at my life. 401K balance: minimal, no other retirement. Manageable debt that left me with a little extra spending cash each month. Basically spinning my wheels. Why? How could this happen? I made good money, I should be in a better position than this! Look at my finances! One slightly major problem and I'm wiped out!

At that point I realized that I needed to make drastic changes if I was going to be in a better position 10 years from now. I got serious about paying down my debt. Started calling for rate decreases and scratching and saving for every penny I could throw at my debts. It wasn't until 6 months ago that I stumbled across the magic bullet formula that we all know as the Snowball. I just kept throwing money at each debt never really seeing any major progress, resigned to paying my debts off by 2016 instead of 2030. I also got interested in exactly how much my profligate lifestyle had cost me over the years so I started contact every past creditor looking for records. The discovery of the Snowball was my lifesaver and brings the light at the end of the tunnel 7 years closer.

So what is 193,345.59? That is the total interest I've paid over 20 years.

And that first purchase? An awesome stereo system. Not a rack type of system, but one of those all in ones. A glorified boom box that I just had to have. Lasted 1 year. And the damned thing ate my favorite tape.
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So what is 193,345.59? That is the total interest I've paid over 20 years.

Great post. Wish it could be reprinted and included in the orientation package of every incoming student in the U.S.

To take your investigation another step, just imagine if the $50 here and $80 there in monthly interest payments to CCs had instead been contributed to an IRA account. Invested in even the most conservative of funds over 20 years, you'd now be a 35-year-old with a huge headstart on early retirement.

Good luck with your snowball,


Jeanie
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Thanks. And I share your wish. Even one semester of personal finances in high school would be a big help to everybody. When I think back on how many years of effort I've wasted it makes me ill. I made a vow last night that I will avoid finance charges like the plague from now on. Credit is a tool, but without education it's a dull blade. Eventually it's going to turn on you.

I think my biggest point above goes back to my mother, and as a corrolary to all the parents out there. If you don't pass the knowledge of credit and finance on to your sons and daughters you are dooming them to a future of at least wasted effort, and at worse credit failure. I've no children of my own, but my extended family includes two teenage nephews that I hold in high regard. I'm going to make sure that they are prepared for what's waiting for them in the next few years.
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Credit is a tool, but without education it's a dull blade. Eventually it's going to turn on you.

Outstanding summary!

Too bad that won't fit on a bumper sticker.

Your teenage nephews are lucky to have a (now) wise uncle :-)


Cheers,

Jeanie
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I think seeing that figure is an amazing kick in the teeth. Can you imagine 20 years ago saying to yourself "I'm going to spend $193,345.59 extra on everything I buy."

I'm curious, though... I've never thought about contacting past creditors to get copies of records. I would assume you'd have to pay to get copies that go back more than a few years at least? Do they even keep records going back 10, 15, 20 years? Or is there a cutoff for most credit card companies? Your post makes me curious about all the money I paid over the years because I just couldn't LBMM enough to pay cash.
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It's extremely difficult getting information out of creditors that is older than 7 years. Due to accounting laws they really don't need to waste the space on storing anything older than that.

I was helped along by a few things. My mother somehow managed to get it in my head to pull my credit report every year. I have paper copies of credit reports going all the way back to 1986. That helped locate some of the creditors.

Another thing, I'm a horrible pack rat. I have a box here in my office of schoolwork I did in the 7th grade. God only knows why I've lugged it around, but it's there. Up until this morning I had 3 large boxes of monthly bills and paystubs going back to 1990. I just finished shredding them all (burned out my old shredder so I had to go to Target and get another one 2 hours ago. Bought with cash.) and I will be lugging 10 large plastic bags out to the back yard to burn. I'm keeping the schoolwork though, sentimental value. I've no desire to keep the old financial records anymore. They are a weight around my neck that I don't need to carry anymore.

Most of the creditors that I contacted were surprised and not very helpful at finding records. One of them wanted to charge me over $500 with no gaurantees that they could find the records. Luckilly they were one of the ones that the bills were still semi-readable on so I took a pass on that.

3 of my creditors had become uncontactable. Either they closed the business, died, went bankrupt or got bought out. I had to estimate from bills.

In short, I don't recommend trying this yourself. If you aren't a packrat it will cost you a lot of money. Heck even my current bank wanted to charge me for records over 18 months old.

But yes, if I could go back I would give myself a solid thrashing. You know what I have left from that extra 193,345.59? A mountain of paper, a pit of debt, one car (10 years old) and one house (still paying). Nothing else. Regrets? Hell yes, but hindsight is perfect. Time to live for tomorrow instead of yesterday or today.
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You know what I have left from that extra 193,345.59? A mountain of paper, a pit of debt, one car (10 years old) and one house (still paying). Nothing else.

Ah, but you also have a nice bonfire to keep you warm for a while. Grab yourself a bag of marshmallows, some chocolate and graham crackers and you can at least get some smores out of it.

Thanks for the info. I figured it wouldn't be cheap and easy to get that kind of info.
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Credit is a tool, but without education it's a dull blade. Eventually it's going to turn on you.

How about this? That without education credit is a SHARP blade and then it could turn on you!!

--George
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Post of the year.

Give 'em the fete award now...
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Actually, dull knives are far more dangerous than sharp. A knife that's too dull to cut the work is still plenty sharp enough to take a chunk out of your soft flesh. And precisely because it's too dull to cut the work, it's far more likely to skip off the work surface and end up in you. Plus the dullness also increases the force you need to apply to the blade to get it to cut, which means when it does skip off it'll hit you that much harder. That's why every craftsman knows to keep his knives sharp -- they're far safer that way.
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I did not know that. Thank you for that info and I will stay away from both dull ans sharp knives!!

--George
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I am so glad this is a Hot Topic - a well deserved post - post of the year - give 'em the Fete' Award - it's done.
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Congratulations on seeing the light and changing your ways!

I just did some quick calculations, and it appears your average debt must have been around $54,000, assuming an average interest rate of 18%. I don't know what the principal payments would have been, but you averaged over $800 a month in interest payments. Of course the amount of average interest payments wouldn't change, but if you managed a lower interest rate, your average debt would have been higher. Having that hanging over me, whether I could "afford" the payments or not, would have driven me nuts, if not to mention bankruptcy, in a lot less than 20 years.

If you had invested those interest payments every month and could have averaged just a little over an 8% return you'd have a cool half million dollars now.

OS
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Are you calling Napoleon nuts? We shall meet at Waterloo at dawn. Bring your bannana, sir.

And your average figures are essentially correct. Remember this is multiple accounts over 20 years. I spent a year in the payday loan trap just as a for instance. $2429.43 in interest.

Or the time I put my mother's rent on the card for a year: $4956.11 over 4 years.

Or hell, look at that first purchase. $250 financed same as cash for 6 months. I didn't have all of it paid off by the end of those 6 months, so retroactive interest charges all the way back. Says here my final payment total was $537.26 What a deal!

Except for one gloomy period of my life, I was always able to meet the minimums and THAT was precisely the problem. I didn't consider myself in debt. Debt is when you can't pay your bills, right?

That idea was endemic amongst my peers. I would go so far as to say that it is still the thinking of the great majority of people. It was a complete paradigm shift when I made the common sense connection between paying someone for the use of my money and debt. Today you and I look back at that idiot and say "Of course,you moron! You are in debt the second you use a card, or take a loan, and pay $.01 interest." Up until a year ago I was simply unable to make that connection. And I consider myself a reasonably intelligent person.


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ClimbingOut added to your Favorite Fools list

Are you calling Napoleon nuts? We shall meet at Waterloo at dawn. Bring your bannana, sir.


This put the biggest smile on my face :)

Scapelands
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We all get into so much trouble because no one teaches us how to handle money. My father was self-employed; my mother a public health nurse but neither of them knew the first thing about investments, saving, retirement plans or how to pass on any strategies to their NINE children.

As a nation, we focus on the next generation's (our children's) education. Prez Bush touts "No Child Left Behind." What is the most important subject a student can learn that will prepare them to be a fiscally responsible adult? PERSONAL FINANCE.

So why isn't anyone screaming to add this subject to the mandatory curriculum taught in every high school in the United States. Why isn't passing PERSONAL FINANCE required in order to receive a high school diploma?

Best wishes on your Snowball. I'm working on one myself and the end is in sight.
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So why isn't anyone screaming to add this subject to the mandatory curriculum taught in every high school in the United States. Why isn't passing PERSONAL FINANCE required in order to receive a high school diploma?


And you're going to pay for adding this how? What subjects will you cut from the curriculum to add this? There is no room in the kids' schedules now for much beyond what is required. This year, my DS cannot take the required gym class, so it has to be waived because it doesn't fit in his schedule given the requirements for academics.

People are already complaining about how high their taxes are that fund education. How do you propose to convince them to pay more to add this?

When was the last time you looked at what is required educationally for your state? In MA, we have to meet NCLB requirements as well as the state requirements for MCAS for a child to graduate from high school. In our high school, the kids have almost no room for electives, so they take classes outside of school to get those things in.

And who do you want to develop the curriculum? Should the credit card companies do that? I can see it now - you can afford anything as long as you can make those minimum payments. No, you cannot. I say if you do not already have the money in the bank for a purchase, then you cannot afford it, but I am not convinced this will be what is taught. I suspsect the course would show how interest rates work and how to shop for a credit card or loan, but there would be no emphasis on what to do so you don't need that loan.

No, I do not want personal finance taught in the schools. I want it taught at home where I can teach my children how to be financially responsible, something we started with them at a very young age. I am also tired of parents thinking that the schools should teach everything, or because some parents do not teach their children something, it should be done in school. The school is not a parental replacement, and we should stop trying to make it such.
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And you're going to pay for adding this how? What subjects will you cut from the curriculum to add this?


Some of it could be incorporated into the math classes, as part of the practice problems. Why not do a compound interest problem as part of learning exponents? Or the Rule of 72 in first year algebra? Or solving for P in the equation A=P*[(1+r)N- 1]/r?

Well, you get the idea. Why use a random practice problem of no apparent significance when you can use a problem that shows the kids exactly why math is important?
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Some of it could be incorporated into the math classes, as part of the practice problems.

It already is incorporated into math classes. They do percentage in math class today.

What I am hearing people say is that they want something in addition to the percentage and compounding that is already part of the curriculum, and they want it as a separate finances class. This is not the same as what is done today and what was done back in my day in school.

I had no problem learning it back then, and I don't see where it's any different today. My kids can already tell you that interest can compound for you in a savings account or against you on a credit card. The fact that some people choose to ignore the effects of interest or consider that they can 'afford' something just because they can make the minimum payment and pay no attention to the fact that the bottom line keeps growing seems like a personal problem. I do not see it as an educational problem when all these people have had basic math, but seem to be refusing to apply it.

I still think it's a case of 'I want it NOW' and not a case of 'I don't understand how continually adding to the bottom line will increase it.' Even if you don't understand exactly how interest rates are derived and charges are calculated, it is not rocket science to see that finance charges are added to a bill monthly when it's not paid off. And by definition, adding increases something, so the amount owed is going up.

No, this is not an educational problem. This is a responsibility problem where the person doing the charging and not paying off the balance is refusing to take the responsibility for those actions, and instead claiming ignorance. That is an argument that I am not buying.
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Some schools do teach personal finance. I took accounting as an elective at my school, and economics was a requirement--stuff like the law of supply and demand, but also how to write a check, balance a checkbook, how interest worked, basic stuff like that.

I have also taken lots of math, and I understand what exponential means. But you have to have some personal insight to connect it to your own spendy ways--at least, it took me a while.


--Booa (but my school was run by nuns, so we were weird)
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Well, you get the idea. Why use a random practice problem of no apparent significance when you can use a problem that shows the kids exactly why math is important?

I remember in 6th grade math, while learning percentages, we learned to calculate someone's batting average. I think it would have been good to explain how someone can be half a game back in the pennant race, as well. :-)


--Booa
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My point seems to have been lost and I wasn't really thinking yet about where in any curriculum basic personal finance would be taught.

We teach our children many things in school that don't necessarily prepare them to be responsible adults. (Early European history comes to mind.) Through generations of poverty, my parents were completely unable to teach any of us anything about personal financial strategies beyond the next paycheck so I had to learn as an adult.

Asking average high school students to make the leap from exponents to mortgage balloon payments is absurd. However, showing them how the interest on their $150 boombox accumulates over 5 years to cost them $350 for that boombox is not. It would be a beginning to show many people a way out of poverty, or debt.

As for the credit card companies, they are starting to do exactly that. Have you seen the recent VISA commercial that shows programs for donating computers to poor schools and teaching online personal finance courses? Is this what we want? If not, then we had better start moving quickly to get something in our schools.

I wouldn't expect education taxes to rise (although politicians will certainly jump on this as another excuse to ask for increases). Instead, I would expect the courses to be made available in high schools for those students who NEED some guidance because there's no one in their lives who can give it to them. We've done the same for educating our children about sexuality, why not help them out in the pocketbook?

If your child is taking a full load of college prep, are they really going to need this course? Of course not. You've likely done a great job educating them about personal finance. But look around at just how many NON-college bound students are in our high schools. How many of them are going into hourly jobs that don't pay a lot of money? Don't they deserve just a little education so they can make better choices when it comes to incurring debt? How valuable would that one high school course be over the next 10 years? How valuable has sex education been for reducing the teen pregnancy & STD rate?
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I wouldn't expect education taxes to rise (although politicians will certainly jump on this as another excuse to ask for increases). Instead, I would expect the courses to be made available in high schools for those students who NEED some guidance because there's no one in their lives who can give it to them.

Of course taxes will rise. Don't you think they will need a teacher to teach this course? What about teaching materials like textbooks or workbooks or even publications? Will the kids need computers for this course? All of these things require funding, and if it's not there now, then it is additional funding. Where will this come from?

Like most people who ask for new things in the school, you don't seem to realize that everything has a cost. Speaking for my own district, I can tell you that every penny in the budget is accounted for and has a purpose. Adding a course would require the addition of a teacher, and that costs money.

As far as asking high school students about finances, I can tell you that my 14-year-old freshmen [I have twins] know how a mortgage works. They know how interest works, and understand that if you do not pay off a credit card bill when it comes in, then interest is accrued. If I had not taught that to them yet, then I would think they'd figure it out the first time they didn't pay off their bill completely because there would be an interest charge on the bill the following month. If they're not reading their bills, then that's an entirely different problem.
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I was reminded of this thread and the discussion on teaching children about money this weekend as I was packing DS's backpack for school, and came upon his latest badge book for the Boy Scouts that he neglected to take out of his pack. It seems he is working on the Personal Management badge, and I'd say easily 75-80% of the book focuses on finances and financial management with the remainder about personal time management.

I wanted to know what they'd be teaching him, so I read the book yesterday. It is actually quite excellent. It talks about the difference between saving and investing where you save for short-term goals in something like a savings account, but you invest for better returns and with higher risk for longer term goals. It talks about stocks, bonds, and mutual funds. It tells the difference between EE bonds and I bonds, and discusses life insurance including a dissertation on some people buy term and invest the difference.

It talks about how to control impulse spending, always paying your credit card in full or end up paying high interest rates, and how compound interest works for you or against you.

It says to pay yourself first, tells how that might be done [i.e. payroll deduction into a 401k], and suggests at least 10%.

It talks about getting credit cards, how not to get sucked in when attending college, and why you might need a loan such as a mortgage, student loan [investing in yourself is the best investment], or car loan, but says that cars depreciate, and buying used can be a really good strategy.

There's a list of references at the back including the Motley Fool website, NAIC website, and a few others. There are a few books mentioned such as the Motley Fool Investment Guide for Teens, The 7 Habits of Highly Effective People, and Kplinger's Money-Smart Kids.

All in all, this looks to be an excellent book, and I'm pleased that DS is working on this badge if only to reinforce what he's already learned at home. We talked about it a little last night, and he really already knows most of the money management stuff, but it can't hurt to hear it from someone else. And if they can find a trick to get him to manage his time effectively, I'll be thrilled.

Anyhow, as we had been discussing ways that kids can get educated, I thought I'd point out what the Boy Scouts do. I know the Girl Scouts have something similar, but I haven't perused those requirements yet.
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