Archives for August 2013

There’s Tim Cook! Oh, and there’s Eddy Cue! Look at their styles and panache, as they deliver the most anticipated presentation of the year. I’m literally salivating at the beauty of the devices being introduced. Pop open the soda, chips, candies, and settle in. This is like watching the Super Bowl of technology; except, the entire show is one big advertisement for Apple.

New software, hardware, and features are all wrapped up in their presentations. Every time you see the Apple logo, music, and a powerful CEO take center stage, you know you’re going to see something new. This bastion for consumerism is also one of my favorite things to watch. I’m a technophile, iPhone 5 owner, and (previously) wasteful smartphone upgrader. I want to be in-the-know. In the past, it also meant spending a small fortune each year on unnecessary gadgets – made to make my life easier – that was causing me to go into deeper debt. The irony.

Contracts And Upgrades

In case you’re waking from a coma, the 21st century has brought great technological revolution. But it’s also meant fine print, two-year contracts, and plenty of strings attached. For phone buyers, most people are stuck overpaying for service and not able to leave a company for fear of hefty termination fees.

This puts many smartphone buyers in a bind. Technology evolves faster than two-year contracts. For the desperate, iPhone buyers can expect to spend over a half grand to upgrade outside of contract. In fact, to get the 64 GB iPhone 5 off-contract, you’ll spend about $849 before tax. That’s a hefty fee to have the latest technology in your pocket.

Apple’s Release Cycle

Despite a sizable population being excluded from an upgrade every year or so, Apple developed its own, ambitious release cycle. Every year, the iPhone gets an upgrade.

Here I am, watching another wonderful release date. What will come out next? These guarded devices are shrouded in secrecy and speculation until the moment it hits the stage. What a wonderful sight!

But there’s a fundamental quandary that encourages people to spend more than they should: upgrade now or later?

Upgrade Now And Later

The product design appears flawless, and the iPhone has been poured over to check for flaws and areas for improvement. You could literally be holding the latest technological innovation if you buy it today.

Maybe you’re like me, and bought your first iPhone a few years back. I’ve had them since the 3GS. Every year, prior to my frugal life, I would upgrade to the newest version. My bank account took a beating because of this wayward spending, but I didn’t seem to care.

See, Apple may be flawless designers, but they are even better business people. They’ve studied consumer behavior, reaction, and sentiment. They know how to make the most money they can and still keep you happy.

Here’s the secret: Every year, they design a product that is mostly evolutionary, but borders on revolutionary for the device (they even use this terminology in their speeches). Each year’s redesign is minor, but important. Between iPhone 4 and 4S, there wasn’t a major design change, but users got to experience “Siri” in the latter version. Between 4 and 5, there are major, visible distinctions.

By changing the phone a little bit every year, it attracts people from two years back. Their phones are feeling ancient compared to this technology, contracts are due to expire, and they want the latest version. But the important part is that the changes are just enough to attract people that are one year into contracts, too.

Now, the two-year old iPhone holders are instantly ready to upgrade. They see no reason not to! The one-year old iPhone owners are carefully protected. Apple doesn’t want you to feel like your device is already outdated – even though it is. Because Apple creates an evolutionary device, owners can feel good about keeping their product – knowing it’s still relevant and feeling respected – but also have the burning desire for that next new thing. That’s the sweet spot: between respect and desire.

Innovation, Stifled By Planned Growth

Technology was never meant to be choked back by product cycles and plans. Apple can blame the small changes year-to-year to technological limitations, supply-chain management, and various research and development functions. The honest truth is that they likely hinder growth to assuage current customers and lure in new ones into a perpetual, yearly buying cycle.

Development can be anarchic. When major corporations hold the keys for improvement, sometimes they control the growth rate to aid in profits. But what if corporations lost this control or willingly gave it up? How fast could our technology change, then?

Either way, I’ve gotta stop watching these keynote speeches. I’m afraid I’ll be lured into buying an iPhone 5C.

I’m lucky to have such fantastic friends. They’re an exciting and diverse group of people that continually test me. They know just how to support me when I’m at my best or worst. No doubt, I’m here today, a graduate student, because I had fantastic friendships and relationships to guide me here. I owe them a lot. But, did you know that friends affect your budget, too?

Friendly Budgets

…People who felt lonely or isolated were 87 percent more likely to make a risky financial decision than those with social support. (Source)

As the study stated, loneliness begets risky financial decisions. It’s important to realize that spending carelessly goes beyond self-control. Instead, successful budgets are all about preparation.

Even temporary feelings of social isolation—say, if one of your buddies blows you off this weekend—can trigger stupid monetary decisions, Duclos says. To protect your bottom line, spend a few minutes online looking through your own Facebook pics if you’re solo. (Source)

If you feel yourself becoming vulnerable to loneliness, get social. Find organizations that may alleviate isolation and aid in friendship development. Be active and mindful of growing desires to go shopping and notice when these arise. Maybe it’s loneliness, and not that those jeans look amazing.

Depression And Spending

We’ve long known that loneliness and its consequence, depression, have terrible psychological effects. Needless to say, when you’re depressed or saddened, you’re more likely to spend. The quick fix and high of spending can entice, but the long-term effects are quick to wear off.

This is an unfortunate fact for your budgets. Psychological distress and careful spending don’t get mix. By being proactive, you may be able to circumvent increased spending and spiraling budgets, but you may want support.

Bring Your Friends

Becoming frugal isn’t usually a solitary venture. It requires soul searching and introspection for overcoming some of life’s greatest financial pitfalls. But it also necessitates including friends and family – roping them in to help encourage you along the way.

Early on in my Frugaling journey, I began telling people about my debt, plans for saving more, and how I was beginning to cut costs. I started bringing lunches to work and school. By making my frugality visible, I was also holding myself accountable in front of those that support me most.

There’s a tragic movement afoot that characterizes and stereotypes Millennials. Media powerhouses have latched onto contorted, shortsighted views. This wholesale disqualification is embodied in Time Magazine‘s “The Me Me Me Generation” cover and articles.

As the cover states, “Millennials are lazy, entitled narcissists who still live with their parents.” Without a critical curiosity, you may read the article and think, “Wow, this generation really is the worst yet.” Unfortunately, vitriolic articles are commonplace about Millennials and the effects will likely damage us all.

Them vs. Us

The consequence of overindulgent, everlasting news outlets is that they simplify and repeat. With 24-hour, cyclical news, it’s often filtered for mass audiences. The consequences result in Them versus Us debate. Stories are painted in black and white – watered down for easy consumption.

Millennials likely have very little different from the parents and predecessors. Even though rapid social change has occurred, the generations are largely the same. Regrettably, media outlets continue their onslaught – wrong as they may be.

Damaging Disqualification

Here’s the cold, hard data: The incidence of narcissistic personality disorder is nearly three times as high for people in their 20s as for the generation that’s now 65 or older, according to the National Institutes of Health (Source)

Time Magazine would like you to believe that they’re only dealing in facts – no opinion, assumption, or personal perspective. They cite an article from the NIH that suggests, when compared to those 65 or older, Millennials are three times more likely to suffer from Narcissistic Personality Disorder (NPD). This severe psychological disorder brings with it heavy consequences. NPD sufferers often have a lack of empathy, arrogance, need lots of attention, and preoccupied with thoughts and fantasies regarding success and others’ admiration.

There’s nothing flippant about this disorder. Despite popular culture and media interest, narcissism in a psychological sense is terrifying. Yet, the author of this Time article throws it around. And yet, a very small minority of the population actually has narcissism.

Unfortunately, this is poorly understood and disrespectfully used in the context. In these studies that compare narcissism over time, it’s important to realize that they’re are longitudinally-based; meaning, you’re getting a section in time. By analyzing rates of NPD across generations in this single subset of time, you risk missing the bigger picture: increased rates of “narcissism” (I’d say, selfish) at this time of life (to an extent). Secondarily, that people lose this selfishness and self-centeredness as they age. This would require a latitudinal (over time) study with a consistent psychological definition of narcissism (which rarely happens, as the DSM gets updated every decade or so).

Economic Upheaval

The report says nearly every group is worse off than four years ago, except for those 65 to 74. Some groups have experienced larger-than-average declines, including blacks, young and upper-middle-aged people and the unemployed. (Source)

Vast economic upheaval has left this generation feeling abandoned by political powers and past generations. Rising unemployment, staggering student loan debt, and lessening social mobility all confluence together into a torrential problem for everyone. By writing these caustic articles, Time Magazine and media outlets like them are downplaying these significant social issues.  If anything, “Generation Me” is asking to be remembered before this country abandons them.

In a recent Rolling Stone article on the crisis of student loan debt, Matt Taibbi takes aim at this $1.2 trillion problem. Rather than blaming individuals for suffering the crushing burden of out-of-control student loans, he takes jabs at a system that has failed lower and middle-income populations. Students of the millennial generation suffer through the most onerous tuition fees and rising costs amidst state tax revenue shortages.

Frankly, the majority of us don’t have time to sit around and bask in our reflections, as Time’s article suggests. This generation is struggling to make ends meet. The economic distress of our time is changing the minds of our youth. We are a tougher group, and we’re fighting tooth and nail to change our situation. And as we hope and work for a better future, media outlets criticize these efforts – labeling them as narcissistic and lazy.

We must move away from pejorative labeling and accept a more peaceful acceptance of other generations. Many came before us and many will follow. Why create such demons in those to come? Everybody should be saving and contributing to a better future.

The United States is home of the free, the brave, and the in-debt. We are a people and country swimming in the loathsome tide of I.O.U.s. It’s painful to self-correct or change a path that’s been forged by our predecessors. Workers are paid less than ever (when controlling for inflation) and students are practically forced to take internships that pay nothing. We’re lining our shelves with stuff and our pockets with receipts.

Nearly everyone in America recognizes that something needs to change. Our spending habits need to be curtailed. We must develop a critical-consumer mentality and protect ourselves from the threat of spending outside our budgets. That’s why I started this site – to engage an audience and self-reflect about the choices I make. But sometimes it feels like it’s fruitless in a system that’s stacked against those working tirelessly for a better life.

There’s a continuous drumbeat-like debate inside my head over the balance of personal and governmental responsibility. There are choices we can make that help alleviate debt, overcome student loans, and craft a better future. When we sign a loan, it’s an acceptance of the terms and conditions (whether you’ve read them or not). The burden of responsibility is clear, but the system seems to be stacked against us, too.

Recently, The Washington Post published an article on the staggeringly-low minimum wage in America. It’s $7.25.

Most developed countries have a higher minimum wage than we do…The U.S., unsurprisingly, is on the bottom but it’s tied with Japan. (Source)

In comparison, Australia’s is $16.88. The words “unconscionable” and “immoral” flutter and flicker in my mind. How can we pay such unlivable wages? Even before taxes, you can’t live off of $7.25 an hour. Never mind budgeting, saving for retirement, giving to charity, and a wealth of good that’s talked about in the personal finance community. The cards feel stacked against those with less – they have an even larger hurdle to balance their spending.

In fact, McDonald’s came under close scrutiny from the popular media over it’s partnership with PracticalMoneySkills.com. The McD’s sponsored site offered budget tips and an outline for how to make the most of your income (You can download the “Budget Journal” here). The budgets left you with a plan to:

…save $100 a month to realize long term financial goals…the purchasing power of the minimum wage has been on a general downward path since 1968, when it stood at $1.60—the equivalent of $10.70 in May 2013 dollars.(Source)

A fallacy exists about minimum wage. It goes like this, “Minimum wage is a stepping stone to a better life. This is where people get their first jobs before college. You have to work your way up.” Ever heard it, said it, felt it? Maybe I can’t dissuade the belief in ~750 words, but I want to tell you that’s a myth. Here’s why:

The average age of a fast-food worker is almost 30 right now. (Source)

Simultaneously, the youngest, most financially unprepared age group, is accepting non-paid internships at alarming rates. These bastions for experience and career networking have turned into a previous generation taking advantage of youth. They’re not protected by legal authority, can be let go at will, and experience no direct financial gain from today’s non-paid internships. And yet, students and recent graduates continue to work for free.

Because of this, we’ll likely see a greater splitting of income groups – a caste. Lower and middle-income populations are placed under financial duress when accepting these future-oriented opportunities. Maybe they’ll unlock doors to careers that pay well and allow for budgets to flourish. But the risk may not be worth the reward. Regardless, at times, it feels like the system is stacked against the greater whole.

Even at the top – in the White House – interns are not paid. If, the White Whose pays their interns, the cost to taxpayers is estimated to be around $7 million dollars at a $9 per hour wage. Incredible and expensive, but a infinitesimal fraction of the country’s budget. Our most competent and motivated youth receive White House internships – it is a true honor. But what if you couldn’t accept it because you’d fall into greater debt or need to support a family?

We need a gut-check, America. The status quo is painful, disorganized, and stacked against the majority. The pejorative wages and non-paid internships undercut the fabric of opportunity and the livelihood of our American dream. Employers need to be encouraged systematically to raise their minimum wages, offer more financial incentives for internships, and bolster the bottom. In turn, individuals should react accordingly by saving more, planning for retirement, and taking responsibility of this gift.

What do you think the federal government should do about minimum wage? What’s been your experience with non-paid internships? Are they fair?