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Tavis Smiley and Dr. Cornel West have been working hard to bring the issue of poverty into the consciousness of the citizens and political discourse of the United States. As a team, Smiley and West have been touring city to city, speaking to audiences concerned about the increasing wealth gap in this country. Their book, The Rich and the Rest of Us: A Poverty Manifeseto, is the culmination of their observations of American citizens throughout these travels.

While the economy is technically in recovery from the Great Recession, a vast slice of Americans have not experienced a real recovery. A “jobless recovery,” where the beneficiaries of an improving economy are the wealthy while the middle class struggles with unemployment, is not a real recovery. Despite this disadvantage, the prevalence and pervasiveness of poverty is still astonishing. According to Smiley and West, 150 million people in this country are in or near poverty. That number represents one out of every two individuals — half the country.

Tavis SmileyThe issue of poverty, affecting this number of individuals, is bigger than poverty itself. The government tallies 46 million Americans living in poverty according to the 2010 census and the government’s own definitions of poverty. Many more individuals are affected by poverty because they are living dangerously close. Many middle class households, particularly those already living in debt or in a paycheck-to-paycheck situation, are one lost paycheck away from a dangerous financial situation, and many families are already experiencing a personal decline due to the inability to find gainful employment.

Poverty has traditionally been a problem classified as urban or rural. Minorities have been and are disproportionately affected by poverty, but poverty is not a suburban problem, too. With white, middle-class families now facing the issue of poverty, whether by losing a job or being dangerously close to not being able to afford their homes, the issue is gaining more attention. While poverty is making life difficult for an increasing number of Americans, those in or seeking office, whether Democrats or Republicans, are not concerned. In order to receive a voice in political discourse, you need money. While the United States may have been founded on the ideals of freedom and liberty, these have generally only been granted to an elite selection of its inhabitants. The distribution of social power is expanded only by revolution among the disenfranchised.

Smiley and West contacted Consumerism Commentary with an interest in speaking to me about these issues — to defend their position, and to open my eyes to the realities faced even by the middle class in this country, many of whom are the “new poor.” We arranged an interview for the Consumerism Commentary Podcast, airing Sunday, May 13. Unfortunately, Dr. West was unable to participate in the interview at the last minutes as he was in New York waiting for a verdict after a conviction related to a political protest in that city. Tavis Smiley was able to participate, but our time together was short. We weren’t able to address all the questions I had prepared, but the discussion was valuable.

Listen to the entire discussion with Tavis Smiley, podcast host Jay Frosting, and myself, Luke Landes, once it is available this weekend. Smiley is the host of Tavis Smiley on PBS and The Tavis Smiley Show on Public Radio International. Update: Listen to the podcast here.

In the interview, Smiley dispelled many of the myths about poverty. One such myth is the idea that those in poverty are entirely to blame for their financial situation.

On Consumerism Commentary, I’ve written that taking personal responsibility for your decisions, financial and otherwise, plays the biggest role in achieving financial security and independence. This is today’s American promise: “Anyone can make it in America.” The media love rags-to-riches stories, even if it doesn’t reflect a reality for the majority of Americans. It’s true that this country’s brand of capitalism is favorable to the situations European immigrants left behind. Religious intolerance, a caste system based on ancestry, and an economic system wherein generally only the first-born male would have rights to any property drove pioneers to create a new society or join a country with a promise to create a better life for yourself. Never mind that doing so displaced others who occupied the land here.

Even in this new society, you had to be a member of the elite to receive the rights as endowed. Not everyone begins on equal footing. The lack of early educational opportunities throughout this country is one of the strongest causes of generational poverty. As Smiley addresses in the podcast, Washington state is the home to large multi-national corporations, providing a huge advantage to those who reside in Washington thanks to the tax these companies pay. The educational opportunities in Washington state far outshine the opportunities in Washington, D.C., for example. Until a quality education for the entire country is given priority, generational poverty will continue to exist.

In the interview, we also address the issue of austerity. The concept of reducing the deficit and national debt is and should be a high priority for policymakers, but the timing of austerity measures, such as reducing funding to societal programs, is just as important. Smiley argues that we cannot cut the budget for these important issues when the economy is not “flowing,” saying that the budget is being balanced on the backs of poor people. Budgets are moral documents, and you can determine a country’s real priorities by evaluating where the money is going. If this country does not address the economy for the 99 percent — those who have seen no benefit from this “jobless recovery” — rather than the “1 percent,” Smiley warns of the downfall of the United States as a world leader.

No empire in the history of the world that at some point did not falter or fail. Every empire had its day. Americans don’t want to think we could be dangerously close to the edge… Poverty is the moral and spiritual issue of our time.

Time did not permit us to explore all the topics I would have liked to cover in the interview with Tavis Smiley. For example, I would have liked to talk more about the Occupy movement and getting a national stage for the issue of poverty. In recent weeks, civil rights are again receiving national attention, from the perspective of same-sex marriage. Not to minimize that issue of equal treatment under the law for all individuals, poverty deserves the same attention from our nation’s leaders.

Be sure to subscribe to the Consumerism Commentary Podcast to hear the interview with Tavis Smiley, where we address more topics related to poverty than are outlined above, as soon as it is available. Be sure also to read The Rich and the Rest of Us: A Poverty Manifesto. Update: The interview is now available as a podcast here.

Photo: DC Central Kitchen

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I mentioned a few months ago with my year-end balance sheet that I would soon be changing the way I report my finances publicly. These monthly reports have been a relatively consistent part of Consumerism Commentary since I founded this website in July 2003. One of the original purposes of this website was to help myself take control of my finances and learn more about managing my own money.

After a while, though, the net worth reports, which include not much more than an accounting of my bank account and credit card balances, became less meaningful. At the same time, I stopped myself from reporting my income figures due to the complexities with dealing with a private transaction. I’ve decided to turn back to basics with the monthly reporting in order to focus once again on reducing my expenses.

The report below includes the last six months of my expenses after taxes and not including a few items like charitable contributions and business expenses. It will provide a good baseline for moving forward and determining where I can reduce my expenses and where I can compromise and allow myself more leeway. I’ve already done a good job of eliminating unnecessary expenses in order for me to enjoy certain things without stretching my budget, so reducing expenses might not be as important right now as monitoring my spending to ensure I’m not being wasteful. Continue reading to see my expenses.

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Improving your financial situation requires more than just trying harder. People who write financial websites offering advice often think or imply that the reason for financial misfortune is ignorance of the basics. Recently, there was one website that claimed that the only thing people need to know was spend less than you earn, as if taking this to heart is the single solution to getting your finances on the right track.

There is no switch that you can just turn on, for the most part. In some cases, particularly where someone experiences a major emotional setback — “hits rock bottom” — changing your direction in place works, but that could mean losing a house or destroying a family relationship. A devastating situation isn’t guaranteed for everyone and you may not want to wait until you reach such a low point.

MoneyIf you’ve been living in debt for the entirety of your adult life, you may have an epiphany of some sort and turn yourself around with just the knowledge that your net worth needs to increase at the end of each month in order to become financially independent, but for most people, changing behavior takes much more than desire.

There are certain things you can do to help yourself — and your brain — accept that you need to start improving your financial situations for the sake of your future self and family.

Replace old habits with new habits

Much behavior can be reduced to patterns and habits. Breaking a habit, like emotional spending, can be incredibly difficult because of the comfort that has developed through years of participating in the activity. Shoppers who derive pleasure from spending money may be in uncontrollable debt, and use shopping in difficult times to feel better. Of course, with more shopping and spending more money than is available, this person could experience emotionally difficult situations due to the lack of finances, yet still seek to cure those negative feelings by shopping.

Replace the reaction of shopping with something that makes you feel better without damaging your personal finances. Exercising releases chemicals in the brain that, for many people, enable happy feelings, so one of the best options for replacing a bad financial habit is exercise. Whenever you feel the urge to do something that you know is harmful to your finances, choose to run around the block or work out in a gym.

It might be difficult to make this change at first, but the goal is to make a new habit that can be triggered in place of your old habit. For some time, you may want to overlap both reactions, but after several weeks of consciously using your new habit, you should be able to successfully replace the old.

Resist temptation by making it difficult or inconvenient

Some financial advisers and gurus suggest freezing your credit card in ice or keeping your emergency fund at a bank that’s difficult to access. The more barriers you can place between yourself and your bad financial behaviors (in this case, using your credit card or dipping into your emergency fund), the more success you’ll have in avoiding these temptations.

Combining barriers with habits can be successful, too. Rather than purchasing items from Amazon on impulse, create a habit of waiting 24 hours between your desire and your action. This barrier of time gives you the opportunity to re-evaluate your decision. Twenty-four hours later, you may be in a different mood and decide that you don’t need the item you intended to purchase as bad as you thought you did.

Remove barriers to good financial behavior

While you’re adding barriers to prevent bad financial behavior, you may want to think about whether you already have barriers preventing you from making good financial decisions. Although the stock market has been on a rally lately, medium-term performance has not been great, and the investing industry has attracted a bad reputation through and following the recession and credit crunch. The fear of losing money may be preventing young people from investing in the stock market.

Many investment advisers say that you should evaluate your risk and only invest in a way that makes you comfortable with your possible losses, but an investor’s level of risk aversion could be tied to his or her feelings about the stock market. Risk profile measured this way would then fluctuate. One possible outcome from feeling good about the stock market and willing to take on risk during times of confidence about Wall Street while feeling nervous when the media is taking the financial industry to task is the unprofitable accidental strategy of buying high and selling low.

If you’re young and would like to save for retirement, with a goal of leaving your work behind one day with enough money to pay your expenses, you can’t ignore the stock market. A diversified portfolio may not make you rich over time, but there’s a good chance you’ll be able to retire.

Change your words

The words you choose to describe your financial behaviors will have an effect on your approach to your money. For example, take “investment” and “expense.” I mentioned this phenomenon in my editor’s note after Jennifer Calonia’s article about wedding planning and spending.

One way people often justify or rationalize expenses is by calling them “investments.” For example, one might say, “Spending a large amount of money for a wedding is an investment in your relationship.” Someone else might say, “Going to a private university is an investment in your future.” You should only invest in something when you receive an asset in return, and you are planning for the value of that asset to increase over time.

You may be able to argue that the asset you receive in return for a wedding is a partner who stays with you for the rest of your life. You may receive an emotional asset in return. But in order to be truthful with yourself, consider whether you’re using the term “investment” to justify paying more for a ceremony than you need to. As I’ve written previously, spending money for once-in-a-lifetime event is not a bad way to spend money if you can afford it, but calling it an investment is just a way for you to feel better about your resulting lack of money.

In return for your expense for your college-level education, you may receive assets: your ability to earn an increased income over time when compared with someone with just a high school diploma, possibly, cognitive skills that help you succeed in the world regardless of your job, career, or income, and, possibly, connections that you retain for the rest of your life, helping you with career moves and friendships. The values of these things may increase over time, making the term “investment” more legitimate. The trouble appears when you pay a higher price for education than necessary, calling it an investment.

If you ask anyone who has any experience with finance, a house is an asset and a mortgage is a liability. Yet, some financial gurus continue to insist that a house is a liability. This doesn’t make any sense from a purely financial perspective, but if you look at the connotations of the words instead of the meanings — or if you look at the broader sense of “liability” rather than its financial sense — these gurus might have an argument. A house that does not create cash flow for you (that is, a house that is not an investment with rental income) should be avoided as much as possible. Anything that costs you money is a liability in the sense that is drags your finances down. Although it’s not financially accurate, considering bad assets “liabilities” encourages you to eliminate as many of these as possible and to replace them with income-producing assets.

Politicians and activists use word choice to influence their constituents’ opinions all the time. That’s why we have terms like “pro-life” and “American Recovery and Reinvestment Act.” It’s a form of manipulation, but if you’re using this technique to benefit your financial situation, no one can blame you for misdirection.

Using these tricks — replacing old habits with new habits, adding barriers to bad behaviors, removing barriers to good choices, and changing the words to describe what you do — can help you overcome the difficulty of putting what you know about “spending less than you earn” into effect. There’s a bridge between knowledge and action, and unfortunately, many people mistakenly think that the reason so many people in the United States are suffering financially is due to lack of knowledge. The prescribe solutions like money management class in high school and other financial literacy initiatives. Having more information is not going to solve financial illiteracy. On an individual or family level, taking steps to modify behavior will certainly move finances in the right direction.

khrawlings

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According to the Federal Reserve’s research published last week, overall American credit card debt increased at an annual rate of 7.5% during the final quarter of last year. This could mean that consumers are feeling more confident about the economy and are willing to take the risk that they will have money in the future to pay off debt. These numbers are seasonally adjusted, too, so it’s not a result of holiday spending.

For any individual or family, increased use of credit cards might cause financial turmoil if debt spirals out of control. Even people who understand the guiding principle of spending less than you earn can fall into a debt trap if they spend what they expect to earn rather than what they have in the bank to cover their debt.

Credit card debt consolidationAt some point after a period of indiscriminate spending, the monthly minimum payments on total credit card debt could exceed leftover cash flow after paying for the necessities like food and shelter. This might be a good opportunity to consolidate the credit card balances onto one card. This has the benefit of, in many cases, lowering your total monthly minimum payment. Additionally, you might find a way to significantly lower your interest rate. Of course, if you pay less towards your credit cards, it will take longer to get out of debt, but in some cases when cash flow is tight, having the extra income at the end of the month for saving or for meeting all of your ongoing expenses is more important.

In a perfect world, you would be able to transfer all your credit card balances onto one card that has the following features:

  • 0% APR for the life of your balance.
  • No balance transfer fee.
  • A low minimum monthly payment requirement.

The best credit card is going to be difficult to find, and if you do find one that meets these criteria, it may be out of your reach in terms of qualification. The goal is to find the best deal you can, either from within your current cards or by applying for a new 0% balance transfer credit card.

Start by calling the number on the back of each credit card. Explain to the customer service representative that you plan to move balances from your other cards to this card to pay off your debt, and ask for their best deal for balance transfers. You may find that the issuer offers you an unpublished deal. Be sure to ask about introductory APR, length of the introductory term, regular APR for balance transfers after the introductory period expires, balance transfer fee, and monthly minimum payment.

At the same time, while you’re talking to the customer service representative for each card, you might want to take the opportunity to ask for a lower ongoing interest rate on your card. It can’t hurt. It’s easy to ask, and you might get a cost-saving result immediately.

Don’t make the decision on the phone, however. Write down the terms the issuer offers and do the same for all other cards you own. This will help you compare the offers with the published offers from issuers offering balance transfer deals. Once you compile all information, you can make an informed decision about the best card for consolidating your credit card debt.

You may also wish to compare these offers with a loan for consolidation. Many people have had luck asking for a loan on a peer-to-peer lending network like LendingClub and Prosper, but your state may regulate what you are able to receive through these services.

Watch out for companies that offer to consolidate your credit card debt. Many charge an up-front fee and don’t provide any kind of cost savings beyond what you could easily achieve on your own. At worst, some charge an up-front fee and disappear. If you must seek outside help for your debt, go to a well-vetted non-profit organization that will provide advice, not charge you for their services. Even with this in mind, you’ll need to be careful; some companies appear to be non-profit credit counseling agencies until you look very closely.

Once you transfer your balances to a card, don’t use that card for any other spending. It should be dedicated to paying off your balances over time. Also, don’t immediately close your existing credit cards. You can cut them up, leaving one for emergency spending until you build up an emergency fund in the form of a savings account. Closing your credit card accounts might damage your credit score at a time when you might prefer to keep your number as high as possible.

When I first realized I needed to get out of debt and I had balances across several credit cards, this was one the first steps I took in order to get my finances organized, save money, and find a way to get and stay out of debt. What are your suggestions for consolidating your credit card debt?

Photo: sovietmole
Federal Reserve

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