Friday, January 5, 2018

For Richer, For Poorer

A marriage or relationship is based not only on emotions, but economics - and the two are inter-related.

A reader writes, citing an article from the New York Times, asking if a person's student loan debts (or other debts) should be taken into consideration when getting married.

And the answer is, of course, yes.  A marriage or relationship is an economic relationship as well as an emotional one, and if the economics don't work out, well, divorce is in the cards - an even more expensive proposition.   Money troubles are the number one cause of marital discord, so it pays to have your financial house in order, if you want your marital house in order.

A good marriage should be a benefit to both parties - it should be a 1+1=3 situation, where the two of you are better off together than apart.   Otherwise, you are little more than roommates, sharing a flat, and maybe some living expenses.   And sadly, a lot of marriages are that way - with strangers living in the same house, their lives occasionally intersecting for a few hours a day.

In the Times article, a young man broke off an engagement when he found out his wife-to-be rang up $170,000 in student loan debts getting a degree in photography.   Not only was this a sign of poor judgement, she previously told him she only had $100,000 in debt.   A marriage based on poor financial planning and misunderstanding from the get-go is not going to go far.

This level of debt for a degree that leads to a $35,000 a year job (if you are lucky) also shows an alarming lack of judgement and a tendency towards self-indulgence.   Today, you can go to college and borrow a staggering amount of money - far more than they would let me borrow when I was in school.   Back in the 1980's and 1990's, I could only borrow money for tuition, and perhaps dorm fees (and even then).   I was expected to pony up some money of my own.   As a result, I borrowed a lot less, proportional to the overall tuition and costs of attending college.   I also worked - which is why it took me 14 years to finish my education.

And before you go off saying, "Well, college was less expensive back then!" let me point out that I ended up with $38,000 in student loan debt, which today would be nearly $70,000 with inflation, or about twice as much as the average student loan debt today.   I paid it all back, too.

Today, sadly, it is possible to borrow far more, and students are doing so, as they are young and have little impulse control.   When I was that age, I had no impulse control, either, but the banks were better at saying "no, you can't have that" - although I was able to saddle myself with some pretty hefty car loan debts and whatnot, nevertheless.

So this young man is contemplating marrying this young woman.   It sounds like she must have had a good time in college and didn't lack for anything, borrowing from tomorrow to have a good time today.   And she apparently never did the math or made a realistic assessment as to whether her career would pay enough to service these loans.   She had no idea how much she had even borrowed.   The portrait painted here is one of self-indulgence, self-deception, lack of foresight, lack of insight, and lack of, well, common sense.

(And I suspect that there is a lot more to the story than what is reported in the Times.   Perhaps this lady wants to paint her finance as a shallow money-grubber who ditched her once he saw the debt load.   Maybe that is true - maybe there is something more.   Would you want to marry someone who washes your dirty laundry in a New York Times article?  I think the groom-to-be dodged a bullet here.   The problem for the lady in the story is now, who would want to go out with her?  Hey, if it doesn't work out, you'll be the subject of a newspaper story.   What's not to like?)

Once you marry this, these student loan debts are now your debts.   And it would be no great shocker if the wife decides not to work anymore once the two of you are married.   With that level of debt, forget about buying a house, or much of anything, for at least a decade.   Her financial problems are your financial problems now.

Plus, you may be married to someone who "wants it all now" and is not willing to make sacrifices for a sound financial future - or even figure out how much they really owe.   No wonder the guy bailed on this.   Getting laid regularly isn't worth it (and you know the old joke about how to stop a woman from having sex - marry her!).

It reminds me of the first season of Glee, where Will Schuster's wife wants a new house with a "sun nook" and won't take no for an answer - and is unwilling to compromise.   "I don't want a used house for my child!" she chirps - but of course the pregnancy was later found out to be faked.   Do people really do horrible things like that?   You betcha.   So it is better to figure this out before you marry it.

The Times article also profiles a medical student who hopes to become an emergency room doctor - a position that can pay well into the six figures.   Is it worth the $250,000 she has already rung up in debt?   Was a study program in London really worth it?  Some might argue yes - the job will pay off the debt.   But suppose you don't get the job?  Suppose, like me, you end up dropping out of college - and not getting that big-ticket job that was supposed to pay off the loans?

It happens - in fact to about 1-in-3 college students.   And they end up saddled with debt and no way to pay it off.   Even some folks who end up getting the job find that the pay isn't what they thought it would be, and still struggle with the loan payments.   In the law field, many young people had the rug pulled out from under them in 2008 when the market for young graduates basically collapsed.   One local Judge I talked to called it the "lost generation" of law students, as many never found jobs in the legal field, and after 2-3 years unemployed or working in other fields, could not compete with the fresh crop of graduates coming down the pike.

Luxury student housing, delivery foods, designer clothes, brand-new cars - these are the talismans of a college education today, or indeed, even back when I was in college.   Some choose to scrimp and save, as I did, and learn to do without - or work for a living while attending school.   I delivered pizzas to students who tipped me with money that came - directly or indirectly - from student loans.  They borrowed, I worked.  They gave me money, I took it

Whatever the degree, whatever the situation, there is a way of reducing costs.  You can go to a less expensive school, you can learn to do without fancy clothes and restaurant meals.   You can drive a used car.   One young man I know got his grandmother to co-sign a car loan while in college, using the old rubric, "I need a reliable car to get to class, grandma!"  He made all the payments - using student loan money, basically making loan payments with borrowed money.  That's paying interest on interest!

Once he graduated, he found out that life sucked.   The "high paying job" wasn't there (it never was, of course) and he had to pay back all these debts.   He went back to grandma once again, as his car was now "five years old" and "unreliable".   He thought about going back to graduate school and running up more debt, not because it would lead to a job, but because college was a lot more fun that working, and he wanted to go back to those fun times. 

This is how people think - if you can call it thinking.   It is really more of emotional impulses and the "I want, gimmie!" mentality.   They are not taking from you and I, of course, unless they default on their loan payments.   But they are mortgaging their own future, which is a sad thing to see.

The days of the "starving student" who lived in a roach-infested apartment or a dorm room, who either had no car, or had some rusted-out hand-me-down from Mom and Dad, are long gone.  Colleges and Universities are building luxury student housing, and high-end retail stores and upscale restaurants now ring college campuses - and are full with young students spending money they don't have.   Like I said, they wouldn't loan money to us back then like they do today.   And loaning huge sums of money to 18-year-olds is scandalous.

But it ain't about to change.   Students need to be more astute about borrowing - and parents need to sit down with their kids and discuss how much to spend on college.   Sadly, that isn't likely to happen often.   Reining in student borrowing isn't about to happen so long as the bankers make money from this scheme.   Kids will never learn to say "no" in a society that infantilizes young adults until age 35.   Parents are often as clueless as their children with regard to financing.   The over-mortgaged Mom and Dad who have nothing in their 401(k) are not likely to give sound financial advice to their children.

Nothing is going to change externallyIt is entirely beholden upon the individual to look out for themselves.   That's the harsh reality of it, like it or not.  The good news is, the stories you read about in the paper are usually outliers.  The Times argues that running up six-figures in debt isn't hard to do.  But the reality is, the average student loan debt in America is about $35,000 - hardly the crises proportions the Times rants about.   But you would not click on a story that talked about students who borrowed modest amounts and figured out in advance how much they could realistically afford to borrow, would you?   Sadly, the Times is click-bait news these days.   All news is fake news, particularly today.

Getting back to marriage, it doesn't matter if it is the husband or wife - marrying a debtor is marrying the debt.   This is not to say that this is always a deal-killer, only that one should think carefully not only about these sort of debts, but what they say about the character of the debtor.

For example, we rented out a duplex to a young couple who were just starting out in life.   They got married and had two kids - one of the literally on the living room floor of the duplex!   They were good tenants and reliable people.   But before they were married, the husband-to-be was like I was at that age - no impulse control.   He "got into credit card trouble" as most Americans do at least once in their life and ran up a pretty impressive amount of debt.   He was just being a party-boy and hanging out with his buds and doing stupid things like "picking up the tab" to show off.   That and buying toys and junk he couldn't afford.  He ended up in bankruptcy.

His wife was more financially astute, and she came from a fairly affluent family.  Before they got married, they sat down and discussed their finances openly and honestly, and worked out a plan to pay off the remaining debts and to start down the road to fiscal responsibility.   They wanted to raise a family, and that is pretty deadly serious business.  And like I said, it worked out well for them.   Communication is the key.

In other relationships, not so much.   A lot of people "don't like to talk about money" which I think is idiotic.   It is not that they have some Miss Manners idea that it is tacky, or that they are embarrassed by how little or how much they make, but rather it makes them anxious as they have no idea how much they owe, or indeed what they are spending every month.   You start talking about investments and spending and they get nervous, as they have no savings and they pay the minimum amount on their credit card bill every month - without even reconciling the charges!   They are probably still paying on an AOL account and don't even know it.

And that right there is the key to overcoming this problem.   I am sure that there were more issues that just "student loan debt" that caused this engagement to break off.   But getting your financial house in order is probably a good idea if you want to attract a mate.   Again, a relationship is financial as well as emotional, and if you are bringing nothing to the table other that liabilities, then you are a liability as well.   Figure out how much you owe.   Figure out how much you are spending.   Figure out where you can cut expenses in your life (we all can, you know!) and put that money toward paying down debt and building up savings.

Putting your head in the sand and just "not thinking about it" is probably the worst possible way to deal with things (or more precisely, not deal with things).  Eventually, you will have to confront your financial situation.   The longer you put it off, the worse the reconciliation will be.

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