Friday, August 28, 2015

Financial Illiteracy

When I graduated from Loyola Chicago in 2010, I graduated as a highly privileged millennial, financially atypical from the rest of my generation. Thanks to many academic scholarships and overly-generous parents, I managed to escape student loan debt altogether. (There were some small loans in my name, but I paid them back during college by working part-time at Borders, and I paid my parents directly, while they actually dealt with the banks.) Immediately upon graduation, I was hired by a company that paid me very well and gave me very good benefits--again, not something that happened to most people my age. Sure, I'm type-A, I'm a hard worker, whatever. That's not the point. I was (am) extraordinarily lucky, and I'm grateful for it.

I worked at that well-paid job for three years. (Full-time, that is--I still work for them part-time and remotely.) My salary was large enough that I had the luxury of not having to budget in any formal way. I knew what my rent was, what my share of the bills roughly was each month, and I never had to make a high-ticket purchase of any kind. I was living in Chicago, where the public transit is great, so I didn't have to worry about a car. I had health and dental insurance and a 401(k) from my employer. Because of all this, I saved up a decent amount of money--without having to think about saving it. There was never a fixed amount of money I set aside each month or anything like that. It just pooled up in my account, and I worked hard enough that my boss kept giving me raises.

While all this sounds ideal--and it was, in many ways--I decided to leave that job to pursue my fiction writing MFA. Rather, I decided to do that assuming I could get into an MFA program that would give me a full-ride and a stipend, as I wasn't willing to go into debt to do it. And in another ridiculous stroke of luck, I was accepted by the program here in Vegas. So many things that have happened in my life are based almost entirely on a shiny gold fairy-dust foundation of good luck. I'm constantly nervous that my luck will disappear and everything will collapse.

Anyway, even though the MFA program is (mostly) tuition-free and does provide a stipend, I knew that I'd be taking a significant pay cut to come here, and that I'd probably have to eat into my savings to a certain extent. And that's exactly what happened. I've still got a cushion, but whereas that cushion used to be stuffed with down feathers and covered in silk, it's now more like a stylish throw pillow from Target. For whatever bullshit bureaucratic reason, the university doesn't start paying us until October 1st, so I still have another month until the end of the salary dry spell. Therefore, I've been thinking a lot about finances lately--especially since I'm graduating in May and will have to figure out something else to do with my life.

Here's the thing: I don't understand anything about money, and it causes me a great deal of anxiety.

Let's start with my 401(k), which I still have. What is a 401(k), exactly? I know I put money into it, and my employer matches some of it, and then when I'm too old to do anything interesting with that money I supposedly get it back. I know that the money is in stocks. I think? Or "mutual funds"? Which are possibly many stocks bundled together, but I could be wrong. What does the title "401(k)" refer to? What does the "k" stand for? If it's retirement savings, why doesn't it have a nice, comforting name rather than something that sounds like a tax form or a mile marker? There is an online account where I can check on and adjust my 401(k). I have never checked on it. I don't remember the password.

How does the stock market work in general? When I was in 7th grade we had to do a stock project, where we got into groups and pretended to buy stock in various companies. The thing I remember most is that my group invested in Krispy Kreme, and when we went to our local Krispy Kreme and told them that, they gave us free donuts. (Donuts!) People seem to blame stock market problems on the president, but I don't understand what the president has to do with it at all. He's just one person; he can't magically raise and lower the price of stocks. Also--the price of stocks falls when people sell their stocks, right? That's why the price falls? So couldn't we just solve the problem of stock market crashes if everyone just bought stock and never sold it? Or sold it in only very small increments from time to time? Wouldn't it at least stay relatively even that way?

I understand what interest is. I think. If a bank gives you a loan, they charge you for more than you're borrowing because they're jerks, and you have to pay a certain percentage more each month so that they get their cut. Please tell me this is what interest is. I'm pretty sure that's what it is. But how do they decide interest rates? Do banks just get to decide willy-nilly? Are there laws about it? Also, I've heard about people "refinancing" loans and getting a different interest rate. How the hell does that work?

Let's move on to health insurance. What on earth is a deductible? If I'm not mistaken, it works this way: I pay a ton of money for health insurance, and then they make me pay even more money before they actually provide me with the service I paid for. How is that even legal? Isn't that fraud?  It seems as though every time I think my insurance will cover something, it doesn't cover it. Out here in Vegas, it's pretty good as long as my problem is something the student health clinic can take care of. If I have to go see a specialist, it's very expensive, even if I have a referral. Which is why I'll just eat bland foods to deal with the weird stomach issues that have been plaguing me for months and months and months rather than go see a gastroenterologist. I don't think I can afford the many hundreds of dollars it would take to do that, especially if it required multiple trips. Maybe I could technically afford it, but I certainly don't want to pay it. Why do we trust health insurance companies if it's in their financial interest not to help you when you're sick? I'd give anything for socialized medicine. #BernieSanders2016

As I'm sure you're beginning to understand, I am truly oblivious when it comes to financial matters. And I suspect I'm not the only one. The worst thing about it is that even though I know I should understand all this, I have absolutely no desire to learn about it. For one thing, as I mentioned earlier, it makes me extremely nervous. Just writing all this down I'm feeling panicky--throat tight, quick pulse, all that. But the other problem is that finances are utterly dull. There's nothing interesting or beautiful or whimsical about numbers, so my brain tries to forget that they exist most of the time.

There really should have been a required course about all this in college--or even in high school. Because there wasn't, I can only hope that I'll write a bestselling novel and become filthy rich so I can hire a financial planner and personal accountant. I suppose I can also hope that there's an app for that. Hey now--Buzzfeed informs me that there are many apps for that! Maybe I won't end up homeless and starving after all.

1 comment:

  1. Read any of Suze Orman's books - there is a good one I read called "Women and Money". She really breaks everything down so it's easy to understand, and tells you what is important to focus on at different stages of life and financial situation. Bottom line - your 401k is great, but you should open a Roth IRA. 401k's defer taxes now, but Roth IRA's are tax free at retirement. Also, saving so that you don't see it - set up automatic monthly transfers of a certain amount to your savings and retirement accounts. If it just happens, you dont' have to think about it, and you won't be tempted to spend money that isn't there in your checking account. I love personal finance stuff so if you ever want to chat about it let me know! also, I love Mint.com for tracking personal finances as well!

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