Financial wisdom from Mom

One of the CNMI’s government officials used to mock my humble car. “Why don’t you get a new car?” she chided me, “I know you can afford one.”

I’d just shrug and laugh. That car was the first new car I had ever owned. I bought it in Texas. I loved it so much I had it shipped to Saipan. A good car is more than a car, it is a best friend. I like cars. They’re human, after all.

I remember how shopping for that car steered me into the best financial advice I ever got. That was to be my first substantial loan and, as I was shopping around, I called Mom and told her that I seemed incapable of allowing myself to get an expensive car, as all my friends were doing. Everyone had access to ample credit. Car-wise, the sky was the limit for us. My pals were buying red Corvettes. One got a Porsche.

Here was Mom’s comment: “Money that you haven’t earned yet is easier to spend than money that you have earned.”

Most economists would argue that point. They’d say that the dollar is “homogenous,” in other words, that every dollar is the same as every other dollar. But most of us know that working for money is different than being given it as an entitlement (as if the CNMI needs more evidence of that). So, even assuming you’re earning money and not just being given it, the money you earned really is different than the money you haven’t earned yet.

To me, having worked at a variety of minimum wage jobs as a teenager, along with various youthful freelance work such as lawn-mowing and snow-shoveling, every dollar I had represented some genuine work. It was X-amount of hours selling luggage at a grim, downscale department store; Y-amount of hours shoveling walkways in cold Illinois blizzards; Z-amount of sleepless nights as a security guard working graveyard shift.

A car loan to me was not just a number on paper. It was real money. Yeah, I had a good job at the time, but that wasn’t the point.

But I am in the minority on that. I don’t think that humans are really geared toward the abstract quantification of future events. A loan, to so many people, is just something that happens in the murky future, and the future doesn’t really exist, it’s just a weightless and invisible concept.

I’m not discounting the blessings of credit. And, in fact, I regularly discuss its importance here, especially when it comes to having good credit cards and a good credit score. In particular, I have tried to give Saipan’s U.S.-bound workers some prodding to come to grips with the U.S. consumer credit market, since it influences every aspect of life there, from what you drive, to your insurance rates, to how much you pay for housing, to (in some cases) whether or not an employer hires you.

In the age of mass media and wholesale groupthink, beliefs are usually polarized into opposite camps, and credit is no exception. Many people, at least in the U.S. mainland, will borrow as much as they can until they go broke. Then they’re stuck. That’s one extreme. The other extreme has the atavistic types who think that all credit is some sort of sinister conspiracy; they like to showboat their “independence,” which makes them the temporary hero of the pool hall or the coffee house. The counter-culture hero status lasts until they have to produce a credit card for a rental car, or a hotel room, or a Web purchase, or for Internet service, or, well whatever else.

Then they’re stuck, too. I guess they don’t make heroes the way they used to.

Anyway, back in paradise, many of Saipan’s garment workers have often banked $20,000 or $30,000 or so before returning home, which, in their native lands, is enough to bootstrap them into small-business-owner status, members of the burgeoning middle class. I know of workers that banked far more, so I’m not giving you some high figure for that.

Meanwhile, I’ve seen my share of Americans who have lived comparatively easy lives, who have never held full-time minimum wage jobs, but who are actually worth less than zero because their irresponsible borrowings, oftentimes coupled with their feckless gambling in the stock market, have done the inevitable.

Earned money trumps make-believe wealth in the long run. This wisdom will set the stage for the coming financial turmoil, which is just getting started. Some people in the Commonwealth get the point. Some never will.