22 November 2005

Economic Slavery: Nina

Nina is 38 years old, has an 11-year old daughter, lives as a single mother in her own home, works for the government, makes $44,000 gross a year and she hates her life.

Not all of it, just the part that has to do with work and money. Owner of 3 credit cards, two of which are maxed out, Nina has a credit card debt of $17,000...at almost 20% interest.

Nina also is the proud owner of two "easy payment" loans, both for $5,000. Both loans have an interest rate of 26%. The first she took out in 2002 to take her daughter to Disney World. The second she took out late last year to take a cruise and shop through the Caribbean.

She refinanced the first "easy payment" loan in early 2004 to put a down payment on her car. On the contract for the refinancing, which Nina admits she didn't read, is the total amount she is paying for that first loan: $14,650. She took out $5,000, minus fees and ends up paying a little over $9,800 more for using $5,000.

The car? A 2005 Neon. Her "old" car was a 2002 Lumina. Her house? Pays $635 a month and having owned it for 12 years, she is considering taking out a second mortgage.

Nina's take-home pay is about $3,400 a month, more than twice the median family income for Puerto Rico. She has only one child, who is healthy, and attends a "cheap" private school (about $300 a month.) Nina is not so healthy: she consumes prescription painkillers in high quantities to deal with the "migraines" she gets at work. She can't wait for the weekend, takes frequent sick days, often goes out for long lunch hours and then, wracked with guilt, works like a demon for a week or two, only to slump back into loathing her job.

A job she feels she can't quit. Nina has no savings nor any investments. Her monthly debt load is $2,845 without adding in food and utilities. Nina and her daughter "live" on about $555 a month. To make ends meet, Nina often uses the employee's credit union for "short-term" loans, making her even more dependent on a job she can't stand.

Sure, you can say, Nina's an idiot. But is she? She makes more money than most people here, owns her house and lives the "normal" lifestyle of paying twice for education, buying a new car before the old one warranties out, taking a big vacation every few years and using her credit cards to shop. If that's being an idiot, then many of Us in Puerto Rico are idiots.

Nina may or may not be an idiot, but there's no doubt she's a slave. Her job and the bank "own" her. Her credit cards and loans come directly or indirectly from the same source: Banco Popular, a member of The Jenius' List. But even if they didn't, even if Nina spread her productivity out over several "masters," the situation is the same: she can't change jobs, she has no economic freedom, she is a slave.

The Truth is, Nina and the rest of the slaves, are "cash cows" for the bank, who take over 20% of their productivity in the form on interest rates. Nina works almost 2 days a week to give that money to the bank, to service the debt she chose to have, in order to live the lifestyle she believes is "right", a lifestyle promoted with overwhelming intensity evry hour of every day.

Yes, Nina may be an idiot and she is a slave. But look hard at your own situation. How close are you to falling into Nina's pit of despair? Or how far are you from climbing up to Nina's "freedom"?

The Jenius Has Spoken.


Gabriel said...

Timely column. Lots of people become Ninas this time of the year because of the stupid "obligation¨ to waste electricity in ornamets and other things that have nothing to do with Christmas and in extravagant gifts for family that people don't really want or can't afford.
Bo hoo poor Nina? Nope, She IS an idiot as are many of us. A well maintained car can last 10 years be it a Yugo or a BMW. Why would she want to change it? A monthly debt that size happens when you want to live beyond your means. Period. Stay in a cabaña here for a week for 15% of the cost of 3 days in Disney. Don't change your closet every 6 months, wear your clothes till they fade. Buy a bottle of wine at the supermarket and drink with friends at home instead of going to the pub etc etc. The knowledge to avoid money slavery exists, if people choose to accept terms imposed by others then they deserve their fate.

For the record, my car is a 1996 Acura Integra in top notch condition. I do most maintenace work myself. I save in different saving instruments, not because I have money to spare but because I make the money work. When I need to take out a loan I have a plan and I usually pay before term. Loans, credit cards etc are negociated via Internet or with one of the few honest credit unions around. I also make sure to have enough eff you money in the bank so if I don't like my work situation I can leave (I have a clear, definite idea what I want to do at most times). Yes, I know people who think me and my family are out of sync with the times and we live like monks or something. The reality is that we can provide for our baby, sleep soundly at night and are confortable with our lifestyle because we are aware exactly what "lifestyle" we can safely live.
Puertorricans spend more than newyorkers on less income than the poorest south of the Missisipi states. Idiots? Unfortunately yes.

Anonymous said...

Nina needs to learn to WANT what she HAS instead of trying to HAVE what she WANTS. Wanting more "stuff" (then purchasing it) isn't going to solve Nina's problems. Despite what Madison Avenue tells Nina, more "stuff" will only increase her debt, and her current vicious cycle. It will not purchase happiness.

If I can't pay for something NOW, then I don't buy it. My car is seven years old (and paid for), and I expect it to last for many more. "Money Education" (where it comes from, where it goes, and why you need to save some of it) is something I plan to pass on to my son.

He hasn't been to Disney World, and he missed the Carribean cruise. But his parents' monthly interest expense is limited to home mortgage interest (one lien), and we'll be able to retire with savings. That's worth more than a trip to Disney World.