Saturday, November 22, 2003

"I'd Like A Mortgage On This Venti Mocha Machiatto, Please."

"I'll have a Venti White Chocolate Mocha no-whip with a double-shot of espresso, very hot, and a bran muffin" the young woman ordered matter-of-factly in the Baltimore Airport Starbucks last week.

Even Starbucks' aficionados stood back in awe. The Venti Mocha, I am told, comes stock from the factory with 4 shots of espresso -- enough caffeine to transmogrify the most docile wimp into a Pit Bull on a gunpowder diet. Adding another 2 shots of pure speed is like putting half again as much heroin in a junkie's needle, because the standard dose of pure smack may just not be enough to kill him. I stood, watched and wondered whether they should have wrapped her muffin in a death certificate.

And I thought I had seen it all, as far as the public abuse of drugs is concerned, but it was what happened next that was truly horrifying.

"$6.50," the clerk said to her, not looking up, no hesitation.

The young woman whipped out a MasterCard from her Coach purse. The counter clerk swiped it. A receipt was generated. Transaction concluded. The young woman waited impatiently, tapping her long nails on the counter as the Starbucks Squad dedicated the entire espresso machine preparing her morning "medicine." She snatched it off the counter and drew deeply. The double-strength concoction snapped her head back like she'd hit a bridge abutment at 65, and as she walked down the corridor grousing out loud at life in general I saw her toss the credit card receipt into a trash can.

Now, don't get me wrong. I like Starbucks as much as the next obsessive-compulsive white trash hobo. Indeed, I favor the Christmas Blend more than most. But, when the day comes I start ordering $4.50 Grande Caramel Machiattos and taking out a mortgage on them, I hope someone cares enough to commit me to a 12-step program for those who pistol-whip airport ticket agents after charging their "Cup 'a Joe" at 19.5% interest.

And, it’s not only Starbucks. As I look at the numbers, it strikes me that many, perhaps most Americans, are in need of help. We are caffeine junkies, to be sure, but more importantly, we are credit junkies -- a nation of debtors. If it can be charged, we charge it. If it can't be charged, we get another credit card.

Don't believe it?

According to the Federal Reserve, in September, 2003 consumer credit rose at an annual rate of 9-3/4 percent while wages were rising at a 2 1/2 - 3% clip, just in line with inflation. Bottom line? Household debt hit a record high relative to disposable income -- even higher than you get after downing a Venti Coffee Frappuccino.

And this from Debtscape . . .

"The average balance on a credit card is $7,000.

"The average interest rate is 18.9%.

"Late fees are now $29.00 (if not received on the payment due date).

"The average household has 10 credit cards.

"Almost half the households in America report having difficulty paying
their minimum monthly payments, thus making bankruptcy seem like a good
alternative. And, apparently for some, it is. Personal bankruptcy is up more
than 100% since 1995.

"If your credit card balance is $8,000, and you make the minimum
monthly payment at 18% interest, it will take you 25 years, 7 months to pay the
debt off. You will pay $15,432 in interest charges, (almost twice the balance),
bringing your total to $23,432.

"Americans paid out approximately $65 billion in interest last year

"If you didn't have your credit card payment of $218 a month, and you
instead invested that money in a 12% savings plan, in 25 years you could retire
with $1,354,930 in the bank. So your credit card payments not only will cost you
thousands in interest, but also prohibits many Americans from adequately saving
for their retirement and makes bankruptcy look like the only alternative.

"Last year over 1.3 million Americans filed for bankruptcy, the highest
in our nations' history.

"Credit card companies solicit the average American 7 times a year
through the mail."

And, even knowing all of that, as a nation we're not stopping the Stuff habit. Hell, we're not even slowing down. Our only question is, "Have you got anything larger than a Venti -- maybe a 55 gallon drum?" When it comes to debt, the most common asset purchased with refinance money from our homes are plasma flat-screen TV's. We're hooked.

Average credit card debt has jumped 35 percent this year, which won't stop Americans from spending an average of $722 Christmas gift-shopping this holiday season. We average $3,250 per person on an average of 2.5 credit cards, the same cards more than half of shoppers plan to use for their holiday purchases, the same cards about 60 percent of their holders won't pay off when the bill arrives.

Welcome to Wimpie's world of paying next Tuesday for the hamburger today, a world where Tuesday never comes -- at least in our imaginations.

To our debt equation, one in which all math is addition, we have created a housing bubble that continues to swell . . .

With mortgage rates as low as they have been in a half century, it seems that everyone is buying a house -- on credit, of course. They are counting on low rates and higher prices. But, because rates can't go any lower, what the consumer should be counting on is higher rates and lower prices. Foreclosures are already setting all-time records and that is even before real estate prices start to fall, as they must when interest rates begin to rise again. Those already paying piddling interest on adjustable rate mortgages will find their payments skyrocketing. Those who are on fixed rate mortgages will switch to adjustable rate mortgages to ease the monthly pain, hoping that rates will return to lower levels, hopefully before the last of their savings (if they have any) disappears.

Is there an answer that can pull our proverbial tit out of the wringer?

Yes. Pay cash. For everything. Plain. Simple. No exceptions.

And where did I learn this bit of wisdom? In Mexico.

Here, everything from your water bill to your cable TV, your food to your house (yes, your even house) must be paid for in cash. Except for tourist-havens like Cancun and Puerto Vallarta, credit cards are pretty much worthless. A few restaurants will take them, but even those that advertise "We Welcome American Express" don't welcome American Express at all, and it is curious just how often you hear a waiter say, "Sorry, our credit card machine isn't working tonight," making you come up with cash anyway.

What we have found is that paying cash for everything leads to spending less. Think of it as an "Automatic Budgeting Device." Having to go to the bank or to the ATM and withdraw money gives you time to think about whether what you are buying is worth what you're paying, and it is surprising how often decisions that were once easy while fingering a VISA card become more difficult clutching cash.

It is a lesson more than a few need to learn and I often suggest employers teach it to their employees. (Indeed I believe it important enough that I may produce a new training program to do just that.) After all, money, as in not having more money, makes more people more unhappy than any other reason. And while having "more" money is a condition that can never be satisfied, if only because there is always "more," having "enough" money is a choice, and it is a choice made easier if we stop going into debt for $5.50 cups of coffee.

For sure it is a step in the right direction.

Wednesday, November 12, 2003

Smiles From The Tienda

Before I left home on a speaking trip last week, I walked down the street to a small "tienda" -- one of many family owned stores prolific in Mexico that sell staples and snacks. I go there a time or two each week and buy a Coke and stop and chat with the owner, Jose. He and his wife and six children run the place, a place about the size of a small bedroom. Jose is usually at the counter, but when his kids are not in school, it is not uncommon to see Abraham, seven years old, making change, smiling and giggling at my Spanish. I walked to Jose's tienda before leaving last week, knowing there would be no time for breakfast in Leon, what with the strip search and mandatory colonoscopy required to board an airplane these days. There is something comforting about walking into a store and seeing someone behind the counter you know, buy a soft drink, and chat for a few minutes about kids, dogs, and the weather before heading home. Think of it as all that Wal-Mart is not. I walked into Jose's tienda about nine that night and he was still there, smiling as always. The back door was open and I could see into his house -- a tin shed with beds neatly lining the perimeter and the kitchen -- a small stove hooked to a natural gas tank in the middle of the same room. His wife was cooking tortillas over an open flame, and the children were waiting anxiously for their bedtime snack, probably better described as their dinner. I asked him in Spanish, "Jose, why are you always so happy?" Jose didn't hesitate. "Because I have so much to be thankful for," he replied. "I have a loving family, many friends, and this store that provides for our needs. I am a very lucky man!" he exclaimed. I smiled and left, went to bed, and was waiting for the shuttle when the driver arrived at 4 a.m. I made the 7:15 to Dallas and had an hour layover before my flight to Little Rock. I wandered down the airport corridor, passing gates on one side and shops on the other, and I could not help being stricken by the busyness -- people running, cell phones ringing, men talking loudly, women in animated conversations, others in the bars trying to drown it all out, and still others glued to CNN or their newspapers, never acknowledging the presence of another, never looking up, never talking, at least not until their cell phones demanded attention. But the most striking observation was that no one was smiling. As I stood there in the middle of the noisy corridor, I recalled the evening before. The dramatic contrast reminded me how important it is to gain and keep perspective about what makes us happy, and keep our eye on the ball. Instead, we have become good little consumers and believe, as we are told on TV every night, that cash and the Stuff it buys is our key to nirvana. In response, we run like spotted apes, blood pressure no longer within site of the nearest speed limit, chasing airplanes and dreams that will never come true. As hard as it to accept, scientists tell us that once our basic needs are met, there is no correlation between how happy we are and how much additional money and Stuff we have. "The fact that an opinion has been widely held," wrote über-thinker Bertrand Russell early in the 20th Century, "is no evidence whatever that it is not utterly absurd." That is where most of us find ourselves, believing because everyone else believes, in spite of the fact that all scientific and most anecdotal evidence points to positive relationships, especially those with family and friends, as that phenomenon that brings us the most joy. Perhaps that is why Nigeria and Mexico, two poor nations, were rated #1 and #2 in overall happiness according to a recent study of 50 countries, while the U.S., rich and powerful and busy by any standard, continues to slide -- now down to #16. What is the lesson? Is it to get out of the squirrel-cage and open a tienda in the central Mexican highlands? Regrettably, that is not an option for most of us, and even if it were, we are far too invested the Myth of More -- the Myth that More will make us happy and that one day More will be come Enough. Sure, we may fantasize about walking away and living in a lean-to on a beach somewhere or in a mountain shack, but few of us will actually pull the trigger. Instead, in the morning when the alarm clock tells us to run, we will strap on the Nikes at $100 a pair and haul ass. Why? Because we are still fighting for what we believe, what we were taught to believe -- that if we work very, very hard, and sublimate everything in our lives to our work and the money it brings us that one day we'll have all the money and Stuff and power we want and we won't have to do it anymore. A sad irony to be sure, since by the time most of us finish our work or it finishes us, our families are grown and gone, our friendships are shallow for lack of attention, or our lives have become nothing more than the dash between two dates on a stone. It occurs to me that one need not live in a tin shed with six children and cook tortillas over an open gas flame to be happy, although it seems to help. For those of us burdened early with the Myth of More, we can be happy, too. But first, we must slow down. Indeed, for a minute or two, or a week, month, or year, we must stop, be quiet, and examine our preconceptions. We need to decide what we are doing today and why we are doing it, ask what makes us happy, respond to that question honestly, and then begin living like we believed the answer. Epilog: When I returned from this trip, I noticed one of our foster dogs was gone. "Where is Tigger?” I asked. "Tigger was adopted," Kelly beamed. "And so is Belle, as soon as we can get her to the border!" "You're really something, Miss K," I grinned. Kelly smiled and gave me a squeeze, and it felt better than my last paycheck. "Want to get a Coke?" she asked. We walked slowly in the evening breeze down to Jose's tienda where we found him still smiling for all the right reasons. (NOTE: Kelly's web site for "Save A Mexican Mutt" can be found at If you want a dog, or know someone who does, please take a look. If you don't see a dog you want, let her know. She'll find what you're looking for, and smile every second she's looking!)