Tag Archives: Real Talk

The Leasing Game

There are people in this world who hate leasing vehicles.  The reasons vary.  My favorite one is that leasing leaves you with nothing to show for the money you’ve spent.  Then comes the expense.  You’re responsible for maintenance.  You spend all this money on a car that isn’t even yours.  You pay insurance premiums that will ultimately pay out to the leasing company in the event of an accident.  They also say that you’re paying for the worst depreciation on the car — when it is first released into the wild.

I can’t deny the truths behind these arguments.  Leasing is kind-of an odd thing.  You really do insure a vehicle that you don’t own.  You really do have to maintain it on your own dime (although, a warranty will cover everything else.)  You really do have to give it back at the end of the lease term.  So, what’s the up-side?  That depends.

A car lease is a contract wherein the lessee (you) agrees to pay money for a given term in exchange for the use of a vehicle.  The amount of money you pay is determined by the purchase price of the vehicle less the residual value after the lease term.  The residual value is how much the lesser (the people leasing you the car) think the car will be worth after you have used it.  This value seems arbitrary, but it is actually based on several obvious factors: mileage, wear and tear, “gap insurance”, and supply and demand.

Mileage is the most obvious variable in the residual value equation.  A lease always includes very strict mileage allowances.  For every mile over that allowance the car has traveled, you pay extra.  So, right here — right at this very sentence — if you drive more than 12,000 miles in a year, you shouldn’t lease a vehicle.  Honestly, you shouldn’t be driving 12,000 miles a year.  Driving is a total waste of time and energy on your part.  It’s expensive.  It’s boring.  It’s dangerous.  Don’t do it.  If you drive only 3,000 miles per year, you may want to consider purchasing.  Why?  Because you won’t use the car as much as you could have, and you will be paying for utility that you do not utilize.  Just buy a car and plan on keeping it forever.

Wear and tear is also pretty obvious.  The dealer expects the car to need some work when it comes back.  This work will be minor, but it still has a cost.  That is factored in to the residual value.  After a 36,000 mile lease, the car will likely be out-of-warranty, but still very mechanically sound.  This is great for the used-car market, where “clean”, low-mileage cars actually go at a premium.  This relates to the supply and demand factor.

I use quotations on “Gap Insurance”, because the actual contract isn’t technically gap insurance.  There is a risk that a certain number of lessees will total the cars they lease.  The dealer factors that risk (and the cost of that event) into the lease.  Meanwhile, you pay regular car insurance that covers smaller accidents, medical bills, etc.

Finally, and the least obvious of the factors, is supply and demand.  The worst thing about this factor is that it is constantly changing.  The residual value of a vehicle is largely influenced by the greater used car market.  The used car market is supplied by off-lease vehicles and trade-ins.  Car lease terms range from 24-48 months, with the most common advertised term being 36 months.  Car loan terms have taken on much longer terms in recent years, as long as 72 months.  In fact, In 2010 nearly 1/3 of car buyers financed using a 6-year (72 month) car loan.

What do you know about car loans, or just loans in general?  I’m going to take a minute to explain them.  If you already know, feel free to skip ahead.  Most people know the basics of loans.  An interest rate and a term is advertised.  The interest rate is applied to the loan balance repeatedly over the life of the loan.  In many cases, the interest rate is applied monthly.  The other advertised value is the principle, or sale price, of the vehicle.  You must understand that both the interest rate AND THE TERM determine how much extra money you pay.  So often people focus on the interest rate.  The term can have as much or more influence on the total interest charged.  Furthermore, you must understand that loan payments are biased toward the balance of the interest, and gradually change bias towards the balance of the principle (the car’s sale price)

Let me try to put that in a concrete example, without getting too mathy.  Let’s say you want to finance (not lease) a $10,000 car (forget taxes for now).  The interest rate is 6.00%  The term is 36 months.  Over those 36 months you will pay $1996.81 in interest.  Great.  When you’re done paying for the car, it actually cost you $11996.81.  And, your monthly payment will likely be $333.  That’s pretty steep for a $10,000 car!

Now, let’s say you want to finance that same $10,000 with an interest rate of 3% for 72 months (6 years).  That interest rate is really attractive, right?  I mean, it’s HALF of the other interest rate.  But, the term has doubled.  Over those six years, you will pay $1969.48 in interest, and the car will have cost you $11969.48 total.  Now, your payment is only $166!  How wonderful!

But, is it wonderful?  Now that you’ve seen compounding interest in action, you need to understand depreciation.  Accountants learn that word in college, and all it means is “things lose value.”  Cars, houses, mobile homes, your computer, your tablet, your phone…  Everything you have ever bought becomes less valuable after you buy it.  They all take on wear and tear.  They all become “old”.  There is no mathematical equation that predicts depreciation in the way that we can predict interest.  The car’s value is determined by whoever is willing to buy it, and the amount they are willing to buy it for.  Car dealers buy used cars all the time, so they often have a big say in how much value a used car has.

Now, as soon as you drive your brand new $10,000 car off the lot, it has lost value.  It doesn’t lose value gradually, the value drops FAST, and then gradually sinks as the car ages.  If you owe more money on the car than what someone else is willing to pay you for it, you are “upside down” in your loan.  In other words, if you want out of the loan, you need to come up with not only the value of the car, but also the difference between that value and the balance of your loan.  If you’ve only made two payments on your $10,000 car financed for 36 months, and someone is only willing to pay you $8,000 for it, you need to come up with $1333 to cover the difference.  However, if you financed that same car for 72 months and you get the same offer, you need to come up with $1668.  Why?  Because your monthly payment for a 72 month term is only half of what it was for the 36 month term.  (36 month term payment was $333/mo, 72 month term payment was $166/mo.)

I’m trying to paint a picture here that shows you why financing anything is a terrible idea.

To make it even worse, loans are designed such that you pay more towards the interest at the beginning, and more towards the principle toward the end.  For example, 90% of your first payment goes towards the interest you own, and 10% goes toward the principle.  These rates gradually swap over the loan term, until your last payment is 10% interest and 90% principle.  What does that mean?  Well, number one, it means that the finance people want their interest first and foremost.  And, number two, it means that you actually aren’t paying much toward the car’s actual cost.  It’s another way to keep you upside down in the loan and to keep you from selling the car before you’re done paying the interest (which is where the bankers make their profits).

Jeez.  This is a long post.  Go grab a cup of coffee or tea and meet me back here.  I’m about to start talking about leasing.

So, we’ve established that long financing terms are bad, even at lower interest rates.  We’ve described how loans are set up to keep you from being able to sell the car before the loan term is over.  (And, at 6 years, you’re probably stuck with a car that is falling apart.)  We’ve shown that a low payment is both a blessing and curse.

Now, on to leasing!  LEASING IS STILL A FORM OF FINANCING.  You pay interest on a lease, but it has a different name.  This is the “money factor”, and it is basically an interest rate.  So, yes, leasing is just as bad as financing.  But, when you lease, you agree to pay for only the portion of the car that you use.  No, you don’t only pay for the driver’s seat and the steering wheel.  You pay for the car’s loss of value.  So, if that $10,000 car is only worth $6000 after a 36 month lease, you have only payed $4000.  $4000 divided over those 36 months is an $111.11 per month payment (not including the interest).  That’s ridiculously low, right?  I was just talking about how a low payment was a bad thing.  Well, in this case it still is.  The car is still losing value as you drive it.  More on that later.

Most lease advertisements include a “down payment” amount.  It’s a payment that goes directly toward the price of the car, and often times includes a sort of security deposit.  The portion that goes directly to the car is basically a pre-paid amount toward the lease.  This is good and bad.  Paying money down brings the monthly cost down.  For example, if you put $1000 down payment on your $10,000 car lease (36 month term), your payment drops to $83.33 (not including interest).  Holy cow!  That’s all fine and good.  But, what if you’re driving along and some joker runs a red light.  He hits your brand new leased car that you just drove off the lot and totals it.  You walk away form the accident unscathed, but you’re now carless.  You know what else you are?  You’re out $1000.  That’s right.  Your down payment gets carried away on a flatbed truck.  That’s why my advice is to never, ever put a down payment on a lease.  But, I don’t trust other drivers at all.

So, is that all there is to leasing?  Yeah, basically.  But, no, there’s much more.  You should be aware that car dealers lease cars from each other all the time.  In fact, they lease cars and then they sell them.  Sounds shady, right?  It’s not.  Basically, they pay a monthly payment to keep the car on their lot.  When the car sells, they pay off the lease balance and pocket the difference between the sale price and that lease balance.  The best part of this is that you can do it, too.

Car dealers don’t want you to do it, though.  They want you to pay the lease payment every month (because you’re paying interest) and then turn the car back in when you’re done.  The problem with this is that they will change the tires, give it a fresh coat of turtle wax, and then re-sell it for a much higher price than the residual value.  But, hey, that’s the business.

Remember, though, that cars depreciate faster than most people can make payments toward their financing.  A lease works in the same way.  But, because you’re only paying for a portion of the car’s overall price, and because you’re guaranteed a certain residual value at the end of the lease, you have the opportunity to out-pace the depreciation.  In fact, a 36 month lease can be set up in such a way that you beat the depreciation around the 24 month mark.  Now, understand, at 24 months you may only be breaking even with the car’s resale value.  And, also understand that you may have to sell the car privately in order to break even.  (This is because private sales are higher than dealer trade-ins.)  However, many dealerships offer incentives if you defect from one brand to another.  For example, if you take your Honda to a Ford dealership, Ford sometimes offers an incentive for first-time Ford buyers to trade in their other-brand cars.

All of these things can help you beat the depreciation on the car, and you can escape a 36 month lease after only 24 (or so) months.

HOWEVER, and this is a big deal, you must have negotiated a very good lease contract to begin with.  A dealer can AND WILL overcharge you for both leasing and finance.  You must go to the dealership knowing how much you plan to pay, and be willing to walk away from the deal.  This is another reason to not wait for the lease term to end before getting rid of the car.  If you have no ride home, the dealer has leverage on his side.  Are you gonna take a taxi home?

The internet is chock-full of car lease calculators.  Most manufacturer websites also list the terms of the lease contracts in the “incentives” and “offers” section.  What you need to do is go to these sites and look for the lease offers for the car you want.  Find what the sale price and the residual value are (IN THE FINE PRINT) and plug those into a lease calculator.  The calculators typically give you a money factor, and the manufacturers often hide that.  Calculate a lease payment, with or without down payment and trade-in value, and then have that number burned into your brain when you go to negotiate the deal.  (Also, double check your number.  Make sure you have input all the information.  Check your calculation against the lease offers to see how realistic it is.)

If they bring you a quotation that is wildly out of proportion with your calculated number, you need to get angry with them.  Or, laugh in their face.  Get them as close to your number as possible.  I had a Ford dealer bring me a quotation of $300/mo for a Ford Fiesta!  I knew from my research that I could get the car for $200/mo easily.  And, $200/mo would be a fair deal to us and to them.  We had already told the guy what we were willing to pay, and he insulted us with his ridiculous offer.  We insisted that our number was fair, and that if he came back with anything different that the deal was off.  Sure enough, they came back at $218 (which included tax of $15/mo).

Now, the problem with this strategy all comes back to the supply and demand factor.  As I said before, the used car market is supplied by off-lease vehicles.  When more people lease vehicles, more vehicles flood the used card market.  When there are a lot of used vehicles for sale, their prices all come down.  Why?  Because supply is higher than demand.  They become harder to sell when you have too many.  Furthermore, when people end a lease, many of them start a new lease.  And, as more people move into leasing instead of buying, used car sales drop.  How does this affect leasing?  Well, as used car prices drop because of oversupply, residual values on leases also drop.  Therefore, leases become more expensive.  Furthermore, as demand for leases increases, car dealers start to charge more.  So, leasing becomes even MORE expensive.  Eventually, these supply and demand forces hit another tipping point, and it all goes in reverse.  Where are we right now, as of mid-2015?  We’re moving toward an over-supply of used cars and more popular leases.  The leasing game may be getting harder to play.

And, when that happens, it becomes more attractive to purchase lightly used car.

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On Confidence and Experience

I learn by doing.  My family bought a Nintendo Entertainment System when I was maybe 4 or 5 years old.  I didn’t care to read the instructions.  I just plugged it in and started playing, bumping into everything and testing everything until something happened.  I recall Who Framed Roger Rabbit being particularly challenging.  That same methodology has been with me ever since.

NES-Console-Set

This is both good and bad.  I was validated last week by my Microprocessor Apps professor.  A student asked him a “what if” question regarding a program in assembly.  He took it as an opportunity to show a few different approaches.  Of course, we found limitations in the platform this way.  We were bumping into everything.  Then, finally, after re-writing the code several times, we found a method that worked.  He then told us, “this is the process of engineering.”  You cannot be afraid of the many, many failures you will have.  You just have to keep pressing until you figure out what works.  In this way, my methodology is good.

Now, let me finish the rest of my original story.  I never finish a video game, except for a few.  This is because I get bored after I’ve bumped into the things and tested the buttons.  I don’t really care about the story.  I don’t marvel at the graphics.  (Let it be known, my favorite game of all time has 16-bit graphics.)  I just lose interest.  This is the bad part of my methodology.  Whether successful or not, when a project is nearing its logical end, I begin to loathe it.  I want to move on to something new.

Sometimes, though, I enjoy something so much that I’m inspired to improve upon it, or recreate it in my own way.  So, I started learning to program in Visual Basic around the age of 10.  Of course, my interest waned when I bumped into the limitations of my abilities and creativity.  At one point I managed to install Linux.  That forced me to purchase “C++ for Dummies”.  A few years later, Macromedia Flash was blowing up on the internet.  I picked it up and started learning the integrated scripting language ActionScript.  But, I spent most of that time animating instead of programming.  Toward the end of high school, I had the opportunity to take programming classes.  I honestly don’t remember all of the languages I studied.  I know there were at least three, but I only recall Visual Basic and Pascal.  (The reason I remember them is because the classes ended before lunch and most of us stayed in the room and played Quake 1 on the school’s LAN.)  Through all of this, I tried and tried to recreate my favorite video games using various languages.  Very few were successful.

I wasn’t until I was much older and much less busy that I finally programmed and published a full, working game.  Unfortunately, it was a Flash game.  Therefore, it enjoyed very limited success and very limited exposure.  It was also kind-of awful.  Still, I made money from it.  For the first time in my life, I had earned money for programming.  I immediately began working on an improved version.

Unfortunately, life got in the way.  My wife and I moved to a different city.  I started commuting long distances.  She lost her job.  We went into debt.  She regained a job.  We paid off the debt.  We coasted.  Then we both lost jobs.  Then we both got new jobs.  My commuting was greatly reduced.  Then, I picked up the game making again.

Unfortunately, at this time, Flash was going through transition.  Adobe had bought Macromedia and was redesigning ActionScript to be much more like java, in an attempt to make it more powerful.  This was a problem for me, because I didn’t have time to learn a new language.  (ActionScript 3.0 used an entirely new syntax.)  So, I used the older syntax that I was familiar with.  It was slower and less capable, so I had to learn how to optimize my code.  The scope of the new game was ridiculously complex relative to the scope of the first one.  I did it anyway.  I spent a few weeks making my own path-finding algorithm.  It wasn’t great, but it sort-of worked.  Then I spent a day implementing A* path-finding.  Both experiences taught me a great deal.  Then, school began to get tough.  So, the programming slowed to a crawl.

In short, I invested a lot of time and energy into a scripting language that ultimately failed.  (I know that Flash is still widely used, but it is rapidly being replaced by mobile apps and HTML5.)  Still, I learned a lot about programming during this time.  Beside algorithms and optimization, I learned that you can make money even if your product sucks.

Still, none of this gave me the confidence to take a job as a programmer.  Knowing the syntax of several languages doesn’t give you confidence.  Knowing the limitations doesn’t give you confidence.  Tiny “successes” don’t give you confidence.  What gives you confidence is experience.  What gives you experience is work.  There are only two kinds of people who can give you work:  Those willing to take a chance on you, and yourself.

I have been fortunate in life.  Several people have been willing to take a chance on me.  I expressed interest in doing what they do, and they wanted to teach me.  But, they didn’t want to sit me in a lecture hall and profess the why and what-for of what they did.  They just wanted me to do it and learn as I went.  The first big opportunity like this that I snatched was at a defense contractor.  I had been working as an electromechanical assembler for about a year.  I had been put on hot projects that were halfway between development and launch.  Therefore, I had a lot of interaction with the engineers.  This interaction convinced me that I wanted to be an engineer.  I expressed interest to the right person at the right time, and was given an entry-level position.  I had only an Associates degree.

So, then I was part of manufacturing engineering.  If you’re unfamiliar with the various engineering fields, manufacturing engineers take design engineers’ drawings and turn them into real things.  Manufacturing engineers are tooling and process developers.  They procure and/or develop the tools for the job, they design manufacturing processes, and they train staff to actually perform the processes.  My entry-level job was essentially a support position for those engineers.  They let me play with all the new equipment.  Sometimes they let me develop tools.  A lot of the time they let me write procedures.  I wasn’t always successful.  Not everything I did was wonderful or exceptional.  Still, all of this experience gave me confidence that I could figure out most of the problems placed in front of me.  I was also fortunate to have a great mentor.  He seemed to know that I learned things the hard way, and wasn’t afraid to let me do it.  Of course, he offered guidance and support when needed.  It was invaluable.

Defense contracting began declining during the Great Recession. (See page 26)  There were massive layoffs.  I was caught in them, because my position was not an essential part of the process.  I wasn’t mad.  In all honesty, I was relieved.  I had been commuting for 2 hours every day.  This was an opportunity to get a job much closer to home and have more time for other things.

The confidence I had gained at that job lead me to the next one.  I actually interviewed for a manufacturing engineering position, but asked for too much money.  They told me that during the interview.  Fortunately for me, my resume was passed around to other departments.  It landed on the Director of R&D’s desk, and he called me in.  He wanted me as an intern, to do CAD and a little bit of design work.  Again, I was fortunate that someone wanted to take a chance on me.  I had no CAD experience, but I had read and interpreted dozens of drawings.  I was computer savvy.  I was studying engineering at a local university.  But, I asked for too much money again.  Maybe my confidence was a little too high?

It worked anyway.  I’ve now been there for nearly three years.  I went from the CAD internship to full-on product design.  Like I said, I’ve been fortunate.  Other than my direct manager, other people at the company have been willing to take a chance on me.  They’ve given me many opportunities to learn and grow.  It has been amazing.  I feel super-confident in my CAD abilities, which I learned entirely at this job under the supervision of several great mentors.

So, what’s the point?  Wasn’t I talking about programming earlier?  Yes.  I was.  Take note:  Both of those jobs required 40 hours per week.  I’ve been employed in these types of positions for a total of 6 years, now.  That’s roughly 12,000 hours of combined manufacturing/design experience.  Meanwhile, I’ve been programming on-and-off in various languages over a much longer period, but with far less consistency.  That self-teaching experience hasn’t given me the same confidence as my work experience.  That is in spite of the fact that I’ve been self-teaching for much longer.  But, in self-teaching, there is no consequence for absolute failure.  There is nothing to deliver.  There are no deadlines.  These are the reasons that self-teaching is bad.  However, self-teaching is also good because it allows you to explore and experiment.  You don’t fear failure, because the only failure in self-teaching is failing to learn something new.  You’re not afraid to take risks when self-teaching.

So, what’s next?  I’m studying Computer Engineering.  I want to design embedded systems.  I want to be an entrepreneur.  I want to know enough about the technical side of things that I can reasonably identify and ally myself with really talented, intelligent people in those fields.  I want to solve a problem that a lot of people need solved.  I want to tell them that I can solve it for them.  And, that brings me to the next big hurdle, after Computer Engineering: Communication.

Communication has always been a struggle for me.  I think it’s a struggle for a lot of people, actually.  By that, I mean that some people are really terrible communicators even though they speak often.  Still, some people are really terrible communicators because they speak so little.  That’s because communication is an art.  It requires practice (experience) to gain confidence.  I’ve had several opportunities in my career to communicate ideas and concepts to small groups of people.  If my programming and design experience is a plate of enchiladas, then my communication experience is a tiny dollop of sour cream.

Since my work doesn’t often require that I speak to groups, I have to self-teach.  This is good, because I can take risks, I set my own deadlines, and I explore a lot of different ideas.  Hence, I’m writing this blog.  This is how I’m building confidence in communicating.  I learn by doing.

On Self-Censorship

The internet is no place to be anonymous.  Your name and face is attached to everything you say.  You cannot guarantee that your sarcasm will translate through your prose.  People will read what you wrote and take it the wrong way.  You may not intend to offend anyone.  Some people are just easily offended.  I am not one of those people.

I can take criticism, cynicism, and obscenity at face value.  I may not agree with those things in certain contexts.  But, I am willing to let them happen.  To me, it is only speech.  Obscenity quickly loses its meaning and becomes white noise.  Cynicism is just a manifestation of doubt.  Criticism is the acknowledgement of differing opinion.  None of those things are particularly offensive by themselves.

In face-to-face interaction, I find myself carefully choosing my words and constantly gauging my audience’s reaction. I feel more tolerant of opinions and ideas that I oppose when I am speaking to someone in person. I don’t do it to avoid conflict, but rather to avoid hurting someone’s feelings. People are passionate about their ideals and opinions. They are entitled to be so. Just because I disagree, or am indifferent, doesn’t mean that I have to tell them that.

For example, some people incorporate religion into many other parts of their lives. As an atheist, the mention of religion in an otherwise secular conversation makes me extremely uncomfortable. It’s not discomfort with the subject, it’s discomfort with the possibility of my differing opinion offending the other person. My atheism is not intended to be offensive in and of itself. I simply lack belief. But, I am aware that some people associate atheism with visceral, militant opposition to theism. In my case, it is not. So, to avoid the whole situation, I engage a religious person as if I too was religious. And, why not? Their ideas are not invalid just because they differ from my own. However, doing this is disingenuous, and constitutes self-censorship. It is suppressing my true self so as not to impose on others.

In the opposite extreme, I’ve found myself uncomfortable talking to people who are religion intolerant.  My reaction is the same.  I’m not conversing with the intent to offend anyone, present or not.  I try to avoid telling my position on the subject, choosing instead an ambiguous non-commitment.

Furthermore, we should all be aware by now that our social media accounts are monitored not only by acquaintances and family, but also by current and potential employers.  What is a crass, atheist, cynic to do?  The answer is to pretend I’m talking to my grandmother every time I make a post on a public forum.  “Everything is peachy, Grandma.  Life is wonderful.  Nothing bad ever happens.  I’m never angry, upset, or agitated.  I’m never at odds with anyone or anything.  I’m apolitical.”  But, that too is disingenuous and constitutes self-censorship.

I envy artists, because their job is to be themselves.  An artists’ expression is often intended to create discord, discussion, provoke thought and questions, etc.  Some art is just downright offensive.  Some is unintentionally offensive.  Either way, you have the choice to experience the art or not.  Unfortunately, artists also have a tough time making money by just being themselves.  It takes a special kind of person to pull that off.  In that respect, I don’t envy them.

So, with future employment in mind, I keep most of my thoughts to myself.  The fact that I’ve decided to write a blog has me seriously conflicted with that, though.  How can you sincerely write a blog without possibly offending anyone?  You can’t.  So, do you go for broke and let everything in your head pour out unfiltered and unedited?  Do you spend as much time deliberating over what topics to write about as you do actually writing about them?  Do you battle analysis paralysis and wind up never posting anything?

The answer is that you write a blog post about this internal conflict.  Then you choose to straddle the fence between censoring yourself and expressing yourself.  You expose some facts that you know will polarize your audience.  Really, if something I’ve said or done in the past offends you so much that my abilities and aptitude become a moot point, what are you really hiring for?  Certainly not diversity in the workplace.  If my personal beliefs (or lack thereof) are so incompatible with your own, do we really have anything to offer each other as friends?  I think there might be.

So, what’s the moral of the story?  It’s that being crass and cynical and expressing your opinions about lofty subjects has a place.  That place is the internet.  Likewise, being respectful and obedient and avoiding interpersonal conflict also has a place.  That place is the workplace.  Employers need to take the pressure off of employees to incorporate their private life into their work life.  Don’t ask me for my facebook password during an interview.  Don’t send me a friend request if you’re my boss.  Likewise, employees need to avoid associating their companies and schools with their private life.  Don’t put your work history on your profile.  Don’t friend request your boss.  (LinkedIn is the only exception to those rules.)  Draw a line between work and home, and then never cross it.

Making money like a lower middle class layperson

tony_robbinsTony Robbins is touting “How to make money like a billionaire” all over the interwebs right now.  He’s an eloquent, inspiring speaker, but I’m pretty sure he is no billionaire.  He surely has made millions, though.  Still, I was taught to speak from experience.  Without having the experience of being a billionaire, I dare not tell anyone how to become one.  However, I have been lower middle class for most of my life.  And, I think I may even be an expert on how to be lower middle class.  I’m pretty good at it.

When I say I’m good at being lower middle class, I mean that I’m good at undermining my own financial goals, at not accounting for future cost increases, and at taking on too much responsibility.  I’m also good at convincing myself that the wages I earn are fair.  And, did I mention that I can’t help but find myself NEEDING debt just to get by?

Because I am so good at trying really hard and ultimately just digging myself deeper into mud, I figured I should share with you the reasons for and methods of my success at achieving net zero.

middle_class_0226Firstly, and probably most importantly, be born into a lower-middle class family.  I am the third of three children.  Both of my parents worked.  My father worked the night shift at a truck dealership, while my mother worked various office-support type jobs.  Both had some college, but no degrees.  Understand that my childhood was not unhappy, that I did not go without the necessities.  I was not neglected, and I don’t intend to imply that being a lower middle class child is anything but just fine.

That said, the story told to me by my parents (who are divorced and have not spoken in many years) is that my mother handled the household budget.  She employed a budgeting method — very similar to the U.S. government’s — called deficit spending.  In deficit spending, ones’ hands writes checks that ones’ ass cannot cash.  This was back when you could write a check and date it so that it would not be cashed until that date.  So, you could pay bills when you had no money in the bank, and technically carry a negative balance.  This drove my dad nuts, and was cited to me as one of the issues that lead to divorce.  It is also very telling as to how much money a lower-middle class family makes.

Studies show that lower class children are less likely to escape the income tax bracket into which they were born.  Why?  Because, it’s difficult to achieve more when you have less.  Its easier to achieve more when you have more.  Therefore, the poor folks stay poor and the rich folks stay rich (generally speaking; there are exceptions to every rule).  The doctor’s son has the resources to attend medical school, and doesn’t need to hold a job while attending.  The truck parts salesman’s son does not have the resources to attend medical school.  His parents can only provide so much for him, and the rest must be made up either with debt or work.  This kid is much more likely to achieve about the same income as his parents.  The best thing you can do to succeed at being lower-middle class is to be born into it.

too-rich-for-financial-aidThat brings me to the second way to succeed at being lower-middle class:  Attend college, with or without loans.  I attend college on (mostly) my own dime, and have been doing so part-time for nearly a decade.  I didn’t take out loans.  Instead, I paid cash for everything.  Unfortunately, life is expensive and it doesn’t care if you have money in the bank or not.  So, there have been a few times when my lower-middle class family has helped me attend.  I have been living paycheck to paycheck for 10 years in order to attend college part time.  Take note: the second most important thing to ensure success at being lower middle class is to have dreams that are just out of reach.  If you read the study, a college education is the key to upward economic mobility.  Unfortunately, it’s also the carrot dangling in front of my nose.  If I reach just a little bit farther, someday I’ll get that carrot and all the glorious middle-middle-class things that come with it.  Or, maybe it’ll just dangle there indefinitely.

As you all are probably aware, my generation is the most educated and least employed.  On top of that, this cohort has also paid more for that education than any in recent history.  Despite that, no matter whose son or daughter you were, you could go to college.  A few extremely smart and hard working poor people have been given a hand up, while an enormous mass of your median not-doing-great-but-still-above-the-poverty-line people have taken on huge loans in an attempt to escape their parents’ tax bracket. Many succeeded in earning those degrees.  Many did not.  Many of those who did were then unable to find the appropriate jobs.  Many of those jobs have quietly sailed away, without much hope of returning.  So, whether you attend college with cash or with loans, you’ve got a great chance of successfully achieving lower-middle class status!  Way to go!

PB9d7The third most important thing to being successful at being lower-middle class is to take on as many responsibilities as you can handle. How many can you handle? You won’t find out until you have too many. By responsibilities, I am referring to things like children, pets, real estate, jobs, classes,vehicles, etc. Anything that requires your time is a responsibility, and most responsibilities also require money. And, as we all know, time IS money.  As a successful lower-middle class layperson, you should have very little time to be void. You should feel guilty about every self-indulgent minute you have. Your time should always belong to someone or something else. And, you should be trading your time for money, so that you can turn around and trade that money to a university for the opportunity to spend your time solving the university’s puzzles.  In this way, you will ensure that you learn to find joy in the work grind, the homework grind, and the housework grind, among other grinds.

Speaking of grinds, take a moment each day to consume a ridiculous amount of coffee. Don’t do it because you enjoy coffee, but because you need to prevent fatigue. Looking fatigued at work is a sure-fire way to get on your boss’s bad side.

If you find yourself with spare time, you risk a moment of lucidity. This could lead to an existential crisis wherein you realize that you may never escape the purgatory that you have built around yourself.  If ever you feel yourself wanting to do more, to be more, to achieve the American dream, then just sit down and turn on television. Let the fictional characters on the bright, shiny screen do the living for you.  It’s far easier to watch someone else try and fail than to try and fail yourself.