Hot (broke) Messes: How to Have Your Latte and Drink It Tooby Nancy Trejos
31-year-old Nancy Trejos was supposed to be an expert on handling her money - after all, she's the personal finance columnist for one of the nation's leading newspapers, The Washington Post. But a few months ago, she found herself in her own dire financial straits. Faced with a mountain of bills, debt, and no way to pay her rent, she was forced to call her/b>
31-year-old Nancy Trejos was supposed to be an expert on handling her money - after all, she's the personal finance columnist for one of the nation's leading newspapers, The Washington Post. But a few months ago, she found herself in her own dire financial straits. Faced with a mountain of bills, debt, and no way to pay her rent, she was forced to call her parents to ask them for a loan. That night was a wake-up call - she vowed to get herself out of debt and into financial solvency.
In Hot Broke Messes, Trejos takes readers along with her on her journey. She meets with a financial planner and a therapist to deal with all the issues young people face today - from credit card debt and student loans, to impulse buying and emotional spending, to the cost of having a social life, to buying a house with someone during a potentially impermanent relationship and more. Trejos learns what causes these problems in herself, how she can fix them, and how she can pass that advice on to other young people going through the same experiences.
Even better, she shows readers how they can address these problems without completely giving up their lives - no "give up your latte a day" type advice here! Trejos' personal and unique voice, along with her experiences that everyone can relate to, will lead readers to relatively painless financial security.
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Hot (broke) MessesHow to Have Your Latte and Drink It Too
By Trejos, Nancy
Business PlusCopyright © 2010 Trejos, Nancy
All right reserved.
life in dc, as in debt city
It had been days, maybe even weeks, since I had logged on to Bank of America’s website to see how much money was in my checking account.
It was June 2008 and I had spent most of the week talking to compulsive shoppers, hearing in excruciating detail how they ran up their credit card bills because they simply had to have that pair of Jimmy Choos to make them feel taller and sexier.
No, I was not doing this for fun. This was my job. I was the personal finance writer for the Washington Post, which meant that I had to write about how people spend, invest, save—or don’t save—their money.
That day, I had interviewed a woman in California who had to seek therapy to deal with her shopping addiction. She had tens of thousands of dollars in credit card debt, brought on by twenty-two years of ferocious shopping. Her story terrified me. I realized then that I had been neglecting my own finances for far too long. On my desk at home was a pile of unopened bills. It was finally time to open them, I told myself.
I decided to stay in that night, which is rare for me. I got to my apartment building in Adams Morgan, home to the young and the hip of Washington, DC. Instead of heading straight to the elevator, as I often do, I walked over to my mailbox. When I opened it, it was stuffed with envelopes from people and companies I didn’t want to deal with: Bank of America, HSBC auto loans, my podiatrist, Sallie Mae.
When I walked into my cozy one-bedroom apartment, I dropped my purse on a chair, sat at my table, and contemplated opening a bottle of wine. No, I told myself. I had to do this sober. I didn’t want to turn into a drunken, sobbing mess. I had to work the next day. I slowly opened each envelope. Due to HSBC: $293.28. Due to Sallie Mae: $98. Due to Dr. Osterman, the podiatrist who treated a stress fracture in my left foot: $329. My stomach started hurting. My face got flushed. Suddenly, I felt like I was having a panic attack. I switched on my laptop and logged on to Bank of America’s website.
Sure enough, what I saw did not make me happy. My rent was due in a few days. So was my car payment. I had enough to cover it. But I had also just sent out several checks to pay off various medical bills. I knew that on my modest journalist’s salary, I would have no money left over to eat or even take the bus to work. And my next paycheck was a full ten days away. I was, by many definitions, broke. A broke personal finance writer. I burst into tears. There I was—a sober, sobbing mess.
I went to bed around 1:00 a.m. and tossed and turned. I thought about ways to make some extra cash. Could I find some freelancing gigs? Maybe, but that would not take care of my immediate needs. Could I take money out of my 401(k) retirement account? Perhaps, but… after a rocky few days in the stock market, I had probably lost a lot of money and would not even have enough to cover my debt. Plus, I was not even sure my employer would let me take out money. Could I sell off some clothing or computer equipment on eBay? Sure, but do I really have anything worth much? I surveyed my apartment and realized the only items of any value were my laptop and a tin, five-foot-tall Knight in Shining Armor that one of my best friends had bought me after my last breakup. (“This is the only boyfriend who will never leave you,” Keith had said, as he shoved the knight into my silver Beetle after buying it at a flea market in Capitol Hill.)
I knew what I had to do. I could think of no other option. The next morning, I walked to work instead of taking the bus. I spent the first fifteen minutes practicing my speech to my mother. I finally dialed my parents’ home phone in Queens, New York. My mother answered.
“Hola mami,” I said in Spanish. She grew up in Ecuador and is more comfortable speaking in her native language.
“Hola mami,” she said. She likes calling me that too. When I say it, I use it literally to mean “mother.” When she says it, she uses it loosely to mean “dear.”
“Que milagro,” she said, which means “What a miracle.” She was surprised to hear from me on a weekday morning. Usually we talk on Sunday evenings. Actually, she often says this at the beginning of our once-a-week phone calls. It’s her way of reminding me that I don’t call her enough.
“Um,” I started. I told her about my medical bills, my car payment, my rent. Then, I told her I was out of money.
It took her a moment to say something. “How much do you need?” she asked.
I could tell she was disappointed. She and my father, who grew up in Colombia, never made it past high school and worked jobs that required manual labor. They had always dreamed of their children getting college degrees. Of their three children, I was the only one who did. I was also the only one with a career. My sister was a stay-at-home mom and my brother was unemployed. I was supposed to be the independent one. The one who made it. I’m the one she brags about to her siblings and neighbors. What she never tells them is that despite the fact that I was valedictorian of my high school, graduated from college, and went on to work at one of the best newspapers in the country, I am actually a mess. How many times had she told me not to squander away all my money? How many times had she scolded me for vacationing overseas too much? How many times had she looked at my closet in disbelief at the number of little black dresses I owned?
“A thousand dollars,” I told her. I could have used more, but I couldn’t bring myself to ask for it.
“Talk to your father,” she said. She covered the receiver. I could tell they were having a conversation about me, but I couldn’t make out the words.
Papi got on the phone. He didn’t say hello. He got right down to business. “What is your mailing address?”
I was standing in front of the Post’s headquarters downtown, not far from the White House. At seventy-nine, my dad’s hearing was not all that great, so he asked me to repeat my address several times. I did, very loudly.
“Ene Dobleoo, Ene Dobleoo,” I kept shouting into the phone, as my colleagues walked past me and waved hello. That’s how you say the letters NW in Spanish, which have to go after my street number because I live in Northwest DC. It took him a while to get it. “Ohhh, Northwest,” he finally said in English.
“I’m so sorry I am doing this,” I said once he had jotted everything down. I started crying, out of guilt and embarrassment. I moved away from the entrance so the people walking into the building would not see me in tears.
“Don’t worry,” he said. “This is what we are here for. There’s no need to explain. You know what you’re doing.”
Did I really know what I was doing? No. For much of my adult life, when it came to money, I never seemed to do anything right. Yet when I borrowed money from my parents, I was a personal finance writer for one of the most respected newspapers in the country. I was writing about people in debt. I was writing about people going bankrupt. I was interviewing experts, then offering tips on how people could fix their finances, on how they could avoid getting into situations like the one I was in. I was spending most of my time tending to my readers, and little time tending to myself.
When it came to my own personal finance, I was basing my decisions on the personal, not the financial, part of it. I have made pretty much every personal finance mistake you can make. I got my first credit card in college. It didn’t take long for me to max it out. That was the beginning of a string of errors.
Here are a few others: In January 2005, when I was twenty-eight, I bought an overpriced condo during the height of the real estate boom with my then-boyfriend, later my fiancé, and then had to sell it at a loss two years later after we broke up. When I turned thirty, I bought a Volkswagen Beetle that I really couldn’t afford because I got sick of my old car and wanted to drive around in something cute. Now I hardly drive it and can’t sell it for what I owe the bank. After another bad breakup in April 2007, I blew all sorts of cash on a crazy trip through California (I called it the Trejos Recovery Tour of 2007). I rented a convertible and drove up the Pacific Coast Highway, staying at nice hotels, getting spa treatments, and ordering but not actually eating fancy meals along the way.
Once I got off the phone with my parents, I asked myself: How had I become such a personal finance mess? My parents were good with money. They counted every penny, and made every penny count. Why had I not figured out how to be like them?
But the truth is: Few people of my generation are like them.
I am thirty-two years old as I write this. For the most part, people of my generation grew up in times of economic prosperity. We were children of the “Greed Is Good” era of the 1980s. We watched young people get rich during the dot-com boom. We watched real estate values soar. We watched the Dow Jones Industrial Average hit record highs. We made celebrities our heroes. We made Us Weekly required reading and reality shows like The Hills required viewing because we wanted to know what the rich and the beautiful were wearing, where they were vacationing, where they were dining. We tried to emulate our heroes even if our bank accounts couldn’t support that lifestyle. When our bank accounts failed us, the nation’s credit card companies did not.
We fell into a state of denial about our finances. We would go to the ATM and hit no when asked if we wanted a copy for our records. We would wait days before opening our credit card statements. We became live-for-the-moment people, and our mantra was this: Spend now, deal with the consequences later.
Decades ago, it wasn’t until one had a career, a spouse, even a child that credit cards entered the picture. For the last several years, once people turned eighteen, they were bombarded with card offers. College campuses became breeding grounds for new consumers of credit, with companies using free T-shirts, food, even iPods to entice potential debtors. That will all change in February 2010 when a new law that restricts marketing to college students goes into effect.
That’s not to say that the credit card companies should take all the blame. We may be young, but we are old enough to make our own decisions. And we often don’t make the right ones because we have no concept of long-term planning. Here’s some evidence: In a 2008 Fidelity-commissioned survey of about 1,200 workers between the ages of twenty and forty, those people we would think of as members of Generation X and Generation Y, 51 percent said managing everyday finances, making mortgage payments, and paying down credit card debt were higher priorities than saving for retirement. When switching jobs, 40 percent cashed out their retirement accounts rather than keep it in a savings plan. Why think ahead when many of us are postponing marriage and children? We have only ourselves to worry about, only ourselves on whom to spend money.
Our parents and grandparents, on the other hand, had more responsibilities at our age. They got married earlier and had families to support. Their goal was job security. When they landed good jobs—or good enough jobs—they worked hard for their money, and they worked hard to hold on to their money. They were frugal. They paid cash for everything, or if they used credit, they paid it off right away. They planned for their futures and their children’s futures.
We were too many decades removed from the Great Depression to understand what it felt like to have to scrounge for enough money to eat, to pay for housing, to survive.
In late 2008, I got an e-mail from an eighty-one-year-old former personal secretary to three members of Congress asking me whether or not she should close an American Express card account that she was no longer using. I called her to discuss her situation. Helen Galanoplos told me how the memories she had of the Great Depression got her into the habit of immediately paying the balances off on her two credit cards. “I remember how things were. I remember a little boy coming to my door every night begging for food. I think it put a fear in me of large debt of any kind,” she said.
As I talked to her, I thought: Why is she asking me for advice? She was in great shape. I was not.
Darin Pope, chief investment officer of United Advisors, a wealth management firm in New Jersey, summed it up well. Our parents, he said, “saw their parents go through the Depression and what that entails. The Depression Babies, they saw that and reacted to it. They would be more miserable spending money because they would be more anxious about it even though they could take that vacation 100 times over. We’ve done a 180 at this point. Now no one cares. They spend what they make today tomorrow…. There’s going to be a point when there’s a generation that does less well.”
That point arrived in 2008. After years of rapidly rising property values, people finally stopped buying houses and condos. Many of those who had already bought properties realized they couldn’t afford them. Foreclosures soared. The stock market tanked, not just in America but all over the world. Investment banks, which had financed many of the mortgages that people could no longer afford, became extinct. Auto companies went bankrupt. The federal government was forced to bail out major financial institutions that drive our economy. Americans were in more credit card debt than ever, just as they were losing their homes and their jobs.
We were in the midst of the worst financial crisis since the Depression. We were in a recession.
Our parents lived frugally to make sure that their children would have better lives. Sadly, many of us do not. As the recession got worse, people my age started realizing their mistakes. Many started paying down their debt and saving more. Spending frivolously was out. Being frugal was in.
But for many of us, it was too little too late. We have become the middle-class poor. We are Generation Debt.
• • •
I grew up in Queens surrounded by immigrant families. Most of my childhood was spent in Jackson Heights, also known as Little Colombia at the time. (It has become Little India and Little Pakistan with a sprinkle of Little Colombia of late.) We were a fifteen-minute subway ride to Manhattan, which is where my parents worked. My father, Jose Trejos, served food in the cafeteria of St. Luke’s Roosevelt Hospital on the west side, where I and the two siblings I was raised with were born. My mother, Maria Trejos, cleaned Park Avenue apartments during the day and midtown Manhattan offices at night.
When they weren’t working, they were perfectly happy staying in Queens. Manhattan was too expensive for them. We never went to Broadway shows. We never tried any of Manhattan’s wonderful restaurants. We never went to any of its great boutiques.
My parents reasoned: Why leave Queens if we didn’t have to? If we wanted to eat out, there was the Mark Twain Diner where you could get a cheeseburger with French fries for $5. Or the Chinese restaurant on Northern Boulevard that lacked ambience, but had very tasty boneless spare ribs for less than $10. If we wanted to splurge we could go to La Pequeña Colombia, one of the fancier of the many Colombian restaurants in our neighborhood, where the portions were so huge we could split one entrée between two of us.
There was a good reason for their frugality. Combined, my parents made about $60,000 a year and had to raise three children in one of the most expensive cities in the world while paying a mortgage. My father, the oldest of eight siblings, also had to send money to Colombia every month to take care of his parents and siblings, as well as two children from a previous marriage.
So it’s no wonder that we didn’t take big trips, that we ate at home every night except Sunday, and that our clothing came from JCPenney and our shoes from Payless. When I was a child, my mother, who had gone to a beautician school in Ecuador, would cut my hair. (She once gave me really short bangs. Oh, how embarrassing!) My parents never wasted anything. Every food item in the refrigerator had to be used in some dish. My packed lunch would often include a sandwich with the ends of the loaf of bread. If my dad noticed that the light in my bedroom was turned on when no one was in there, he would switch it off. To this day, my mom wears the same hot pink sweater with pandas on it that she has had since I was a teenager. The Little Mermaid bedspread I used in middle school is still on my childhood bed.
My parents did, however, splurge on important things. The public schools in our neighborhood were horrible, so they scrounged together some money and sent me to private Catholic schools. When it was time for me to choose a college, they didn’t limit my choices to a public or local university close to home. I had a grade point average that exceeded 4.0 because I did so well in my honors courses. As much as they hated to see me leave our home, they wanted to reward me for my hard work and helped me pay for Georgetown University in DC.
Everything my parents did was for their children. They didn’t want us to live like they had in their native homelands. During one of my visits to New York, I asked my mother why she was so frugal. “I don’t buy anything I don’t need,” she said. “I don’t buy clothes. For what? To keep in my closet? I don’t go to parties. I don’t go to restaurants all the time. I’d rather spend my money on my children and my grandchildren. You have to help them.”
My parents are retired now. Through Social Security and pensions, they earn about as much as they did while working. My mom received extra money through a worker’s compensation case. Their house is paid off. They have a home equity line of credit, which is covered by the rent they earn from their basement apartment. They have money saved up. They rarely use credit cards.
“It’s about willpower. You have to be strong and learn how to live within your means,” my mom told me.
My mother grew up on a farm in Ecuador. There were many nights when dinner consisted of slices of bananas mixed with rice.
My mother couldn’t afford to go to college and not work full-time. At sixteen, she decided to leave her small town near the southern city of Cuenca without telling her parents. Ironically, she said it was her vanity that drove her.
“I had two dresses and one pair of shoes. I wore the same clothes all the time. I was ashamed. By then, I was starting to date. I said, ‘I have to do something about this,’ ” she recalled.
So she moved from Cuenca to Quito, the capital of Ecuador, then to Guayaquil, another big city, in search of work. For four years, she tried different jobs at nursing homes and hospitals, even a mental ward once. Eventually she grew tired of that and convinced herself that she could do better in America. She saved enough money for a plane ticket to New York and took off in 1968, much to her parents’ dismay.
It wasn’t easy. She hardly knew English. She worked at nursing homes, in factories, cleaning people’s homes. She bounced around from one apartment to another, living off the kindness of friends or renting tiny rooms here and there. She was sexually harassed countless times.
She met my father just a few months after arriving in America. He had already been in America for four years. They bonded over their similar backgrounds. My father had grown up in Pereira, a big city in the western part of Colombia. My grandfather worked odd jobs here and there—at a bakery or selling guns or anything else he could get his hands on. My grandmother made hundreds of empanadas each week. My dad’s first job, at age six, was hawking those empanadas for a penny each in one of the city’s main plazas. My dad went to school until age twelve. “I loved math. I loved school. I wanted to keep studying, but I needed to make money,” he told me. “My family needed me. But I would have been a great student.”
He carried bags for passengers at a train station. He sold popcorn, ice cream, and newspapers. At seventeen, he moved to Cali, a much larger city, and managed a billiards hall, becoming a minor local celebrity because of his pool-playing skills. He briefly joined the military before being married to the mother of his first two children for a short time.
Dissatisfied with the living he was eking out, and with violence spreading across his country, he decided to move to America. He arrived in 1964 with $135 in his wallet, no English-speaking skills, and no prospects for a job. He was thirty-five years old. He paid $50 a month to sleep on the living room floor of an acquaintance’s apartment in Manhattan and worked in a nursing home. “It was a hard life but this is where the opportunities are,” he said.
In 1968, he saw one of those opportunities in a movie theater. He was walking out of the theater when he spotted the pretty, spunky woman who would become my mom. She was with her cousin and her cousin’s boyfriend. He decided to watch the movie a second time and took the seat next to her.
When it was over, he offered to take her and her companions to dinner. My mom didn’t want to go. She thought he was too old for her—and she wasn’t hungry. Her cousin’s boyfriend, on the other hand, was very hungry and convinced her to accept my dad’s invitation.
For the next few months, she repeatedly refused my father, but he kept showing up with flowers and food for her and her roommate. He eventually won her over with carnations and plantains. They got married in 1969. My brother, Daniel, and sister, Lucy, were born just over a year apart. I am the youngest of the three.
My parents hardly saw each other because of their work schedules.
My father would get up at 5:30 a.m. every weekday morning. He would always wear a collared shirt, dress pants, and a fedora, even though he was taking trays of food to patients’ rooms all day long.
My mom would get us up at 7:00 a.m., feed us, walk us to school, then run off to her job cleaning apartments for wealthy lawyers and businessmen. Sometimes, if I was too sick to go to school or had a day off, she would take me with her. I remember one Park Avenue penthouse in particular. I was mesmerized by the size of the kitchen with its island in the center and two-door refrigerator. I was amazed that the master bedroom had a stationary bike in it. While my mom cleaned, I ran around from room to room. I was shocked at how many there were. Why couldn’t we live this way?
On the days I was in school, my mom would make it back in time to pick me and my siblings up when classes were over. Then she would quickly make dinner. Like my dad, she would get dressed up for work even though she had to change into a uniform once she got there—never pants, always a dress or skirt and blouse, and high heels.
My mom would leave for her full-time job around 4:00 p.m. That’s around the time my dad would get home, usually with a bag of M&M’s or a Charms Blow Pop lollipop for each of us. Sometimes my parents would run into each other. Sometimes they wouldn’t. My mom got off work around midnight or 1:00 a.m. Lucy, Danny, and I would often stay up late waiting for her. Mami would show up with a bag of donuts or McDonald’s cheeseburgers for us. We would all eat together, then watch Star Trek before going to bed. We were exhausted in school but so grateful for the time we got to spend with our mom.
It was a tough life for my parents, but they say they wouldn’t have done it any other way. Their American Dream was to raise children, own a home, and make sure their children eventually got married and owned their homes as well. They had no desire to travel, to go out to hip bars, or to follow the latest fashion trends.
Many years later, I concluded that I too had an American Dream.
A good friend made me realize what that dream was over dinner in a foreign city one night. His philosophy was this: Our lives are divided into parts. The first ten years don’t really mean anything. We’re children and we don’t make any decisions of our own. The next five to eleven years, we are students. The five years after that are the screwing-around years. We don’t really know what we want, so we try different things. The next forty-five years until we retire or die are what truly matter. That’s when we define ourselves. That’s really all the time we’ve got to be who we were meant to be in this world. So we have to make a choice. Are we spouses, who devote ourselves to raising children? Are we philanthropists, who spend all our time giving to others? Are we conquerors, who run organizations, companies, countries, etc.? Are we hedonists, who focus on accumulating wealth, traveling, and getting regular facials and pedicures? Or are we explorers, who spend our lives looking, not looking for something, but just looking?
I knew exactly what I was. I was an explorer. That was my American Dream. I was in no rush to settle down and raise children. I could have had that once. I spent five years with one of the sweetest men I will probably ever meet. He would open doors for me and constantly tell me how beautiful he thought I was. We got engaged when I was twenty-eight. But happiness eluded me. On our vacations, he had no desire to go anywhere but California, which is where his family lived. He had never left the country and didn’t want to. He wanted to write beautiful stories, be a good husband and father, and eventually move back to his hometown. I felt smothered. I loved him but I didn’t want the life he was offering me. I wanted to have a fulfilling career, to spend time with family and friends over good meals and cocktails, to see the world, to meet interesting people, to accessorize well, to have passionate love affairs, to read good books, to write. And I wanted to do it all without hurting myself or the people I love. It seemed so simple.
Except that it’s not, because that kind of life can get expensive. So in my effort to achieve that dream, I was now living an American nightmare. I was living above my means.
I was living in debt.
Excerpted from Hot (broke) Messes by Trejos, Nancy Copyright © 2010 by Trejos, Nancy. Excerpted by permission.
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Meet the Author
Nancy Trejos is the personal finance columnist for the Washington Post. She's been with the Post for nine years, and her column is extremely popular.
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This book gives great, practical advice on finances. Uses lamens terms & professional insights to explain things.
Yes, you can afford to continue to buy your latte-a-day in this recession, you just need to budget for it and Nancy Trejos wants to show you how. Hot (Broke) Messes, which is a combination of Trejos' own journey to financial stability and the fruits of her research labor as a financial writer for The Post, is based on the principle of living within your means. This is great advice, but if you're looking for tips to help you do that on a day to day basis, this probably isn't the book for you. Hot (Broke) Messes is filled with gems like "stop using your credit cards" and "eat in a few nights a week." The advice is either too basic to be of any help, or too ridiculous (wasteful, expensive) to be called advice. I don't know about you, but I'm not comfortable telling my friends that I'm on a budget in an effort to get them to cover my tab and/or making sure I hit a bunch of embassy parties because they usually have great, free spreads. While these tactics seem to have worked well for Trejos, they are hardly applicable or even accessible to everyone. That is not to say that there is no value in this book, because there is. Trejos' background as a financial reporter saved Hot (Broke) Messes for me. There is some wonderfully useful information about monitoring your credit score, managing debt, "good" vs. "bad" debt, how to choose insurance, and more. There is also cutting edge information about the new rules and regulations affecting student loans, credit card debt, and car and home loan options. Trejos offers all of this information in a very understandable way and with input from various financial experts. An extensive appendix also offers tables to help you figure out your net worth and set up your own financial plan and goals. It also provides detailed information about topics covered earlier such as taxes, mortgages, and student loans. Bottom line: follow the big advice Trejos has to offer, but skip the small stuff. Book source: Free copy from the publisher through the Goodreads First Reads program.