<img src="http://www.joplinglobeonline.com/images/zope/extra.gif" border=0>Economic crisis ‘no better time’ to emphasize basic principles<font color="#ff0000"> w/ link to 5k5k.com</font>

Home

Related Photos

Discussion

December 13, 2008

Anonymous The Joplin Globe Sat Dec 13, 2008, 06:14 PM CST

By Derek Spellman

dspellman@joplinglobe.com

Chett Daniel has seen how it can happen.

The former U.S. Marine who is now a Neosho schoolteacher also spent years working for Wal-Mart Stores Inc., including time as a district supervisor with the company’s asset protection division. Part of his job involved talking to employees who had committed internal theft.

In many instances, he said, the theft stemmed from employees “being strapped for cash” to cover bills. He said he often thought that if those workers were better educated about basic financial decisions, they might have been able avert the personal economic problems that led them to steal.

It’s that issue — economic and financial literacy — that Daniel and others say should be front-and-center now.

Daniel, who is studying to be a certified financial planner through Missouri Southern State University, is doing his part.

He has mounted a “5k5k” program. Through his Web site, he is encouraging people to try and run five kilometers to improve their physical fitness and to improve their financial fitness by eliminating $5,000 in debt or saving $5,000.

Daniel, who has done workshops for fellow Neosho teachers and for his church, said he bases his program partly on Dave Ramsey’s “Total Money Makeover.”

Practices he encourages people to adopt include establishing emergency funds and compiling a list of debts, from smallest to largest, and paying them off.

Daniel, who teaches fourth graders in the Neosho School District, said the practices are good in the best of times, but may be more important in the current crisis.

“I think it is magnified now,” he said, referring to the national economic downturn.

“Personal finance is as much emotional as it is knowledge,” he added. “People who make a true change and get ahead financially at some point get tired of just getting by and sweating out each month’s payments.”

The average American household with at least one credit card had an average of about $10,678 in credit-card debt last year, according to CardTrak.com.

Total credit-card debt for Missouri alone last year was about $14.3 billion — an average of $2,432 per person, according to CardTrak.Com and the U.S. Census Bureau.

Richard Rawlins, a finance professor at Missouri Southern State University, said the national credit crisis has been exacerbated by the amount of debt families carry. That debt, he said, is the product of spending decisions over the years.

“It isn’t the bank’s fault completely,” he said. “There is plenty of blame to go around.”

Daniel said he “absolutely” believes personal financial management practices are a result of outside forces as well as individual decisions.

People are encouraged, he said, by others and to an extent by the government, to spend money. He cited the stimulus checks issued earlier this year as an example. The government issued those checks, he said, in hopes that people would spend the money.

Rawlins said the economic downtown could spur people to learn more about the economy in general, and he said it “ought to generate more discussion,” but warned that the average person on the street will likely be more preoccupied with immediate problems.

In the short-term, he said, it might encourage changes in personal habits.

As far as enduring change, he said a lot of that depends on a person’s experience. Those who suffer an immediate, personal impact are more likely to undertake that process, he said. Those who haven’t are less likely.

“Somebody who has gone through a wreck probably has a lot more respect for seat belts,” he said.

If a person who eats out once a week (estimating $6 per meal) brings a meal from home (estimated cost $2), the savings over 10 years comes to more than $2,080. Invested at 5 percent interest, the total savings come to $2,691, according to the American Consumer Credit Counseling Service.

Jennifer Cornell, executive director for the Powell Center for Economic Literacy, a Richmond, Va.-based organization that promotes economic literacy for young people and provides resources to that end for schools, said the current economic climate affords an opportunity for people to learn about economics and finance.

“There is no better time to be teaching economics and supporting economic education right now,” she said.

Cornell said that the roots of the current financial crisis, despite its multiple components, inexorably lead back to basic economic principles.

Cornell said the subprime mortgage crisis — which economists cited as a crucial element in the downturn — can be distilled into a basic principle about being “too good to be true.” Many people were able to obtain financing for a home, she said, with little or no money down and often paid on the interest alone during the initial years of the loan.

A study of economic history, she said, would “tell us that could not possibly have been sustained.”

The Powell Center, for its part, has encouraged states to incorporate economic and financial education into their school curriculums, even making them part of their graduation requirements. That movement is at different stages in different states, she said.

“I do think there is a heightened sense of urgency,” she added.

The state of Missouri several years ago decided to make a half-unit course in personal finance one of the new graduation requirements for high schools, said Stan Johnson, assistant commissioner for school improvement at the Missouri Department of Elementary and Secondary Education. The new requirement is to be in effect for students who will graduate in 2010.

The decision predated the national economic woes, and was borne out by a desire to help train students who were opening checking accounts, getting jobs, filing for credit cards, and enjoying access to ATMs, according to DESE.

But Johnson said there is “no question” the requirement is coming in handy now.

“It was truly pertinent then and it is perhaps even more now,” he said.

The Federal Reserve reported Thursday that households reduced their debt levels by 0.8 percent at an annual rate during the July-September period — the first decline since the agency began keeping records more than 50 years ago.

Web link

To participate in Chett Daniel’s “5k5k” program, visit his Web site at www.my5k5k.com.