Letters to the Editor
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To put it politely
Letter writer should butt out. If there is one conversation you don't ever initiate with friends, it's their finances. Discuss your own all you want, but if you want to keep them as friends, unless they've come to you for advice or help it's better to leave it alone.
If they crash, they crash. It's a situation of their own making and they're the grown adults who are responsible for the fallout. Yes, it's tough to watch it happen to people you care about, but at the end of the day the more likely scenario should you confront them even gently about it is they will end their friendship with you and do what they want anyway.
If the day comes when their financial world comes crashing down around them and they come to you for help, then you can help them see the error of their ways, but not before because they aren't asking for your advice.
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Debt Reduction could be the answer.
Tell your friends about Debt Reduction. Basically, they sign up with a service where attornies go in and settle their debts for approximately 25 cents on the dollar and the interest stops as well. It ends up as "Settled as Agreed." on their credit and in two years, they can go out and get into debt all over again. Or, if they've learned their lesson, not. They can actually negotiate terms themselves with the credit card companies, but I recommend they use a service because A. The attornies are accustomed to negotiating these kinds of arrangments and B. To make sure their credit is assigned the "Settle as Agreed." status. And, this is not Debt Consolidation, which is a big fat waste of time. It's Debt Reduction.
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We Don't Have Debtor's Prisons
This is a difficult subject. Most people would rather talk about the details of their sex life then something really private like their finances.
First, are you sure they are really in trouble? $40,000 in student loans doesn't sound like a lot to me. This might sound odd, but I solved my personal financial problems by simply making more money. I have always liked to have and spend cash without giving it much thought. I just needed to earn enough that my personal spending style was no longer financially material. Maybe your friends have untapped earning power.
Secondly, is this a situation where lack of information is a problem? Generally people with weight problems know an enormous amount about calories, diets, etc. Maybe a lot of what they know is wrong, but the point is that whatever their problem, more information isn't going to help. Also, I haven't seen many instances where formal budgeting, planning, etc -- a lot of the kind of stuff in books -- helps much. However, it is possible that they are missing some basic information or skills. If this were the case, you might be able to help.
Third, perhaps the equivalent of financial porn would help. I'm thinking of appealing to greed. Books like the Millionaire Next Door. Getting out of debt doesn't sound like much fun but getting rich is something they might go for. A few illustrations involving compound interest, etc. Getting from negative to zero is awful, but getting from zero to a number with a lot of zeros after it is something they might be able to get behind.
Don't loan them money. Bankruptcy isn't that bad compared to things like alcoholism or cancer. You could give them some money if/when they hit that stage.
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Xrandadu Hutman, he's overly risk averse
Penny pinchers rarely make all that much money - because they are too busy watching the pennies to keep the pounds from rolling out the door.
They don't change careers because of their high risk aversion, and this leads to them getting paid less then your average non-penny pincher.
Generally that sort of character works extremely hard, but is generally only about as effective as your average employee. This is because while the hard worker is going in and doing stuff, the lazy worker is thinking of ways to make it unneccessary to do it, plus the lower stress levels suffered by the lazy makes them more productive.
This is not to say that debt-magnets and CEO culture clubbers are any better, as they tend to worry about their status more then the fact that they are living beyond their means (And aren't really having much fun anyway) but rather to say that one needs a balance for success.
Splurge occassionally, have the nice supper out, have fun, buy good gifts and if your job sucks look for a new one and quit. Life is too short to spend it not living.
As to LW: Let them live their lives. They will crash and burn, but bankruptcy is not the end, particularly if they are studying. That degree will probably serve them well when the chips are down, and if worst comes to worst, with an initial behind their names they can always emigrate.
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Suze Orman in two sentences, if they are the literary type
Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.
Charles Dickens
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Yes It Can Xrandadu
Your letter to the anonymous poster boils down to you saying over and over again "That can't happen to me." Well, with luck it won't happen to you. There are lots of people to whom it never happens. But if you think that you can protect yourself from financial disaster solely through your own efforts (without luck playing any role) then you are not acquainted with the real world.
Who are you Xrandadu? You sincerely believe what you write. To be able to maintain that belief in the face of what has been happening in this country means that you probably fall into one of the five following categories:
(1) You don't live in the US.
(2) You come from a well-to-do family so that you know that you will have resources to fall back upon if needed. By well-to-do I mean one of those thousands of families that based upon income distribution statistics are rich, but who insist upon claiming that they are middle class.
(3) You are a member of Congress. In that case your pension and life-long health care benefits are indeed secure, and you are correct in believing that it can never happen to you.
(4) You are less than thirty years old. You are filled with the righteousness of youth and life has not yet shaken your belief that you are invincible.
(5) You live in a large city, or to be more precise in a large metropolitan area, perhaps in the suburbs. Because this metro area is so large its economy does not depend upon one or two or three large employers. Therefore you will never have the experience of having one of those employers shut down, making the local unemployment rate soar. You haven't seen all the part-time and temp jobs snatched up by people who are desperate for income and are lucky enough to know somebody who can put in a good word for them. Not that there are many of those jobs, because the people who still have jobs are working as hard and as long as they can in hope of escaping unemployment themselves. You also haven't seen what such an event does to the local real estate market - it causes home prices to plunge (there goes your equity) and home sales to come to a standstill.
You live in a part of the country that does not experience natural disasters. Maybe you live in Chicago or Minneapolis. You do not live in Florida, Louisiana or, most especially, California.
You work in an industry that is growing and is expected to continue to grow. This can be deceiving. Sometimes the industries that are expected to grow don't. Sometimes something entirely new comes along and levels them. (Have you bought many music CDs recently?) Your expectations about your industry may be build upon a foundation of sand.
You provide a service, but a very well-paid one. Something that requires a high level of education and skill. A service that people are always going to need in good times and in bad. A service that has to be performed right here, in the city where you live. Or that at least seems at this time as though it will always have to be performed locally. I'd guess surgeon but even doctors are having some trouble finding work these days, and those surgery vacations to Thailand (I hear the hospitals are fabulous) can only make things worse. Nevertheless, you must have some kind of highly paid, immobile service job or else you would be concerned about having your job outsourced.
You have a very good education. This gives you confidence and is, indeed, an asset. You have not yet been employed long enough to feel that some of your skills (maybe a significant part of yours skills) might not be transferable to a new employer. You haven't become intimately familiar with all the procedures and processes and quirks of the company where you currently work.
You have never filed a major insurance claim. You have never been sued.
Of course, it's only my opinion that you fit into one of those five categories. I may be extremely far off base. I'm not a psychic. But you'd be surprised at the things that "just happen" to people who have done nothing wrong.