SPIRALING DEBT IN OUR COMMUNITY:
Another Yated Readers Write Letter

My comments in orange once again. See the Original Article by R. Avroham Birnbaum as well as one other response, "Debt End," that I've posted to date.

Dear Editor,

I was very happy to see the article "Dying To Borrow," by Avrohom Birnbaum, that addressed an issue which has become increasingly more common and devastating in our community: spiraling credit card debt.

He accurately described the dangers of owning "plastic," namely a false sense of security that leads to spending beyond one's means, and then the deathly cycle of paying off only minimums on the credit card each month, leading to an accumulation of ever-larger balances at outrageous rates of interest. [OTOH, rewards offered by credit companies when the balance is always paid off in full is like gravy]. When the Torah calls interest the "bite of a snake"- a venomous snake - it was not exaggerating. Just as venom, slowly at first,but more rapidly as time goes on, affects the inner workings of the victim's body, borrowing on interest one cannot afford, attacks the inner workings of one's self, simchas hachaim and very soul [in addition to eroding one's financial foundation]. This issue needs to be discussed more and brought more into the open. Kudos to the Yated for publishing Rabbi Birnbaum's piece.

However, at the same time, in my opinion, Rabbi Birnbaum oversimplified the problem and how a person in such a position should deal with the issue. He basically said that a person should work on himself to not have kinah. He quotes Rebbetzin Zlata Ginsburg's (daughter of the famed Mirrer andPonevezher mashgiach, Rav Yechezkel Levenstein zt"l) as saying how in America, ostentatious weddings, large houses, fancy cars and expensive clothing have become the new standard, and if one could just train oneself to not pursue such a lifestyle, one would not fall into debt. I'm sorry, but I know numerous situations of people who resisted with all their might ostentatious weddings (try to make one for less than $15k or even $20-25k [Unfortunately even a "budget wedding" is out of range for many, see my post on the need for a new model]), who do not live in large houses, drive fancy cars or need to be adorned in the latest name-brand clothes, but they are still living beyond their means.

Let's talk turkey. I want to share a conversation I had with an executive director of a well-known yeshiva about a year ago. He said that household earning a combined $200,000 or more generally easily meet their tuition responsibilities. Households in the $100-150,000 range, on the other hand,were "making it," but not necessarily easily or were "making it but struggling." He added he was talking about a typical family with 3-4 kids in yeshiva. [Maybe I am only speaking for myself, but $200,000 in combined incomes-both parents working full time and contributing nearly equal amounts-seems like an incredible amount of money, even in 2007, and must come with an incredible non-monetary "price tag" in terms of missed time with the children, exhaustion, coordination, etc.].

What if they have 5-6, or 7-10 or more? And what if one or more of the kids needs extra tutoring or has special education needs? He didn't say, but let's stick with the 3-4 kid cheshbon. Let's say the combined family income is less than $100,000. What does this executive director say about them? They often have "real issues," including "marital" issues, he explained. (Nevertheless, at his yeshiva, even kollel families, he explained, are required to pay at least $3,000 per child. No exceptions.) [I posted on minimum tuitions previously. I believe this post had the most comments to date.]

My point is that most people in a frum community nowadays do not have to live ostentatiously to be beset by extremely problematic and compromising financial situations. These days, with tuitions and other basic necessities, it's hard to imagine how a family with a fair amount of children and without inherited wealth [It is important to try to live frugally even when you can spend more in order to and build a cushion. That cushion will help protect a family from spiraling debts in the future] can survive on anything less than the salary of a doctor, lawyer or successful, independent businessman. [Doctors aren't making what they used to and many who have been to professional school also have $100K of debt to pay back, sometimes multiplied by two if the wife also went to law, med, or dental school. Making the "big bucks" often comes with a big price tag and I know my doctor and lawyer friends don't care for the the assumption that they are rolling in dough, especially when they are just squeezing by].

And, furthermore, what if the yeshiva system really does its job and produces boys and girls filled with the highest idealism who want to continue in kollel life for several years? [Seems the Yeshiva system is quite successful in this area. Even more successful is the Bais Yaakov system]. In case you don't know, the going rate for a solid boy who wants to learn five or more years is approximately $1,000 per month. That's about $50,000 over five years. And that, of course, doesn't include the money paid for the chasunah or the chasunah of other children, their tuitions, daily expenses, etc. [Nor does it include the amount needed to train for a parnasah once a married man decides it is time to leave kollel. Personally, I can't imagine buying a chatan for my own daughter, but it is practically standard in certain Yeshivish communities].

What Rabbi Birnbaum seemed not to understand, or at the least did not address at all in his article, is that there are lots of yirei Shomayim families who truly do not live ostentatiously and yet are faced with bills that cause them to fall into horrific debt despite living a modest lifestyle. I would venture to say that this is true about the vast majority who go into debt [Even a "modest" lifestyle can be beyond ones means]. Yes, there are some who fall into debt because they pursue unnecessary luxuries. However, I think most are not ostentatious, and in fact are repulsed by it.

Yet, debt is a real issue. And generally, the larger the family and the longer one is in the game, so to speak, the more of an issue it becomes. The first thing we have to realize is that despite all the fantastic wealth we are surrounded by in the modern world, living modest frum lives today requires an enormous, enormous amount of money. [My motto: no need to make a frum life more expensive than it needs to be]. We cannot blame those who don't make that $200,000 or more. We cannot tell them that it is a simple matter of working on the middah of kinah and not living ostentatiously [Agreed]. Is there a solution to this problem? [Teaching our children how to run a frugal home--and running one ourself--is part of the solution, although it still doesn't touch the tuition issue. Just like debt spirals out of control, savings increase and become their own additional source of income. In tax terms it is known as "passive income."]. I don't know, but the beginning of any solution has to encompass the entire community, including those with means who are not in debt (whose responsibility Rabbi Birnbaum brushed off). Those with money need to reach a little deeper into their pockets or at the least reassess their tzedakah apportionment. Direct a greater portion of your tzedakah dollars toward yeshivos. Many people give away large portions of their tzedakah money to all sorts of worthy causes, but don't realize that there is arguably no greater tzedakah than your local yeshiva. Yeshivos can start a sponsor-a-family fund to help pay tuition for families who simply can't meet even minimal tuition requirements even after a scholarship has been calculated. [Probably best if these funds are run by a separate organization]. Such tzedakah arguably goes further than any other tzedakah dollar you give and is tax-deductible. [A note: Required, i.e. non-voluntary, donations to a scholarship fund are not deductible]. Furthermore, some of the yeshivos themselves, including their tuition committees, could develop greater sensitivity to situations of families in genuine financial distress [Yeshivot need to pay their bills to, making sensitivity difficult, albeit necessary. Perhaps an easier area to be sensitive in would be to stop nickle and diming parents/students for less than necessary trips, parties, etc. Here is an example: I once watched a girl tell a principal she didn't have the money for a skate party. The principal told her, no problem, I'll pay and you give me an IOU. The girl really was resistant to signing an IOU and was trying to wiggle out of the party. The principal said the event was required. I will never know what the real situation was, but IMO the principal should have let her out of the event or treated the girl herself. She was one of the oldest in a family of 8 or 9 kids and either she didn't have the cash or didn't want to spend her cash on a skate party. And, I'd say that was her right].
At the same time, those who are in financial havoc have to see if there is any way to produce more income or at least reduce expenses [Reducing expenses is sometimes easier than finding new income. I routinuely "save" half or more than half the price of retail for groceries through smart shopping. It requires a lot of work, but every dollar I save is approximately $1.40-1.50 pre-tax dollars earned.]. One of the best ways of doing the latter is by keeping a detailed log of every penny spent [Review your receipts too or, better yet, have a frugal friend review them]. Inexpensive computer software like Quicken and Microsoft Money are great tools to follow your dollars and find hidden places where you may be able to cut back. [Excel works great too . See my Budgeting Label, especially Tool 1, Tool 2, and Tool 3]. Most financial planners will tell you that the first step toward regaining financial well-being is eliminating high-interest debt. One possible way to do this is to refinance your home or take out a line of credit [Home Equity Lines of Credit interest rates are climbing up and they do put your home on the line. Sometimes it is a good idea, sometimes it could be disastrous. The most important thing to do is get your budget in line even when re-aligning debt]. This is "good debt" [Update: I would not ever call a HELOC "good debt," but tax-advantaged debt to a limit]. in that it has tax advantages and is sure to incur interest at a rate less than the sinful rates of credit cards. And, of course, take as much advantage of interest-free gemachim as possible. The bottom line is that responsible yirei Shomayim families falling into debt is a growing problem that is everyone's problem. Not just those in debt [Agreed!]. There is arguably no more common type of mussar in the writings of Neviim than that addressing the insensitivity of those who have power and wealth toward those who don't. How the powerful and wealthy in a community relate to those without such means is a barometer of the spiritual health of a community. If they relate positively, it is a zechus for the community. If, chas veshalom, they do not, it can be well, let's not go there. There is perhaps no greater lesson at this time of year than this message.

As a community, we can do it. Together, we can do it. But as individuals pursuing our own agendas, immersed in our own pursuits, we will all fail. We have to help each other, reach out to each other and work together. Otherwise, what are we on this Earth for? What is the "klal' in Klal Yisroel?

Y. A.