In much of the world, the kitchen table represents a place of intimacy where families play out the dramas of their personal and public lives. At the table, values are transmitted from one generation to the next; behavior is taught by dictate and more often by example; a family reveals at the table its approaches to politics, religion, economics, finance, sports, friendship, love, nutrition, dreams and disappointments. Whether the table is located in a home, a shelter, or the family SUV, it is one of the most important places where one generation educates the next, whether consciously or not, whether effectively or not.
In America as in many other parts of the world, the conversation at the table has changed profoundly over the past 24 months. As economist David Rosenberg has observed, in over five million homes the kitchen table sits in a house that is behind on its mortgage, and the level of employment of the folks around the proverbial table is 8.4 million lower than it was before the recession began. Even for those families who do not have the sophistication, courage, time, or inclination to discuss personal finance, the reality on the ground compels an emotional and behavioral response.
Across the country, regardless of economic class, faith, geographic region, or education level, America’s kitchen table seems to be confronting a handful of common themes:
1. Difficult financial choices
For most of our nation’s history, finance and difficult choices went hand in hand. Families and businesses made tough decisions after thoughtful cost-benefit analysis or with very little analysis. Either way, there were decisions to be made because one could not have everything. The rapid expansion of personal credit and creative corporate and municipal financing over the past thirty years made it much easier to acquire products and services without making trade-offs. Families, businesses, cities and states could have it all—so long as no one called the bluff.
Well, the bluff has been called, the emperor’s nakedness revealed, and now difficult choices are being made—once again for many people and organizations, but perhaps for the first time for many who have come of age in the last thirty years. Thus, the kitchen table is now the site of difficult negotiations about what is most important. If one cannot assume that wealth and earning potential will compound at 10, even 20% per year, if one must rely more on equity and less on credit, then what really matters and what is it worth?
2. Use of Credit
It is difficult to ascertain the degree to which personal and commercial credit declines are due to limited supply (banks aren’t lending), limited capacity (potential borrowers have weak credit), or limited desire (potential borrowers are deleveraging). As the Wall Street Journal reported today, annual household debt has declined for the first time since records began in 1945 (“Americans Pare Debt”, WSJ, March 12, page 1), falling from 13.773 trillion (yes, with a “t”) at the end of 2008 to 13.536 trillion at the end of 2009. But don’t worry—US government debt increased by more than that, from 6.36 trillion to 7.81 trillion, so we still have plenty of leverage to go around.
At the same time, it appears anecdotally that many borrowers—from families to businesses and even churches—have become comfortable simply walking away from debt, seemingly without a sense that there is something wrong in leaving others to pay for one’s previous use of credit (yes, the cost of bankruptcy is indeed born by others). In today’s WSJ article, the Walker family relieved the stress of their $1 million debt by dumping it on someone else (Banks? Businesses? Gov’t?); apparently they even felt comfortable saying so to the reporter of a major news outlet. Choosing to walk away is a values decision made at the kitchen table. At other kitchen tables, walking away from a debt is simply not an option. While such decisions have always faced families and businesses, never have so many tables in America been wrestling with this issue so intently at the same time.
3. Employment and Entrepreneurship
Last week, Syntrinsic had an opportunity to be guest lecturer at a personal finance class at a college in Georgia (on the day before the start of spring break no less!) At least 1/3 of the students stated that a primary financial objective is to start their own business (1/3 wished to pay off their student loans in full, and 1/3 intended to save up for the down payment on a house). We didn’t hear students say they wanted to be ministers or teachers, doctors or lawyers, scientists or engineers. Not one. Could it be that the young people who would enroll in personal finance would be those most inclined toward business? Could it be that these young people perceive that as a business owner, you can exert more control over your destiny and be less dependent on the vagaries of the job market?
And we wonder what conversations might be occurring around the table at home and late at night in dorm rooms and coffee houses about employment and entrepreneurship that are different from those of years past? Is there more uncertainty and fear? Are young people thinking that they can do at least as well financially as their parents, much as previous generations have? Are they wondering how they are going to pay for the entitlements promised to their parents and grandparents?
4. Charitable Giving
It could be easy to lament the decline in charitable giving that many nonprofit organizations faced in 2009 and many expect in 2010. However, we are rather amazed by the tremendous amount of charitable giving given the extreme pressures faced by so many donors. America is fortunate that so many of its citizens of all economic levels are inclined to share their wealth with others at home and abroad. It always has been that way here and we expect it will continue.
And that is likely one of the most impressive conversations being held at the kitchen table as families and businesses strive to determine how to make an impact at a time of economic crisis. Sure, there are always some who expect handouts or who believe that the government should be the safety net, but that is not the norm. There are families making very difficult financial decisions that include helping those most in need. We have a feeling that the kids who today sit at kitchen tables where giving back is a given, not an option, are going to be better friends, neighbors and citizens when they have their own tables in the future.
It’s a good time for all of us to think about the conversations at our kitchen tables, the ones we are having and the ones we are not.