The History of Credit & Debt

Table of Contents

Money troubles are not a modern problem. Many decades ago in Bluffton, Indiana, Betty and Dave Jacobs allowed their money struggles to become the focus of an article in a national magazine.

Today millions of families still suffer from the exact same money issues and troubles. They suffer needlessly.

It is obvious from reading this article from the 1960s that people today make the same mistakes when trying to become financially successful. Today the lack of motivation many people have to conquer their financial problems is the only thing holding them back from a life of plenty. Time after time we have witnessed people sabotage their own financial success by trying to get out of debt without help.

Imagine how much better Dave and Betty’s lives could have been if they had asked for help from a debt coach they could trust like myself or even Damon Day.

Dave loves Betty but oh, that check!

Dave and Betty Jacobs don’t really love money more than each other, but the very sight of it sets their hearts athump. They, like millions of other Americans, are heavily in hock to their dreams for everything from a car to a picnic patio, and money is the persistent mosquito at the picnic.

They make money, all right, but they have to connive even against themselves to stretch. The check they’re kissing is money Dave hid from himself, a $331 U.S. government income tax rebate. He “earned” it by not taking a standard deduction for his second child in giving withholding-tax information to his employer, the Franklin Electric Co., Inc., of Bluffton, Ind. So now he has it-and he can indeed use it.

Time was, especially in places like Bluffton, when young couples scrimped and saved and most of all waited to buy what the wanted. That used to be “The American Way.” Today the way has changed. Young couples still scrimp and save, but they do not wait. They borrow, living on credit in a fashion that mortgages them far beyond the horizon, to get what they want now.

Dave and Betty Jacobs and Bluffton, Ind., whose monetary pleasures and perils are explored on following pages, are typical of Americans in the 1960s. They may be wrong in gambling so heavily on the future, or they may be as right as their fore-fathers who gambled on crossing the Alleghenies.

Here begin the adventures of a daring young couple on the flying fiscal trapeze. They are hard-working citizens of Bluffton, Ind. Their story is not necessarily reflective of life in that community, but of the lives of millions of young Americans much like them, who want what they want when they want it.

By ROBERT BRIGHAM

When Dave and Betty Jacobs got their $331 income tax refund, they went on a spending binge. But because the Jacobses, like most young couples, are always in or close to debt, the “binge” consisted almost entirely of paying off some of the bills they had run up. There was $50 due on their heating bill, $50 in gas for the car, $55 to Sears, $8 to Montgomery Ward, $31 for light and water, $28 for dry cleaning, $6 for TV repair and $4 to the greenhouse where Betty Jacobs indulges in one of her few luxuries-buying rosebushes.

These bills-eating up all but $99 of the refund check-were the ones they wanted to settle. But they also had to worry about the next house payment, new shoes for their two daughters and a number of other charges that make their life an endless series of nibbles, pinches, and bites. By the time they had finished their binge, there was less than $20 and Betty Jacobs had to postpone her hope of getting a new dress.

The History of Credit and Debt. Betty and Dave. — Betty Jacobs leaps for joy and girls hug their father as tax rebate check arrives and family blows some of it (left) on party presents, kite (in Betty’s arms) and lawnmower payments (receipt in Dave’s hand).

Although the refund was a once-a-year event, the pattern of using almost all their money to pay off what they owe is a very familiar one to Dave and Betty Jacobs. This is the way they live year in and year out, for their desires always run ahead of their income. Like millions of other young American couples, they live beyond their income but not beyond their credit, staving off perpetually imminent disaster with the aid of checkbooks, instalment plans, easy terms and the optimistic conviction that, as Dave Jacobs says, “We’ll make it somehow. Things will always be better-maybe a lot better.”

Dave and Betty know where their money goes, but they have nothing so formal as a family budget. “I’ve tried a dozen times to work out a budget,” Dave admits. “I start adding up all we spend, but I never get more than halfway through when I see we can’t possibly do it.”

In a literal sense Dave Jacobs is right: they can’t possibly do it. Although they already owe $16,000 (mostly for a mortgage on their new house), in an average month they spend $31 more than their income. How they manage to do it is an ingenious object lesson in modern American living.

From his job as a designer at Bluffton’s Franklin Electric, Dave earns an average of $511 a month. But before he ever get his hands on the paycheck, $50 is taken out for withholding taxes and social security, and another $87 is removed by the Franklin Electric credit union to pay off a loan that helped furnish Dave and Betty’s new home.

From a take home pay of $375 Dave and Betty have to make certain other inescapable payments. The house, with its mortgage, taxes and utilities, gobbles up $161. Life insurance and hospital insurance take $26, and the operating costs on the car Dave drives to work are $30 a month.

The Jacobses decided last year that storm windows and a fireplace would be an investment, not a luxury. The payments on this investment now come to $20, due the first of every month. Payments on their 1957 car, which was remortgaged to help pay for the house, are $37 a month, and their revolving budget accounts at Sears and Montgomery Ward are $31 a month. This completes the hell-or-high-water commitments that must be met every month-leaving only $70 from Dave’s paycheck. Since it costs Betty $92 a month for food and running the house, the Jacobses would theoretically starve if it were not for Betty’s side income.

Living it up on a minus figure; $542 = $511

Five days a week, earning a total of $15, Betty takes care of two young boys whose parents work at Franklin Electric. That extra $63 a month added to the $70 left over from Dave’s check enables them to pay the household expenses and still have $41 for whooping it up.

But before any particular whooping can be done, there are a few little odds and ends, the items that would break the Jacobses’ budget-if they had one. There are clothes and cleaning, the $1-a-week ballet lessons for their 5-year-old daughter Cindy, an occasional golf game for Dave, hair cuts, permanent waves, grass seed and fertilizer, doctors’ bills, church donations, a movie now and then, a newspaper every day. Month in, month out, the odds and ends average $72-$31 more than exist. In short, the Jacobses must live with a permanent deficit in their balance of payments.

Although a monthly $31 deficit might disconcert many economists and practically all members of the older generation, Dave and Betty are actually a good deal better off today then they have been in the past.

When they were married in 1956, Dave was an apprentice draftsman and Betty was working in an advertising office in Fort Wayne, Ind. “Boy, we were in great shape,” Dave remembers. “I was making $66 before taxes and we didn’t have a nickel in our pockets or a stick of furniture. In fact, we were starting off $1,500 in hock for a new Studebaker I’d bought the year before.”

Betty had always dreamed of a big wedding, so they had a big wedding, paying for everything themselves except for two hams and two kegs of beer provided by her parents. Betty’s wedding dress was picked up at a fire sale for $45. All the money they could lay their hands on went for the big day, leaving just enough for a one-day honeymoon in a motel. The following morning they moved into their furnished apartment in Fort Wayne.

Betty was bringing in $40 a week from her job and they figured that in perhaps two years they could afford to have children. Cindy came along in 10 months. Not only did Betty have to give up her job, but a whole new set of expenses popped up: furniture, a washer and dryer, a move to Bluffton so that Dave could be closer to his job.

The period when Betty was pregnant with Cindy was a difficult test for the Jacobses. Even their special efforts to economize seemed predestined to fail. “That was about the time,” says Dave, ” that Betty decided to cut my hair. A neighbor had one of those clippers you make a butch cut with. The top went just fine, but Betty couldn’t figure out how to do the back.”

Still blushing today when she remembers it, Betty says, “I took one swoop and there was this big white spot. I took another swoop and then I broke down and started bawling. I shoved him into his coat, turned up the collar and sent him down to the barber. I couldn’t say anything, I was crying so hard. We decided we couldn’t save any money that way.”

During Betty’s first pregnancy they had one of their few battles over how to spend. “We saved up some stamp books,” she says, “and we thought we were rich when we went into that store. But Dave, he wanted an electric sander, and I had my heart set on something else. We must have argued in there for two hours. Know what we came out with? A tricycle. I didn’t have Cindy for another half a year, and then we had to keep that crazy bike in a box for three more years until she was big enough t use it.”

Costly lesson in the “hard sell”

But in spite of Cindy’s arrival and all the expenses she entailed, Dave and Betty managed to approach solvency by the fall of 1957. The furniture was paid for and was only just beginning to wear out. Dave’s major worry was the Studebaker, which was still $700 short of being paid for but was already making noises that sounded like $200 worth of repairs. One quiet evening they drove up to Fort Wayne. “We just wanted to take a good look around,” Dave says, “We wanted to get an idea what our car was worth so I’d know how much we ought to put into it.” Two hours later, after a graduate course in the hard sell, Dave and Betty walked out of the showroom, “owning” a brand-new Chevorlet.

“We’ve developed some sales resistance since then,” Dave claims.

Five years in Bluffton have brought to the Jacobses a second daughter, Sherri, now 3, and several raises for Dave that have lifted his hourly pay to $2.56. The years have also brought an outdoor lamp pole and a charcoal grill to their 7-room prefab house.

“This is our only vice,” says Dave, waving at the house and grounds.

The Jacobs house looks much like all the other houses on Columbian Road, five minutes drive from Dave’s job. Nobody has much dog to put on; entertainment is a neighborhood affair. Summer cook-outs may take place at the Jacobses because they have a patio and grill, but a neighbor brings the chicken.

The Jacobses’ two daughters, Cindy and Sherri, lead a predictably inexpensive but thoroughly satisfying life. They never expect toys except at Christmas and birthdays, but fortunately they prefer imaginary toys or household items that can be pretended into something else. The current favorite is a suit box, which becomes a truck, a boat, or a house as the occasion demands.

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Long age Dave and Betty decided they could not afford many children’s books, but they discovered hundreds in the Bluffton public library. Every Saturday morning Dave takes Cindy and Sherri to the children’s corner where each picks out three or four books for the coming week.

Little as the Jacobses spend on fripperies for their daughters, they spend less on themselves. Dave keeps about $2 out of his paycheck for cigarets, coffee breaks, and the feeling of having a little pocket money. Betty gets no money that isn’t aimed at the week’s groceries or bills she must pay.

Presents for each other on special days are a problem, Betty simply clips a little from the food money; Dave merely smiles when the meals lean heavily to spaghetti and casseroles because he knows his birthday is approaching. Dave has his own ways of giving presents. Last fall he stopped smoking and drinking coffee and in three months had enough saved to surprise Betty on Dec. 25. But Betty’s best Christmas came the year she was expecting Sherri. At that time Dave could get all the overtime work he wanted, and since Betty was sleeping late, he slipped out of the house two hours early every day for two months and went to work. That Christmas morning Betty sat on the living room rug and wept as she tore the wrappings from a new winter coat, lingerie, and a new carpet sweeper. “I was so worried,” she say, “I thought he must have stolen the money.”

The future is mortgaged

The Jacobses’ future is completely mortgaged-not just by signed contracts but by an agreed-on way of life. In the years ahead they will pay off some debts now on the books but will certainly contract new ones. They plan to give more money to the church and Dave insists that both girls will get at least one year of college.

“Sometimes I get discouraged,” Dave admits, “Sometimes I feel the job is going nowhere and there isn’t much in the future. That’s when I start thinking I might even go into some other line of work-maybe even a salesman. Then I know I won’t. We’ll stick it out. You can count on me going out and buying a couple of hundred pounds of fertilizer for the yard this year. Betty, she’ll get another four or five rosebushes even though we’ve got 40 of them now.

“You know, I think the only thing to make us change would be if we had something we could do together- Betty and me, we’d really be happy then. But I guess that makes us no different from 70 million other Americans. I have wild dreams sometimes of working up something on the side- you know, something I could make for $.30 and sell for $3.00. It may Sound crazy, I know, but I’ll think of it someday.”