Thomas Fox, whom you will find on Twitter at @ThomasJFox, is a personal finance expert, counselor, teacher and a fellow person who is passionate about helping people with money troubles.
Thom and I met in Springfield, Massachusetts as I was passing through the area on the downhill loop of my tour talking to people about money, the economy, credit and debt.
Sitting in my van outside of a Starbucks we chatted about access to credit, treating yourself to pleasure in downtimes, financial education, student loans, and how to build a good budget.
I invite you to listen to Thom, below.
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Interviewer: All right. Well, I’m here with Thom Fox. I guess we could almost say, “The renowned personal finance expert,” but Thom is certainly a personal finance expert. He’s on Twitter, and he’s been working in this field for a while. He’s a spokesman for a company and if anybody has an outlook on what consumer life is like, credit and debt, in the economy, you’re one of those people who has your finger on the pulse, so how do you think things are going just generally for people right now?
Thom Fox: From what I’ve seen so far, people are just really – they’re overwhelmingly concerned about the American economy, about their own stability, and I think their future’s in question to the point where they’re uncomfortable with many of the purchases that in the past would seem very much routine. They’re really doing the mental gymnastics about where do I wanna go? We’re coming from a savings rate that was in 2007, if I’m not mistaken, -2.7 percent and now we’re climbing up towards 7, but we’re still behind where other countries are, so we can see that shift where people are saying, “I’ve gotta hold onto my money a little bit better,” but there’s also that talk that I hear with the people I educate is, “When are things gonna get better?” They’re looking for that hope, and they’re concerned about the light at the end of the tunnel, and many of them just don’t see it.
Interviewer: Do you think that people miss those days of being able to go out and purchase things that they like to provide themselves with entertainment?
Thom Fox: They do. They miss it. We’re an instant gratification kind of society with the expansion of the malls in the 1970’s. That just helped us out all that much more. We had the ability to go out and do what we wanted to do, but people looked at different things, more so in a very generic sense.
For instance, their 401k’s and even Social Security, they’re saying, “Well, that’s my retirement fund,” and to step them away from that and say, “No, really, this is only part of the puzzle. What are you doing with the rest of your financial life?” They’re starting to take that to heart now.
They’re starting to realize. We have, since the beginning 2008, 6.7 billion jobs that have been lost, and those jobs aren’t readily being put back into the economy. Someone doesn’t know what’s gonna happen to them and how long it’s gonna be. I think the average time being unemployed is over six months, well over six months, so if someone’s worried about if I’m unemployed Thomorrow, I don’t think I have the money to really keep myself going.
Interviewer: Well, I was surprised in my travels. I spoke to one marketing manager at a resort who said this has been the slowest year for them with reservations, which I understand, but he said, “Things are really picking up. It’s like people are reaching the end of summer and realizing, ‘I haven’t had a vacation yet. I’d better do something,’” so they’re now starting to part with some money.
Thom Fox: They are, but now we have to look at where the money’s been going. A lot of people have used their credit cards to fuel a lot of things. I think people – where credit card debt has been down in the country is $928 billion dollars down from $977 billion, but it could be that we’re talking about a lot. The economists were like, “We have this pent up wanna go out and buy.”
We could be getting to that cap because a lot of people could be getting stressed, and let’s be honest, a vacation is not just about the financial part. It’s about the psychological part. “I need a break. I need to do something. I’ve gotta get out of here,” and really, you really can’t put any price on that, so yeah, we could see some people coming around and saying, “I’ve gotta do a little bit more for myself.”
Interviewer: Is it wrong for people to want to treat themselves to a weekend getaway or some small vacation even in desperate times?
Thom Fox: Absolutely not. As far as we know, we go around this place once, might as well enjoy it while we’re here. Obviously we wanna have money saved for certain emergencies and that’s – more so where what I try and do with people is a lot of people say, “Oh, I wanna invest. I wanna do all these things.” Well, you’ve gotta learn how to walk before you can run, and I work on very – just giving people the basics.
I would say 80 percent of the people I talk to don’t understand credit scores. They don’t understand. Even 90 percent of the people don’t have budgets, so when you try to get them on that path and they start to realize, “I can save money doing this. I can save money doing that. I can do this and this,” and then when they start to see that I can build savings, I can do these things, there’s that confidence. I know I can prepare, but I also know that I can take care of myself in the process.
Interviewer: Budget in a little fun.
Thom Fox: You need a little fun, and I think that gets them over to the fun aspect when people start to become – I mean education is the largest tool that we have in this country. Understanding something completely gives you the confidence. I know I can build savings, so wow, I’m gonna do that, but now it’s time to take care of me a little bit.
Interviewer: What about credit cards? Have you had a period of time in your life where you might’ve experienced some stress, some financial stress, and lived through some issues yourself?
Thom Fox: When I was younger, I inherited a fair amount of money. I got married and divorced quickly thereafter, and lost all of the inheritance that I had, which is really what got me on the path of personal finance. I didn’t understand any of the mistakes I made. I didn’t understand why I should’ve been protected with my investments or anything, and then I looked into it, and as I started to look into it, I started to realize more and more just how many people did not know this. When I went to work for the organization I’m with right now, it was a small place. It’s a not-for-profit, and I had to move into different areas, and one of the areas they said is, “Based on what you know, why not work in the education area,” and it’s been 14 years now, and I’ve just been teaching personal finance and developing programs, and it’s been great, but it all started from a bad experience.
It’s only bad if you let it be bad. It’s a learning experience otherwise, and I just look at it as probably the most expensive learning experience I ever had, but a close second is my college education, but I’ve had some tough times with money, and I’ve had tough times with credit too. Because of all that, I fell into collections and had collections agents calling me and pulled in every different direction and it takes time. Just as it took time for me to get into trouble with my finances, it took me a long time to get out of trouble. Despite what anybody says, there’s no overnight magic bullet.
You can’t call a credit report company, and boom, you’re done. It takes time. You just have to – it’s patience. It took a lot of patience of mine, but it also helped me do different things in my life, like really understand what people need to know about finances and how it can help themselves.
Interviewer: Now you and I both know that when people are struggling through these difficulties that they feel like they’re the only ones that are going through this. They’re suffering in silence. They feel like losers and rejects and feel just very despondent about their situation. Somehow they failed. What do you have to say to people when they’re feeling like that?
Thom Fox: Well, there’s been circumstances in my own life where I felt that way, not because of finance but for other things, and one of the lessons I learned is that there’s billions of people on this planet. There’s been billions and billions of people before us and so on. Someone somewhere has gone through a similar situation that you have – talk about it. One of the largest obstacles I see for relationships is no one talks about money, especially if you have to go now do a budget for a family. No one really wants to talk about it, but you need to get people on board.
You need to have a conversation about it, and you’d be surprised. You don’t have to get intimate about it. You don’t have to say, “Well, I make $80,000.00 a year but I can’t afford this,” and there’s your cousin making $35,000.00, and he feels all intimidated. You don’t have to do all that but you can say, “Listen, I’m having some troubles.”
You’d be surprised at how many people are having trouble in one way or another. College students, for instance – everybody’s graduating this year. I’m mystified as to how they’re gonna take care of this situation. The job market’s just not there, and these student loans are gonna start coming due, and if their payments are gonna be – I graduate next year.
If their payments are gonna be anything like mine, I don’t know where they’re getting the $500.00 a month or whatever to pay it, unless obviously they’re gonna consolidate their loans and so forth, but they’re gonna be very stressed. They need to talk about it, and I think I see a lot of young kids talking about it and already preparing for it, which is encouraging on my end – they’re knowing. “Okay, this is coming down the road. I’ve gotta prepare for it,” so we’re making that shift I think a little bit in society to be a little bit more open about it, but we probably have a little bit more to go.
Interviewer: Now college loans are actually scary. Student loans are one of those things that everyone thinks is good debt, debt that we should take on, but student loans are very unforgiving if you run into financial problems. How do you – what do you say to people to prepare themselves for college and not just, “Oh, don’t worry. They’ll give you financing.” Should you plan in advance? Should you base your education on what you can afford?
Thom Fox: Well, I took a breath there because it’s a dual kind of aspect. I’ll share a little bit. I dropped out of high school in ninth grade. I ran into a lot of problems. I actually started a couple of agencies that help kids who are considering dropping out of high school to keep them in high school and then get them onto college, and I’m working with a new program now as a mentor to do the same.
In my opinion, the best education that you can ever – the best investment you can ever make is in your education because even beyond the fact of what you can do for earnings for yourself, there’s still the ability of what you can understand in the world, and again, if you have the knowledge of something, you can better be prepared for it, plus there’s so many ways with the internet and everything else that you can create income, and it’s not just about making one stream of income. It could be multiple, but that comes from education, knowing the world and how it works. You should have a plan going into it. I don’t know if we should put a price tag per se on well, I know I can only afford $30,000.00, so I’m stopping when I get to $30,000.00. I think you should make the plan beyond.
This is what I wanna do with my college education after I graduate, and then work a plan from there to say, “I have to create the streams of income that will help me sustain my college loan which is gonna be X amount of dollars per month.” I’ve spoken to people that have done this. One of my friends actually, she graduated three years ago for nursing, and within the first two years of her employment, she’s paid off all of her student loans because she had a plan going into it. She didn’t say, “I can only afford this much,” but she said, “I know when I’m done this is gonna be waiting for me, so what do I have to do now to prepare for that?”
Interviewer: Have you had those clients come to you like I have that are in their third year of law school and they’re a couple hundred thousand dollars in debt and then they decide, “I don’t wanna be a doctor. I don’t wanna be a lawyer.”
Thom Fox: I haven’t had those and I think I may have read about one of those on your site. It’s a difficult choice, but there’s other things you can do with that education too. You don’t necessarily have to be a lawyer. You could go into consulting or something along those lines. There’s gotta be a way to parlay that, and off of the top of my head I don’t know what it is, but again, having the education is one thing and then applying it is another, so there’s multiple things you could probably do, but again, having a plan going into it, and it’s tough today.
If you’re a young kid and you’re going all the way through medical school, by the time you get to the end of it, you’re talking about a substantial amount of your life that things change. Especially being a younger person, that could be a quarter of their life or two-thirds, and next thing you know they’re like, “Well, wait a minute. I don’t know if I want to do this anymore.” It’s challenging, but again, you do have the education.
You can do something with it. You’ve just gotta have that spark inside of you to say, “Well, all right. I’ve got this. What do I do with it?”
Interviewer: Well, people are oftentimes very irritated at credit card companies and one of the things that they don’t seem to understand is that having a credit card is a privilege, not a right.
Thom Fox: True and I’ve seen a lot of it too, especially with the new Card Act that’s been passed. People are saying, “Well, it should’ve happened years ago,” and I think we’ve gotta get back to the mindset that a credit card organization is a business. The credit card companies, they’re in business to make money. They have to look at the situation. They have to protect their shareholders, and a lot of it now I see, that’s my view of it.
They’re cutting back on credit limits and realigning things because they wanna buffer their shareholders. It’s a privilege in a sense that you don’t have to fuel your lifestyle on credit cards but unfortunately because of the ease of access to credit – several years ago I had someone I was educating in a class and they pulled out 30 credit cards that they had from Sears and this one and that one and the other one and then the regular brands, and you’re going, “Why do you need all those?” “Well, if I wanna shop here, I use this.” We have this – the name escapes me, but we feel as though we have a right to this, and it’s not a right. It is a privilege, and people abuse privileges sometimes.
Sometimes it’s not even their fault because it just gets so easy. Everywhere you go now, you don’t even need to carry cash. We’re going to a cashless society, and the next thing you know, you turn around, you’re $40,000.00, $50,000.00 in credit card debt and you’re scratching your head how you got there because it can happen so quickly.
Interviewer: So let’s talk about savings now. Just recently people have started to save more, but they haven’t for a long time, and what do you tell people about the importance of an emergency fund or putting cash away? It’s almost like it needs to be spent, especially in times when income might not be as great as it once was. How do you promote that?
Thom Fox: You couldn’t even bring up the words, emergency fund, three years ago because no one wanted to hear it because everybody was doing fantastic. The unemployment – I mean we were losing maybe 6,000 jobs a month so no one was worried about unemployment whatsoever. Now you talk about an emergency fund and everybody’s, “What do I do? How much do I need?”
It’s very much dependent upon their situation. You can use the economy right now to teach them. For lack of a better word, it is a teachable moment that’s happening in our economy. I have a colleague, master’s degree, two and a half years unemployed, can’t find a job. He had to go through the administration’s mortgage program because they were about ready to lose their house, and that’s a situation that I try and bring into the classes.
This is an MBA educated – get their MBA. He has to hide it on resumes when he wants to go out there because he can’t get a job because he has an MBA, so it’s a very odd moment, but this is where you really talk about the psychology of what’s going on in the country versus your own personal economy. You need to be prepared. You need to have cash on hand.
You need to build up as much as you have. If the average rate of unemployment is six months, the average duration, try to save a year’s worth of income. It’s a lot of money. It’s gonna take you a while to get there, but when you have it, and if something happens, you don’t have to fret.
Obviously, there will be a level of concern if someone were to lose their unemployment, but you can breathe a little by saying, “I have enough money to take care of my family. My insurances are covered. God forbid anything happens. I’m prepared,” and that’s really where you wanna get. You wanna be prepared.
Interviewer: All right, Thom, anything that we should talk about that we haven’t?
Thom Fox: The one thing, because it’s my profession, is financial literacy in the country. Right now we’re at nine states that actually mandate that financial literacy be taught in high school as a matter of graduation, and I think that if a lot more people were to be educated – an education in school is about an education in life, and how could we not talk about finances as a part of that? I understand algebra and everything like that. Don’t like it, but I know that I’m gonna need to understand how to use a credit card much more than I’m gonna need to know how to use algebra, so I’d like to see more states adopt financial literacy just to give people that upper hand when they have to get involved in situations, and they have to do it young too.
As soon as you graduate high school, they were lining up to give you credit cards. That’s gonna change now, but you still have to manage a checking account. You still have to build savings. You still have to understand a budget, so you still need to know the basics of finance, and I’d like to see more places do that.
Interviewer: I constantly scratch my head about it because financial education, financial literacy is something that seems so common sensical, that people should engage in it, but yet you look at organizations like the Jump$tart coalition and you look at their annual reports that constantly show that students that go through financial literacy classes actually score worse on the financial exams than the students who don’t. There’s almost no measurable impact right now. Is the problem that we’re not teaching it the right way or –
Thom Fox: I can’t speak for their organization. I know the organization I’m with – we do pre and post testing. We do show that there is an impact from the education that we deliver. It could be the way it’s in delivery too. I was talking to another blogger on one of their posts, and just like you said, building off that a little bit, people think it’s rudimentary.
They should already know it, and what I’ve seen sometimes is sometimes people teach it that way, like credit scores are this, and they don’t go into the very basics of it. Randy Pausch, when he did The Last Lecture, he talked about something which I always loved. He talked about meeting his childhood goals and one of the things was to play football.
He never got to do it but he said, “You know what? I’m better off that I didn’t because what I did learn from football was what my coach told me when I was a kid. We went in there one day. We wanted to play football and all the kids were like, ‘Well, let’s go play,’ and he’s like, ‘Well, wait a minute. How many guys hold a football at any given time?’
They go, ‘One person.’ He goes, ‘All right, we’re gonna learn what the rest of the people on the field are doing when that one person has the football.’” Basically, what he did is he taught the basics, drilled it into them and if you do that, in my opinion, if you approach personal finance from giving the basics, understanding what’s in a credit score, understanding what aspects should go to certain parts of your budget, once you build that foundation, then it’s that opportunity for someone to build off of. You don’t need to be a millionaire to be rich. You just need to know how to manage your finances correctly and the rest falls into place.
Interviewer: Do you think there’s some benefit to teaching how to use a credit card in practical terms? For example, encouraging high school seniors to have a stored value card that the parents can monitor, have a deposit and use it and know how to look at a statement and read it?
Thom Fox: There’s definitely a benefit to that. Many of the people even that my organization works with – they don’t know how to read a credit card statement. It’s not saying anything against them. It’s just that they’ve never been taught how it is. I still deal with people who don’t know how to reconcile their checking account, and again, I’ve been in the industry for 14 years, and you go, “You think someone would know it but you can’t teach it that way.”
I think there is a benefit to knowing the basics. Anybody can build from there. Again, if I know how I can budget, then I know how I can allocate a certain portion of my funds to invest, so I know that putting that money here, I can now build on that, but again, it all comes from the basics, so I think it’s a benefit for high school students to learn – change up home economics for a sense. We’re not making Bundt cakes anymore. Home economics is how do I keep the lights on in my house? How do I pay my mortgage?
Interviewer: Let’s talk about budgeting for a second. When I see people, when they get into trouble, the first thing they do is they sit down and they wanna make out a budget to accomplish a goal, which is to stop the collectors from calling and meet their expenses, but they trim everything out of the budget that may be perceived as fun, like no going out, no cable TV, no nothing, and they set themselves up for failure. How do you build in a little fun into difficult times like that?
Thom Fox: Well, the first thing I tell anybody to do is first of all call everybody. For instance, the other evening, I call my cable provider ‘cause I’m always looking for ways to save. I was able to find out about promotions that are going on with both the internet service that I have as well as the cable service that I have. I actually wound up getting more cable TV than I had in the past, but I shaved $60.00 a month off just by asking, so before you say, “Well, I’m gonna cut out my cable TV and I’m gonna cut this out,” call everybody, all your service providers, explain your situation.
They know that it’s tough out there, but they also know that they don’t wanna lose any clients, so it’s still a business. Even though I’m not making $150.00 a month off this cable account, I’m also not making zero, so if I can get somebody down to $90.00 and keep them as a cusThomer, I’m still making money. A little bit less, but I still have that client built in. Call everyone.
Don’t cut all the fun stuff out. You still need to – we’re still human beings. A large part of our makeup is our philosophy, our psychology, and we need to decompress. Don’t cut all that out, but again, seek advice too. There’s plenty of agencies. There’s plenty of blogs out there, like your blog and other places that give good advice, and it’s free. You’ve just gotta look for it.
Interviewer: All right, Thom, well, thank you very much.
Thom Fox: Thank you.