CHAPTER 7
Living Consciously

Living in the moment means letting go of the past and not waiting for the future. It means living your life consciously, aware that each moment you breathe is a gift.

—Oprah Winfrey

Some people know J. C. Watts because he played football. He was a high school athlete who became the star quarterback for the University of Oklahoma, where he led his team to consecutive Orange Bowl victories. Other people remember that J.C. had made history as one of the first two black students to attend an integrated elementary school in Eufaula, Oklahoma, where he grew up. Still others know him as a former member of the U.S. Congress; after a successful professional football career, J.C. served in the House of Representatives from 1995 to 2002. However one knows him, J. C. Watts is a remarkable man.

One of the most striking parts of his story is his decision to take a political stand quite different from that of his family. Most people in his impoverished rural neighborhood were Democrats, and the people he held most dear were Democratic community leaders and activists. J.C. was also an activist, but one with a different point of view. “I was willing to step away, because I wanted to examine issues that I felt were important from a new perspective.”

When he entered his first political race in 1990, he took a chance on his independent views by entering as a Republican. With his victory, he became the first black candidate elected to statewide office in Oklahoma. Later, in the U.S. House, J.C. would win a Republican Party leadership position, becoming the first African American to do so in the history of the U.S. Congress.

“Individual greatness comes from accepting personal responsibility,” is a view that J.C. and I share. His story embodies an important aspect of a psychology of wealth: we must be willing not only to accept responsibility but also to take a chance on ourselves in order to achieve our broader goals—particularly now. “This is no time to hide,” J.C. says about the current economic crisis. “It is no time to hold back. It is time to invest in ourselves, to find a way to move forward, personally and as a nation. The whole world is facing a critical moment now. It is an important time, when we must have the courage to take some chances and to step up and seize opportunities wherever we may find them. If there is an ounce of potential within us that we can harvest, and we do not, we are selling ourselves short.”

“I almost dropped out of college a couple of times,” he recalls. “My father encouraged me to stay. It was tough. I got married when I was a freshman, in 1977. My wife and I had a child, and we were doing all we could to survive. Our parents weren’t able to give us money every month. Also, understandably, they believed that we had made our bed, and so it was ours to lie in. We had next to nothing, and now I wonder how we made it, but we just did what we had to do. After we had our second child, we needed a new refrigerator. We discovered that when you have very little income, you stretch and sometimes you borrow. I went to an installment loan company and got what we needed to buy that refrigerator and keep the milk cold and the food fresh for our kids. It taught us responsibility, and I’m grateful for the experience. I was also thankful to have options.”

“It was hard to keep stretching and moving ahead when each step felt like a burden. But hard times,” he says, “are the ones in which we grow and learn. Everyone wants to move forward, to grow and change—people want to evolve. We shouldn’t shut down as individuals or as a nation because times are hard. We have to prepare ourselves for the future, to create—and to protect—opportunities for people.

“Personal responsibility is often misinterpreted in politics. To me, it simply means that at some point I have to realize that I’m the common denominator in everything that happens to me. I must be responsible for both the good and the bad choices I make. The successful organizations I’ve been involved with—football teams, churches, businesses—know this. If we’re not succeeding, we need to ask what we can do differently.”

The conversation with J.C. caused me to think about opportunity and risk, and their role in a healthy wealth psychology. Next, it was time to meet Dr. Frederick Miller.

Then and Now

Dr. Miller was in the process of retiring from the University of Oklahoma when I first met him. He sat in his office, surrounded by the fruits of his labors in the fields of commercial and consumer law. The stacks of publications and manuscripts documented his work and that of other great minds of the nation. Compared to his accomplishments, Dr. Miller is modest. He’s a little stiff after years of fine dining and travel, and he’s hoping to get his knees working better, but his mind is razor-sharp.

I was becoming increasingly curious about how social and cultural changes are affecting our individual relationships with money and prosperity. Today we are slowly recovering from what is already being called the Great Recession. In one way or another, this economic earthquake has touched the lives of virtually everyone. It has made many of us reexamine our approach to spending, borrowing, risk, and living in general. Many of us also wonder how we’ve come to this not-so-pretty pass. I wanted to hear Dr. Miller’s perspective on that very question, particularly on the social impact of how money is borrowed and loaned. He had some history to share. I was reminded that there was a time when people’s financial options were so limited that, although it may have been difficult to overborrow and overspend, it was also very tough to get ahead.

“In the past, credit was available only to a certain class,” he began. “The result was that some people were able to have a very nice lifestyle. Others, who couldn’t obtain credit, had a hard time bettering themselves.” Those who were not wealthy had few, if any, options for borrowing money. Although many ordinary folks could use consumer installment loans to buy specific goods, only the wealthy could readily borrow cash. This created a critical divide. The inability to borrow money severely limited an individual’s options, both for meeting basic needs and for making investments in the future.

“The credit market was effectively segregated by law,” Dr. Miller continued. “That is to say, there were usury statutes—determinations by legislatures that you couldn’t pay more than a certain amount for interest. But there were a lot of exceptions—for example, for banks. So, if you were the kind of customer that a bank would be interested in, you might be able to get credit despite these caps. The Small Loan Acts, laws first enacted in the 1920s, were designed to allow people other than those favored by banks to borrow cash. The trade-off was a high degree of regulation.”

As we talked, Dr. Miller confirmed what I had learned about the overall growth of prosperity—namely, that credit was a stimulus for the expansion of a strong and flourishing middle class. Access to credit also helped to shrink the great economic class divide. But has our individual and collective relationship with money and credit become so fraught and anxious that the power of credit to improve our lives has been eliminated?

The Dream of Prosperity

As we work to climb out of the recession, many people are still feeling the effects of job losses, defaults on mortgages, and a volatile stock market. With the global economic crisis of 2008, the dream of middle-class prosperity took a serious blow. And, as discussed in the last chapter, credit played a central role. “America’s middle class is hurting,” said U.S. Vice President Joe Biden in January of 2009. “It is our charge to get the middle class—the backbone of this country—up and running again.” As writer Claire Suddath quipped in Time, “One could practically hear the cheers emanating from single-family homes with two-car garages.”¹

We’re all familiar with the spate of runaway spending and borrowing that preceded the crisis. Many Americans and their neighbors around the world were buying things that they couldn’t afford—most notably, houses—at breathtaking rates. The role that subprime mortgages played in the painful reckoning of our economy is well known. With the complicity of banks, average citizens were piling up mountains of debt that they couldn’t necessarily support. As of early 2009, “About 21% of middle-class Americans had spent themselves to the limit. Personal bankruptcies rose by a third from [2008], and mortgage defaults—well, they’re moving beyond subprime borrowers and hitting those with previously high credit scores.”²

During the spree, few people wanted to talk about the consequences of this reckless borrowing and consumption. In retrospect, we wonder: how could we have accumulated these unsupportable levels of debt—both individually and collectively—when history has shown us that such extremes lead to spectacular economic crashes?

May I Borrow a Cup of Sugar?

Throughout history, in all places and at all times, credit has eased and facilitated social life. Prosperity and credit go hand in hand. Most of us couldn’t get through a day without some form of lending and borrowing. Can I lend a hand? May I borrow a cup of sugar? An umbrella? A pen? A moment of your time? These exchanges require trust and imply an interdependence that society simply could not function without. Receiving and bestowing credit are deeply human and social activities, and they are certainly essential tools for creating prosperity.

As I had learned, credit played a key role in the meteoric rise of the U.S. economy during the Industrial Revolution and afterward. In the 1800s, the ability of people with moderate incomes to borrow fueled the emergence of a thriving middle class. Today, in many places around the world, microlending is helping to open economic doors for people who want a better life.

Early installment credit plans paved and widened the path to advancement for middle-income Americans. Similar plans followed rapidly, allowing millions of average citizens to buy cars and other items that had previously been out of their reach. This purchasing power not only provided a way to improve the quality of life, but also freed many people to pursue dreams of greater achievement while, at the same time, opening the door to greater wealth and prosperity in America and around the world.

Checking the Rearview Mirror

By the turn of the twenty-first century, however, something was seriously amiss in the use of credit. Many factors contributed to the rise of debt and the fall of the economy near the end of this century’s first decade. But among them was a culture that seemed to be giving us carte blanche permission—and even encouragement—to spend well beyond our means. We borrowed and bought without looking either in the rearview mirror or at the road ahead. Behind us, a mountain of debt was accumulating, and there had been so many job losses that the means of paying it off was threatened. Many people had lapsed into unconscious habits of consumption and debt. For some, the imperative was to live well, but not to think about the consequences or the bill that would come due sooner or later.

I vividly recall an intelligent and sophisticated friend remarking to me in 2000, “Everyone I know is up to their eyeballs in debt. That’s just what you do now.” She was explaining why she simply wasn’t going to worry about having tapped out her home equity line and accepted every credit card offer that arrived in the mail. It was easy for otherwise smart people to get swept up in the tide of good times that seemed to be available simply by virtue of being a consumer.

But even then, cracks were beginning to show. Driving down a typical suburban street, one could observe the facades of large and apparently prosperous homes. However, inside many of these homes, a real estate agent confessed to me, were barren rooms with little furniture. The owners had maxed out their resources with the purchase of the house and were running on financial fumes. When many of his clients bought their homes, the agent continued, they had assumed that funds would somehow continue to be available indefinitely. Repayment would come sometime far in the future, if ever.

We had closed our eyes to the consequences of how we were borrowing, using, and relating to our money. Things were clearly out of balance. Credit was the fuel of our advancement, but it appeared that we, as a culture, had stopped using debt consciously and judiciously. Not everyone fell prey to this lack of discrimination, of course. But enough did that the aggregate results of this unconsciously acquired debt were catastrophic—both for millions of individuals and for our economy as a whole.

The Pendulum Does Its Thing

I have observed in my friends, associates, clients, and the world at large an interesting fact about human nature: when we make a mistake, a natural desire to correct our course can cause an overreaction that moves us too far in the opposite direction. It’s pretty basic psychology. As with a fishtailing car, as we try to compensate for our error, we can go right off the road. It appears that this natural tendency to overcompensate may be at play in our cultural attitudes toward money.

Because the economic crisis resulted in part from unconscious spending and lending, the cultural pendulum has swung the other way. From a certain acceptance of extravagant purchasing and borrowing—and subtle and not-so-subtle encouragement to ignore the consequences—the popular wisdom has become: “Hunker down and don’t spend a penny more than is absolutely necessary. We have to play it safe. The future is uncertain. Better to save and lie low until the economic picture improves. Debt is to be avoided at all costs. Circle the wagons, and take no risks.”

As with a fishtailing car, as we try to compensate for our error, we can go right off the road.

Some popular financial advisors deliver strict and persuasive warnings about the use of credit, and they counsel us accordingly. Before we make any expenditure, they exhort us to ask ourselves: “Do I need it, or do I want it?” The assumption is that “needs” encompass life’s most elemental requirements (such as food, basic shelter, clothing, and transportation), and also savings and retirement plans. All other expenditures are to be considered suspect and denied as self-indulgent wants. Loan and debt have become four-letter words.

Some advisors also encourage us to reclaim the idealized values and practices of earlier times. But, most likely, such times never existed. As a recent Harvard Business School publication observed, “There is a myth of a lost golden age of economic virtue. Once upon a time, the story goes, people lived within their means and borrowed only under the direst of circumstances. Debt was shameful, and credit financed only ‘productive’ purchases like homes or farm machinery. Although nostalgia seldom makes good history, writers mourned this lost golden age during the Roaring Twenties, the rise of the credit card in the 1960s, and the home mortgage boom and bust of 2005–2008.… [Yet] credit itself is as old as commerce.”³

Nonetheless, some of the popular financial advice has gold at its core. To stop and consider our purchases and our borrowing before we take a plunge is wise. This is conscious financial decision making. Any change that requires us to become more conscious of our behavior is a welcome and necessary course correction. Indeed, it was the general heedlessness with which many people jumped into financial deep water that, in part, got the United States and others nations into trouble.

But has the pendulum swung too far the other way? In our attempt to repair the damage done by unconscious spending and borrowing, are we taking the belt-tightening and self-denial too far for our own good?

Bob Muster is a dentist whose experience reveals one way this issue comes up in our daily lives—that is, in our teeth. In a July 2011 article in the Dayton Daily News, Muster said he understands “that money is tight for many families, but preventive care makes more financial sense in the long run.” He explained, “I consider getting your teeth cleaned every six months like getting oil changes for your car—it keeps your engine from blowing up. It’s much less expensive to do preventive maintenance than a complete overhaul.” In the same article, Dr. Michael Dickerson of Troy, Ohio, explained how “a little financial planning can help people avoid higher costs down the road and life-long problems.”⁴ Tightening the belt too severely can become more expensive in the long run. We cannot create balance by swinging so far to the other side that we run right off the road. Overcompensation does not create balance.

Creating a robust psychology of wealth requires a healthy balance of saving and investing in oneself.

Today many people fear that they don’t have enough money or that they won’t have enough to carry them through an uncertain future. Fear in itself is constrictive and disempowering. It can feed on itself, and it rarely leads to balanced and constructive decisions. The famous misers of the nineteenth century, Hetty Green and Russell Sage, are the not-so-shining examples of the extremes that the fear of loss and want can lead to. (In the next chapter, you’ll learn more about the lengths to which these curious characters took frugality.) Allowing fear to keep us from spending money is certainly counterproductive for creating prosperity.

Common sense tells us that saving and setting aside money for emergencies is a prudent practice. The sense of security that savings can bring is worth its weight in gold. For building a wealth-enhancing sense of self-esteem, saving money certainly does no harm. However, creating a robust psychology of wealth requires a healthy balance of saving and investing in oneself. Creating a financial cushion is beneficial. But it simply doesn’t have the same potent impact on self-esteem—or the potential to create prosperity—that growing, expanding, and taking action can.

From the false-bottomed boom preceding the big bust, we learned that having a glut of possessions, gadgets, and vehicles isn’t the same as being prosperous. Nor, of course, is having a burdensome level of debt. Yet extreme self-restriction and a fearful elimination of all risk taking can severely limit our ability to move forward in life. Not only will financial austerity and avoidance of all investment and debt keep us stuck in our individual lives, but it could have a negative effect on the economy at large. The responsible flow of credit—and the social trust that it requires and engenders—is essential to the commerce of life. Neither of the extremes—heedlessness or inflexible financial abstinence—is likely to lead to prosperity.

A New Perspective

So what will get us out of the unfortunate spot we’ve gotten ourselves into? In a word: consciousness.

Approaching our finances consciously—with an awareness of our circumstances, motivations, and true aims—is a key. With this kind of consciousness, we assess what is meaningful to us and what we must do in order to bring that meaning to fruition. We also acknowledge that we may need to take risks in order to move forward. We take realistic stock of what a particular risk involves and of our ability to take that risk without damaging ourselves or others. And then, if we decide that it’s in our best interest to do so, we bet on ourselves. And if we want to borrow money, we do so knowing how and when we will pay it back.

When is stretching or taking a risk a reasonable and conscious act? Was Representative Johnny Shaw’s ambitious decision to buy a radio station reasonable and responsible? Bennie Taylor made a choice when he borrowed funds for a trip to commemorate his grandfather. Senator Leticia Van de Putte’s family made similar choices when they made investments in their business to give their family a shot at a good life.

None of these investments were impulsive, perilous, or burdensome. The risks that these thoughtful and optimistic people took were not to satisfy what might appear to be simple “wants.” These were conscious investments in their own futures and in lives that were meaningful to them. Perhaps most telling, all these people made choices to keep up with no one but an inner voice that told them they were worth the stretch.

Money Matters

Jeff Burch teaches U.S. military personnel how to make conscious decisions about money. For the past 20 years, he has been assisting active-duty service members in learning how to manage their finances in the unique circumstances of military life.

Jeff explains, “Military personnel are required to be alert and ready for service. Financial preparedness and being ready for duty go hand in hand.” Being financially prepared in any walk of life means being careful with your money—saving, building good credit, and using debt wisely. “But it’s particularly important in the military,” Jeff says, “because service members live under a mandate to keep their finances in order. Otherwise they can be dishonorably discharged. The reason is straightforward: carrying too much debt creates stress, and stress is a distraction. A service member whose mind is on other things can’t focus on the job. It may sound like a simple thing, but having a balanced budget and solid credit are important aspects of each member’s military readiness. When the people who serve are on solid financial footing, it helps the nation’s military stay focused and strong.”⁵

Balance, responsibility, and discipline: these are all good guideposts for achieving prosperity in any walk of life.

He observes, “Contrary to a common perception, military personnel overall have a higher level of education and financial literacy than the general public. Their responsibility level is high, too. They’re ready to put their lives on the line on short notice, so every aspect of their lives needs to be as balanced as possible. Their relationship with money has to be disciplined. Discipline is paying attention and practicing restraint. In this case, it means paying attention to how they use their money.”

Balance, responsibility, and discipline: these are all good guideposts for achieving prosperity in any walk of life. Jeff expands on the idea of balance from a military perspective: “In the service, the men and women are prepared, but they don’t live in fear. When it comes to finances, I counsel that no one should spend blindly or recklessly, with no thought of the future. But it’s healthy to leave some room for the occasional frivolous purchase, if you can. Squeezing down too tightly can feel like we are not living.”

He concludes, “Like military preparedness, financial preparedness is an attitude of calm alertness. That state of mind and approach to money creates a life with more ease, less stress, and readiness for whatever comes next.”

With military precision, Jeff had just described a healthy relationship with money.

A Very Conscious Decision

Dr. Miller, the consumer law expert, knows the value of a dollar, so I asked him about the ways he believes he has made healthy investments in his own life. In response, he told a story of summer vacations and family.

“I belong to an organization that holds an annual meeting in the summer,” he replied, “where we sit around and discuss law. I think my life would have been much less rich without those gatherings. One of the reasons I feel that way is that I always made sure my wife and my two sons came with me. If you’re going to be gone for more than a week and you don’t bring your wife and children with you, you’re deprived of their company and of a lot of memorable experiences.”

He laughed as he moved to the next part of the story. More than once, he didn’t have the money to pay for these adventures. “At that time, since I was a poor law professor, we didn’t have the money to pay for these trips out of savings. So what we’d do, in effect, is finance them with a credit card. We knew we could pay it off, because we usually were reimbursed. The cost of the short-term debt was well worth it. It was important to me that my family came along.”

When I met Marcia, Dr. Miller’s wife of 52 years, she admitted that borrowing the money was a big deal to her husband. It was obviously a very conscious decision. “Fred is very thrifty, very careful,” she explained. “He always reads the fine print. It’s part of his heritage. After the Great Depression, his grandfather lost a great deal of money and became very frugal. Unbeknownst to the family, he kept his cash in the books in his office. When he passed away, the family discovered it. The money came falling out of the books as they were being packed off for donations. At the time, it was a lot of money.” Fred doesn’t hide his money in books, but, “He’s someone who drives the same car for 15 years,” Marcia laughed. “Fred doesn’t do anything without conscious consideration.”

So what about those vacations on credit? He explained, “Well, borrowing for that kind of experience, it seems to me, is an example of borrowing with a real benefit. It made a big difference to me and to my family. The kids made a lot of friends from all over the country and got to see a lot of places. And, of course, they had the companionship they would have lost had they not been with us during that time. To me, it was well worth it.” Marcia agreed. “Those trips were wonderful. We still have great friends from those meetings.” And, she added, “Fred also knew we could pay back the loans.”

Like many Americans and people around the world, the Millers stretched themselves to make life better for their children—and for the Millers’ goals, this required a big stretch. “To keep the kids in college,” Marcia related, “we got a home equity line of credit—after we had paid off the house. It took 20 years to get both boys out of college, with two degrees each. We told them it was like baseball—three and you’re out! It was expensive, but it was worth it. I taught school, and Fred worked seven days a week, and the boys had some other help. Somehow we got through it. In fact, I thought this was going to be a way of life, and we would never get them out of school,” she confessed with a hint of humor, “but we’re glad we did it. We helped them get out of college debt-free. We’re happy about what they have achieved; both are doing well. It was a good investment.”

What struck me most was the Millers’ determination to catapult their sons ahead in life while keeping their eyes wide open to what that would mean in terms of hard work. You don’t have to be afraid to take a risk. You just have to be prepared to do the work.

You don’t have to be afraid to take a risk. You just have to be prepared to do the work.

Soon after our conversation, Dr. Miller and Marcia moved to Minnesota to be close to their family, and I visited him there as well. Their home is comfortable and beautiful, filled with souvenirs from their travels all over the world. I asked him about his views on wealth and its meaning. “I think it’s important to have the perspective that wealth is not measured just by what you have. It shouldn’t be measured by whether you have a Cadillac or a Chevy, whether you have a mansion or an apartment. It’s ultimately more of an intangible thing. It’s about having freedom and the ability to do things you can’t otherwise do.”

We talked about the American Dream, which may be suffering a little of late, but the spirit of which is still felt by everyone who wants to get ahead and achieve a measure of prosperity. “I think the American Dream embodies our hopes to step up on our own merits.”

Dr. Miller feels that prosperity “is a mark of your success, which often reflects your sense of self-worth.” He said the reward is “the confidence that your success gives you and the sense that you’ve made a contribution to society.”

Moving Forward

It is human nature to want to expand, grow, explore, and stretch boundaries. It is what brought people to the New World, and it continues to inspire dreams of prosperity all over the world. To limit or dampen that abiding and generous drive is certainly not desirable.

Today we have many options for ways to give ourselves a hand up in life and to achieve prosperity for ourselves and our loved ones. These include both monetary and nonmonetary options. But the specific ways in which we invest in our prosperity matter far less than the awareness and value the experience provides. To achieve real prosperity requires us to buy, borrow, invest, and, most important, live consciously. Money that is used consciously can move us ahead without endangering our individual or collective welfare. It can empower, invigorate, and fuel our growth. This perspective holds great promise for a new psychology of wealth.