Taking a Bite Out of Debt

Plenty of temptation abounds on college campuses, especially for incoming freshmen. It is an epidemic which can inflict much trouble upon students, and it hampers the prospects for a life of leisure after graduation. “What is this insipid threat?” you are probably wondering. It is actually debt in the form of credit card bills and student loans.

Many banks offer loans to students needing money for tuition or a vehicle, which many former students work for years to finance. They and other financial institutions also advertise high-interest credit card deals to students, sometimes connected to a “free” prize. These offers have increasingly become offered over the phone and email after restrictions have gradually been enacted limiting on-campus solicitation, including stringent 2001 restrictions in California. Oftentimes, students become overwhelmed by credit card offers and feel obligated to purchase one. While it doesn’t hurt to hold one credit or debit account, college students often neglect to consider their ability to pay for credit purchases in the future. A recent study conducted by student loan agency Nellie Mae determined that the average debt owed by individual college students was $2700. More strikingly, approximately ten percent of students owed credit card fees in excess of $7000. This survey also indicated that the majority of college students hold more than one credit card, a side effect of generous-sounding lures from credit card companies. Evidence indicates that some colleges may in fact sell their students’ contact information to such companies.

For purchase-happy college students, a more beneficial alternative to a credit card is a checking and debit card account. This is because they carry a preset spending balance which cannot be exceeded without incurring a financial penalty, typically a fine of $30 to $50 per overdraw. If you find that a credit card is necessary, buy into an account with a relatively low credit limit and restrict yourself to one card. Actually, having one credit card may be beneficial because using one responsibly establishes good credit, which can help after graduation in securing loans and purchasing a home and vehicle. However, one must realize that credit cards do not provide “free” money to be spent haphazardly on unnecessary items and that such irresponsibility can really come back to haunt you later in life.

Etown SIFE Launches Environmental Blog

Elizabethtown College Students in Free Enterprise has launched its new Go Green! blog at http://sifegogreen.blogspot.com. Read about ways to make your home, your life, and your business more environmentally friends, while saving money at the same time. Be sure to check it out.

Crooked Accountants and Know-Nothing CEOs

Extended form of latest SIFE Sense article as seen in the Etownian

As a naïve child, I had many peculiar opinions of what colloquialisms and phrases used in our culture actually meant. I can recall hearing about a businessman getting arrested for money laundering and summarily meticulously double-checking my pants pockets to ensure no errant bills were inside before putting them in the laundry basket. I can recall viewing successful businessmen such as Donald Trump and Bill Gates as the closest thing to deities on Earth. However, as I matured and the “real world” intruded upon my existence, I realized that businesspeople could be just as vulnerable to the temptation of greed as the common criminal.

Throughout the twentieth century, the notion of letting the free market act as it desired (known as the principle of laissez-faire) prevailed. Corporate officers were essentially free to conduct their business to their wishing. Unfortunately, behind the scenes corporate executives, accounting firms, and other avarice-stung money managers were often altering accounts, exchanging insider information, and laundering money at the expense of shareholders and employees. Yes, money laundering actually refers to the practice of diverting funds from public accounts to undisclosed sources. Due to unethical conduct, several big-name CEOs and CFOs have been charged with these crimes since the dawn of the new millennium.

One of the most noteworthy and standard-setting cases was that of Enron and its accounting firm, Arthur Andersen. CEO Jeff Skilling and CFO Andrew Fastow were implicated in the misquoting of company earnings in financial reports in conspiracy with Andersen’s accountants, and late company founder Ken Lay was also charged with fraud and conspiracy. While testifying, Lay denied having any knowledge of his subordinates’ actions, but this was refuted by the prosecution who claimed that a CEO must be totally in control. While some money-hungry chief execs would undoubtedly step up to debate this, I would argue that CEOs were not paid an all-time record of 419 times the salary of the average worker in 1999 to claim ignorance of lower-level executives’ (mis)management of corporate accounts.

The particularly inane thing about corporate corruption is that the executives imagined they could get away with manipulating company accounts for their own benefit, in a workplace where someone is always looking over your back and auditing your reports. Now, Tyco Electronics’ Dennis Kozlowski, WorldCom’s Bernie Ebbers, and Skilling all share a common residence – prison. In hindsight, I would speculate that none of them would argue that their misdeeds were profitable. In addition, corruption and corporate irresponsibility all demonstrate an inverse correlation with a company’s bottom-line profit margin. These recent cases have reiterated an age-old adage regarding crime – it doesn’t pay.

SOURCES AND ADDITIONAL RESOURCES:

http://www.msnbc.msn.com/id/12968481/ (Article: Lay, Skilling Guilty in Enron Trial, Thursday, May 25, 2006)