Why I'm Broke, Act 1: Origins

Welcome to my new recurring post, "Why I'm Broke," a drama in four (or three, or whatever) acts. Don't worry, it's not actually a play, but it might offer some insight into how to save and manage money or otherwise navigate the current financial quagmire in which we live. Stay tuned for upcoming posts, but for now, enjoy "Origins!"

Protagonist enters, stage right.

I'm broke. I have a job, but I'm broke. I went to a good school, but I'm broke. How did this happen? It doesn't quite make sense by most conventional measures, so I think I will have to do some serious soul-searching and examine my history to figure out why in the world am I so broke, and maybe learn something about money-management along the way.

Many of us are not taught the ways of the financial and banking systems available to us as children. Now, this is often attributed to race, but I would argue that it is more tightly connected to class (although we know the two are cosmically intertwined anyway). Take the book, Rich Dad, Poor Dad by Robert T. Kiyosaki, for example. In a nutshell, this book explains what the rich teach their kids about money that the poor do not. While somewhat exaggerated and lofty without much concrete strategy as to how one can escape the "rat race," the key point remains: don't work for your money, make your money work for you. It's a very interesting point, and something that wasn't exactly ingrained in my head as a child for whatever reason.

Now that I have a few (meager) bucks of my own, I have no idea what to do with it. I had a Bank of America account, but I had a nagging feeling that it wasn't enough. Until I did some real digging into my Bank of America Online Banking page, I didn't know that the interest rate on my savings account was only 0.25%! What can you do with that? That's basically zero (although, admittedly, free money is free money); I knew I could do better. One solution I have discovered (and advertise on the regular with my friends) lies in transferring your savings into an ING Direct savings account. It has one of the best rates around (2.75%) which turns $1000 of savings into almost thirty bucks instead of three after a year. If you are lucky enough to have savings, don't be fooled by the convenience of Brand-name bank savings accounts; there are better ways to save your money.

While few conventional ways of managing money are actually palatable these days with the financial crisis bearing down on us (who really trusts the stock market right now?), I looked into some other forms of microfinance to discover other ways of saving and managing my money. It might be something that the Poor Dad knows that the Rich Dad has overlooked...

Ever heard of a 'susu?'

When I was growing up, I constantly overheard the word "susu" used in my house. I thought it was the name of a family friend at first, then possibly the name of a gift or object ("I get my susu this week" - I was too young to think otherwise, you nasties). For a long time, I didn't know what it meant, but I eventually discovered that the word referred to an Afro-Caribbean method of microfinance based in Ghana which, in a nutshell, provided an informal means by which families and friends can save their money. As I understand it, the saver deposits a portion of his or her income monthly or weekly into a 'pot' with several other savers, and receives the balance of the deposits on a given month, as designated by a list. The 'susu banker' manages the funds in a bank account and is responsible for handling all of the deposits and withdrawals, in addition to informally checking the credit and reliability of each participant. So, if you and your four friends deposit $100 a week for a few months, you will be able to withdraw $500 once every five weeks, helping to manage your cash flow problems, like buying a new appliance for your apartment, or paying down a backed up credit card bill. If you are at all confused, I have drawn up a very scientific diagram of the whole process. This is proprietary information, copyrighted by IINOI, Inc. All rights reserved, snitches:


I did a little research, and I found that the 'susu' has been a viable source of mortgage funding and inventory purchases for small businesses in the United States (especially in Caribbean neighborhoods like Eastern Parkway in Brooklyn). Some susu 'hands' (the money you can receive when it is your turn to withdraw from the pot) are as large as $100,000 and are primarily used for opening or renovating businesses.

This is just one way that you can try to make your money work for you. Why not give it a shot? If there's one thing I can't stand, it is when the practices of a minority are frowned upon in favor of some oppressor's technology or innovation that isn't necessarily better (see religion, medicine, and/or clothing). If you are in a bind, this might be the way to help get that boost you need to keep yourself afloat while you try to make it through these tough times. Now, there are drawbacks to this methodology, namely a lack of long-term savings, interest, or reliability, and it should only be done with people who you trust. But, in the wake of Reaganomics, Bushanomics, and CreditCrunchanomics (I made that one up), why not give "susunomics" a second look? There's got to be a reason why it is one of the oldest economic practices in the world. Thinking on a macro scale, providing the lower and middle classes with sufficient capital to reinvest in their local and national economies may help us take an active part in righting our titanic failure of a system as it flounders today.

My two cents. (submitted diligently every month into the pot)

(An interesting book on the topic by Paul A. Barton can be found here.)

Stay tuned for Act 2... Investments and Why they Scare me