But their finances haven't always been this cushy. Both Obamas graduated from Harvard Law School with significant student loan debt:
“We left school with a mountain of debt,” Mr. Obama said in 2008. “Michelle I know had at least $60,000. I had at least $60,000. New York TimesSure they've now paid it off and congrats to them for doing so, but it certainly wasn't quick or easy and I don't envy them going through the process. Barack's student loans were not only for Harvard Law but also from his undergraduate degree from Columbia:
Mr. Obama personally took out $42,753 in loans for Harvard Law School, on top of several thousand dollars for his undergraduate education at Columbia University. New York TimesPaying off those loans sounds like a long and painful, sometimes shaky road the Obamas traveled:
“We’re making it easier to repay student loans so kids don’t graduate like Michelle and I did with massive loan payments each month,” he said. “It was more than our mortgage for 10 years." Reuters
Obama wrote "Dreams From My Father" and "The Audacity of Hope," which secured his once precarious personal finances. Arriving for the Democratic National Convention in Los Angeles in 2000, his credit card was rejected when he tried to rent a car. Obama in December recalled a difficult period when he wasn't flush. "We're not that far removed from struggling to pay the bills," he said. "Five, six years ago, we were still paying off student loans." LA Times (Apr. 2010)For reference, Obama graduated from Harvard Law School in 1991. So according to the quote above the Obamas took at least thirteen years to pay off their student loans and for at least ten years of the thirteen their payments were more than their mortgage. It could have been even longer than that since Audacity of Hope wasn't even published until 2006. Barack also had his credit card declined, though the article doesn't say why it implies that it was due to financial mismanagement or reaching his credit limit. Michelle also felt that her student loans constrained her career options:
She resolved to leave the law firm and mentor young people from the neighborhood she grew up in. But she was daunted by how little money she would make, and feared she would not be able to pay back her sizable student loans. Obama convinced her that if they married and combined their incomes, they could afford a more frugal life. NewsweekThat quote makes it sound like the Obamas got married for financial reasons. The Obama's have also said that the only way they got out of debt was through the royalties from publishing best sellers:
Michelle Obama ... told women at a town hall meeting .. that when she and her husband left law school, the monthly payments on their school loan debt was more than their monthly mortgage payment, and that they only got out of that debt when Barack Obama wrote his two best selling books, "The Audacity of Hope" and "Dreams from My Father." USA TodayWhat are your odds of publishing a New York Times best selling book? I'd never wager my financial security on it.
The Obamas have been highly successful. Barack has broken down numerous barriers. But had I been in their shoes I would have likely made very different decisions. Both Obamas have accomplished a lot and can serve as great professional and ethical role models, but they could never be true financial role models.
Who are your financial role models?
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That would be my parents. Both graduated in the middle of a recession with little or no debt, but little or no assets. Soon thereafter they were married and my dad started his own company. For years until my dad's company took off they got by on very limited income, creativity, and a kind neighbor's asparagus patch.
ReplyDeleteEven so, they managed to build a house with their own hands, pay it off in 15 years, and raise 10 children there. That still doesn't mean I ever want to eat asparagus again, though. ;)
I guess I need to start working on that book, huh? Maybe a little boy wizard, perhaps?
ReplyDeleteVery interesting post. I had no idea the leader of America was so bad at personal finance.
ReplyDeleteI just stumbled onto this site yesterday. (http://www.thomasjstanley.com/blog.php?Category_ID=1) and thought you might be interested. A ton of really wealthy people appear to have gotten rich by living very conservatively with very frugal spending.
Paul - I read his book The Millionaire Next Door: Surprising Secrets of America's Wealthy a couple years ago. Frugal living leading to wealth is the premise of the book and the author supports it with data.
ReplyDeleteI didn't realize he had a blog or had written another book - Stop Acting Rich: ...And Start Living Like A Real Millionaire. Thanks for the link!
Mattu00 - My dad is my biggest financial role model. Like your parents he's done a lot when he started out with very little salary-wise.
ReplyDeleteoptionsdude - I hear books about young wizards gross billions. You should get on that!
Thanks for sharing this story. It's the first time I've heard about the amount of school debt they had.
ReplyDeleteThis makes me want to avoid business school all the more, so that I don't rack up all that debt.
I'll continue reading the Personal MBA books and blog about it instead.
I'm not sure I have an actual financial role model. Almost all the helpful advice I've learned was from reading.
Great post - I read the Davis Discipline, and the Davis family really opened my eyes to frugality and living well below your means. Their methods were a little extreme in my opinion, but the discipline and mentality is to be admired.
ReplyDeleteHaven't read The Millionaire Next Door: Surprising Secrets of America's Wealthy, but sounds like it has similar concepts - I might have to check it out.
Great post..enjoying reading your entire article. Just secured myself a top 5 admission and figuring out my finances. Interestingly, I had thought about a part-time MBA too, just as it seemed financially more suitable..but realized it wasn't the best bet for a career switcher - may be lack of confidence perhaps in myself that i couldn't make it happen without a top 5 full-time MBA..
ReplyDeleteWhat's interesting is that i thought about finances..and kept it very simple. 50k savings goal and 100k in loans. Realizing how bigga mistake that was. I'm awaiting my financial aid/fellowship package too..hope it works out for me like it did for you.
I hate loans. My idol in terms of living frugally would certainly be my parents too. But of late, I'm becoming a big fan of Mr. Warren Buffett. Reading his biographies and how he maintained a simple lifestyle and kept investing smartly..really really cool guy.