Do We Inflict Peer Pressure On Ourselves?

When my husband and I got married, we were flat broke.  Broke.  We bought the cheapest wedding bands that we could find, and my diamond is small.  However, that was my preference.  I wanted to stay within budget, and I personally like smaller diamonds rather than the big rocks that some women wear.  (All I could think was that when I had babies, I’d accidentally scratch them with a big ring.)

Still, there have been times that I’ve been in the presence of a group of women, each with a huge rock on her hand, and I’ve been a bit embarrassed by my small diamond.  I’ve wondered what other people thought of us and our financial situation.

Peer Pressure Doesn’t End in High School

In high school, peer pressure is at its peak.  If you want to be popular, you have to follow what the other kids are doing.  I didn’t cave to peer pressure often.  Instead, I had a few close friends, and I followed the path that was important to me.  I was relieved when I graduated because I thought the peer pressure would finally be done.

In college, I found that the peer pressure did relent.  People would respect your choice if you didn’t do what they were doing.

However, as I got older, I began to realize that there are societal norms that you’re expected to maintain.  This becomes the “keeping up with the Jones'” phenomenon.

The Pressure Becomes Internalized

Self Inflicted Peer PressureMy husband and I are digging our way out of serious debt.  We are scrimping and saving, knowing that in a few short years we will be out of debt and can start fresh.  We can have all of our money be our own once we’re out of debt.

Meanwhile, we drive a 10 year old minivan with over 125,000 miles on it.  I wear my small diamond ring, which I don’t ever plan to replace with a bigger version.  We rent an apartment instead of owning a home.

No one is pressuring me to spend money that we don’t have.  No one is passing judgment on us (at least not to us directly).  But it’s hard not to look at other people’s lives and see the “stuff” that they have.  The nice cars.  The nice home with brand new furniture and a manicured lawn.

No one is telling me I’m failing, but I feel it sometimes.  I feel that I’m not living up to society’s standards.  I can see how easy it is to want to keep up with the Jones’, even if you can’t afford it.  I can see how easy it is to pull out the plastic just this once because you’ve been scrimping and saving and just want to be like other people once in a while.

For the people who can afford it, there is no danger in this.  For the people who can’t afford it, there’s just debt and heartache.  You might then be just like those you want to be like.

Me, I’ll keep resisting the peer pressure, even though now it’s mostly pressure I put on myself.

Lending Club Returns Update 4Q13

Another quarter has come and gone, so it’s time for an update on the Lending Club returns I’ve been getting on my account.  At the end of the third quarter, my account was sitting at a return rate of 14.69%.  It’s actually improved a bit since then, but Lending Club has also added the ability to adjust the displayed NAR, which does some funny stuff (see below) and reduces the rate a bit.  I think that’s a good thing (again, see below) and that’s the rate I’ll likely be using for future updates.

Lending Club Adjusted NAR

A few months back, Lending Club introduced what they’re calling an adjusted NAR.  Basically, it uses the historical charge off rates of loans at the different stages of delinquency.  Obviously, the current loans have a historical rate of charge off of 0%.  Once they go into the Grace Period, about 23%, 16-30 days late, about 49%, 31-120 days late, about 72%, and in full default, about 86%.Beating Broke Lending Club Update

As an example, my portfolio currently has two notes that are in the 31-120 days late category.  So, when Lending Club is adjusting my NAR, they use the 72% figure and assume that 72% of the principle will be lost.  Using that number, they then calculate the new, adjusted NAR.  With the two notes late, my adjusted NAR is currently showing as 13.16%.  Still a very healthy number, and likely a more realistic number.  I like the new adjustment, as it should give investors a more realistic number to look at.

Lending Club Defaults and Late Notes

As I mentioned above, my portfolio currently has two notes that are 31-120 days delinquent.  And, if you go by the historical numbers, those two notes have about a 72% chance of eventually going into collections.  I’ve been lucky enough to only have had one note actually go that far to date, and the collection agency was able to get a bit of that money back for me.  It wasn’t the entire amount owed, but a significant portion of the principle, which I was happy for.  I could try and sell off the two delinquent notes, but at this point, I wouldn’t get much out of them, so I think I’ll just ride them out and see what happens.  The total principle involved is only about $35, so it would mean about a month and a half of lost interest payments.  That’s a risk I’m willing to take.

The Future of My Portfolio

With the rates I’m getting, I don’t foresee stopping my investing through Lending Club.  I may even start putting some more money into the account sometime in the future.  At the moment, I’m content to just leave it and reinvest the payments each month.  I’ve seen a few other investors that have either significantly changed how they’re using Lending Club, or have begun backing out of it altogether.  I think it’s something that you need to be able to change how you do it, but I also believe that backing out altogether is a mistake at this point.  The technology is still relatively new, and many of the changes that we’re seeing Lending Club make have been for the better.

I’ve created a page that consolidates all of the posts I’ve done on Lending Club, as well as the quarterly updates since I began doing them.  If you’re interested in starting to invest in Lending Club, you can read more on my Lending Club page, or you can sign up for an account and give it a go.

Top Personal Finance Posts of 2013

I always find it interesting to go back and look at the top traffic posts of the previous year.  I have no idea, really, whether you will find the same interest in this list, but I’m going to throw it out there on the off chance that you do think it’s somewhat interesting.  Or, maybe you’ll find a few extra posts that you haven’t read, but should.  Either way, here’s the 10 top personal finance posts of 2013 on Beating Broke.

  1. Are Insurance Companies Just Big Ponzi Schemes?
  2. 4 Top Mobile Apps to Help You Pay Off Debts
  3. Bathroom Remodels on a Budget
  4. Cash Back Credit Cards with no Annual Fee
  5. The Joneses and Jealousy
  6. Change Your Thoughts and Change Your Wealth
  7. How I Select My Lending Club Investments
  8. How I Save More than Just Money By Cutting the Cable
  9. Car Accident. Should You Pay Out-of-Pocket for Repairs?
  10. 1950 vs. Today.  Have Our Changed Spending Habits Improved Our Lives?

That’s the list.  Some of those are actually quite old, and are just perennial favorites, but there’s a few new ones in there that are quick risers!  Take a look through them, leave a comment or two.

Here’s to a good 2014 for everyone!