Thousands of Cayman Islands residents are going into debt to keep up with the cost-of-living. A new money-management course is seeking to teach people to live within their means, whatever they earn. But instructors warn too many people are using credit to fund lifestyles they can’t afford.
In June of last year, Indira McLaughlin took a pair of scissors and cut her credit card into pieces. The next day, she went into the bank and closed out her account.
“It felt like a weight was lifted off my shoulders,” she said.
Destroying the card was the easy part. Destroying her debt is an ongoing challenge.
McLaughlin is one of the first graduates of Financial Peace University – a new money management course that seeks to help Cayman Islands residents get to grips with their finances.
After taking the course, she says she has transformed her approach to spending. She has paid off her credit cards and is working towards clearing what she owes on two other loans.
For the first time in her life, she keeps a written budget and tracks what she spends each month.
She has an emergency fund for unexpected expenses. That came in useful earlier this year when she found herself needing to fund some medical tests, car repairs and a school uniform and new shoes for her 14-year-old son at the same time.
Before she took the course, McLaughlin, who is a single mum following the death of her child’s father, admits she was frivolous and sometimes foolish with money.
Her closet was filled with handbags. She ate breakfast at coffee shops or fast food restaurants and bought brand name groceries and prescription drugs without checking if there was a cheaper alternative. If a friend needed help, she would take out money on her card to support them.
“I guess you could say I was trying to keep up with the Joneses a little bit,” she admits.
“Whenever I saw something I wanted I would swipe my card and get it.”
McLaughlin has a good job but the expenses and the debt added up with just one income in the family. She found herself relying on support from her mother to get by.
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Setting things right has involved a little tough love.
“I had to admit that I had been foolish in the past and to learn to separate what is a ‘want’ versus what is a ‘need,’” she said.
Living beyond your means
McLaughlin’s story is not unique, said Michael Myles, of Inspire Cayman Training trade school, which brought the course to Cayman. He believes thousands of Caymanians are getting themselves into debt to fund lifestyles they can’t afford.
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Myles believes the income disparity in the islands and the lack of education around personal money management have dragged a lot of people into a spiral of spending and debt that is simply unsustainable.
“So many people are living beyond their means because they have never been taught any different,” he said. “Everyone thinks, ‘he has a condo, I want one too’. But you earn $30,000-a-year and he earns $200,000.”
The former social worker says it is not just people at the lower end of the wage spectrum that find themselves with money trouble.
“We have had people come take this course who are making six figures and people making six dollars,” he said.
“They have never been taught how to manage their money.”
Living below the poverty line
It is possible to survive in Cayman on the minimum wage, says Myles, but not without significant sacrifices.
“We know it is possible,” he says, “Otherwise how are people coming here from the Philippines and other places and earning low wages and sending money back home to build houses and businesses? It is because they have learned to sacrifice.”
Myles, whose trade school aims to help young people get careers, hopes to train and inspire Caymanians to earn good money. But he says the aim of the Financial Peace course is to teach them to survive without debt no matter what they earn.
“I am not saying people should stay at $6-an-hour for life, far from it, but if that is what you earn you have to live within it or get a side hustle,” he said.
“You can’t earn minimum wage and have two cell phones, you can’t earn minimum wage and go gambling.”
Hard lessons
Myles says he learned these lessons from hard personal experience.
“I was never taught. I grew up watching my mum get a car loan every three years and another credit card and I did the same.”
That came to a head when he was forced to declare bankruptcy in the US 20 years ago. He took the Financial Peace course, which he said turned his life and finances around.
“Now the only debt I have is on my house. I won’t let my daughters get a car loan. I have told them if you cannot buy it with what you can save, don’t get it.”
The basics of the course are pretty simple: keep a written budget and live within your means.
There are also guidelines on how to start paying off debt and developing an ‘emergency fund’ for unexpected expenses.
“We have had people earning $50,000 or $60,000 who have never written down a budget in their lives. When they put it down on paper they start to see where the money is going.
“We had a mother who was spending $5,000 on Burger King every year.”
Shopping smarter
Instructors also teach people how to shop smarter. The prices at the store or in the restaurant may be out of the consumers’ control, but shoppers can change their approach to shopping for food, says Marilyn Whittaker.
Whittaker, who took the course herself and has since trained to teach it, says shopping for meals from a list instead of just buying as you go means you spend less.
Taking lunch to work instead of buying it is another simple way to save a few dollars every day, she says.
Part of the challenge on an island that is filled with millionaires and businesses that cater to people with incredible wealth is understanding what you can and can’t afford.
Keeping up with the Joneses is an expensive proposition when the Joneses might be earning a seven-figure salary.
“The thing we have noticed is that people are living above their means. They may be earning $3,500 but they are getting their hair done, nails done, they have a large loan, they are shopping without giving it much thought, buying shoes and clothes, and they are maxed out on two or three credit cards,” she said.
One of the challenges, Whittaker has found, is getting the people who need the course the most to take it.
“We get people who are starting to think about their money but not necessarily the ones who are most in need of help. They don’t want to know what they don’t know.”
Myles says the next step is to get the course onto the school curriculum. His vocational courses pull in students from private and public schools across Cayman and he warns that many of them have never been taught basic employability or money management skills.
“If we don’t start teaching this in school, people will continue to fail to manage their finances and will continue to go broke,” he said.
Breaking up with debt
For those that have been through the course and learned from it, it can be life-changing, says McLaughlin.
Each month she checks her budget and sees the debt going down and feels a little rush of excitement.
There is a long way to go, but she is working towards the peace of mind of financial security for her and her son.
“I have goals now,” she said. “I want to finish paying off my debt and clear my mortgage before the completion date.”
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Thank goodness people are now owning up to this. Those of us old enough to have never heard of a credit card till we were in our 30s or 40s understand the importance of budgeting. So much is wasted without doing so. Well done Ms McLaughlin and Mr Myles!