Perhaps it’s just the stereotypical Midwesterner in us rearing its pragmatic head, but articles such as this one in the New York Times, full of quotes from repentant former debt junkies, always make us shake our heads in disbelief.
“We live in a small town, and everybody looks at your clothes and what you drive and where you have your hair done,” said Ms. Gamble, who earns about $2,600 a month as a grievance counselor at a local prison.
Now, she and her husband — a prison guard who brings home $2,000 a month — are grappling with $10,000 in high-interest debt. They no longer go to the movies or out to eat, except occasionally to McDonald’s. They quit their Internet service. Their car was repossessed. “What we say now is, ‘If we can’t afford it, we can’t buy it,’ ” Ms. Gamble said.
And then there’s this lady:
We don’t use our credit cards anymore,” said Lisa Merhaut, a professional at a telecommunications company who lives in Leesburg, Va., and whose family last year ran up credit card debt it could not handle.
Today, Ms. Merhaut, 44, manages her money the way her father did. Despite a household income reaching six figures, she uses cash for every purchase. “What we have is what we have,” Ms. Merhaut said. “We have to rely on the money that we’re bringing in.”
Or this one:
Fran Barbaro has an M.B.A. and a résumé of computer industry jobs with salaries reaching $150,000 a year. She used to have a stock portfolio worth about $1 million. She hung original art on the walls of her three-bedroom house in Boston.
But divorce, illness and motherhood drained her savings. Her home is worth less than she owes, and she owes another $200,000 to credit card companies, banks and tax collectors.
Ms. Barbaro, 50, said she knew she was living beyond her means. But her house demanded work. Her two boys needed after-school programs running $25,000 a year. Medical bills multiplied.
“These were simple day-to-day expenses,” she said. “The money was always there.”
Until it wasn’t. Her take-home pay is $5,200 a month, but her debt payments reach $4,400.
Argh! $200,000? We hope it was mostly owed to the banks and tax collectors. Just imagine having to dust $200,000 worth of junk you bought on credit.
Economy Fitful, Americans Start to Pay as They Go [NYT]
(Photo:morganschneider)
More From Consumerist
-
American Airlines Can’t Catch A Break: London-Bound Flight Lands In Ireland After Smoky Odor Reported
-
American Airlines Hopes Online Meal Reservations Will Make Travelers Forget All Those Other Problems
-
Not Putting Anything In The Overhead Bin? American Airlines Is Seeing What Happens If You Board First
-
Survey: 40% Of Travelers Would Get Weighed At Airport, Other 60% Just Laugh In Response
-
Survey: Consumer Confidence At Highest Level In Four Years
@Xerloq: lol, I really do type waay too fast. Amazing I can actually write code a computer can read some days.
@enm4r: I did cave in and buy an antennae. I figured since it’s all going digital to try it out. I can’t believe how clear some of the channels were. And on the plus side I can easily pick up Fox to watch the Superbowl.
Our economy is built on the backs of unwitting dupes like this, and I encourage them to continue spending beyond their means and promoting a thriving retail economy and credit industry. Any moron who sees nothing wrong with spending more than he makes deserves what he gets.
@bustit22: all of the candidates are for something similar. even ron paul.
the difference being, how MUCH should we help these people that made bad decisions.
why do we have to keep people “in their homes”? do i need to remind you that they can no longer or could never afford their homes. that’s the freaking problem. renting is not a big deal. people that make bad decisions should get to deal with the consequences.
@matto: but do we deserve to bail them out? Cause that’s what will end up happening if they keep on spending beyond their means.
@HRHKingFriday: After school programs can cost anymore from free to really, very expensive. Fran Barbaro seems to have chosen to give her kids an expensive after school program and how she’s paying for it again. Even if she couldn’t get off work to take her kids to different places, I doubt hiring a part-time babysitter with a good driving record costs $25,000. That is to say, and the article doesn’t say, her kids don’t have any mental or emotional problems that require special care.
The best thing that ever happened to me was getting two $1,000-credit-limit cards my first year in college. Sure, I maxed them out, went overlimit, have paid probably $6,000 in interest and still owe about $6,000 (took me a while to get my act together), but I will never be $280,000 in debt on anything that doesn’t qualify as an investment. OK, maybe a house, which is not really an investment given that even in good times home appreciation rarely outstrips inflation once you deduct property taxes, maintenance and debt service, but it really is pretty hard to buy a house before you retire without taking on at least some debt.
@UpsetPanda: In Boston, the going rate for an after school sitter (college aged) is between 10 and 15 bucks per hour. I already worked the math for you, from my own experience. Keep in mind that for 12 weeks of the summer, they’ll need 8 or 9 hours of care, depending how long Mom’s commute is.
Child care is not something you want to find the “best bargain” for- I’m not saying go out and enroll them in some private prep, but if you had kids you’d think twice at dropping them off at any old day care.
I’m just saying that’s the one expense I can really forgive her for. Plasma TVs, dog sitters, vacations, that you can do with out.
@DrGirlfriend: Seriously! People should just go back to calling it “sense”.
@HRHKingFriday: True that you don’t want to skimp, but there are people in my office paying less than $25,000 per year on day care, and we are talking 8 hour a day every day, 5 star (in nc, you have to have and approved educational program to get 5 stars, not just a hey we don’t kill your kids type thing). I doubt she could have halved that and still got decent care, but surely she could have saved some, or like someone else said, sell the original art to pay for it. If your kids aren’t worth more to you than your art, you probably never should have had your kids.
When the debt collectors show up and all those nice things are taken away. My old TV and stereo will still be working fine.
We should have a club for no cable/sat bill consumerists
I refuse to pay for mindless comercial filled packages. My LCD TV is hooked up to a admitedly high end PC and servs up all the good stuff for free from internet via TVU, Joost and network sites. Life is good and now I only wish that HBO and Showtime would create a pay service online…
@loueloui: oooh, I like that idea. Save money = get shiny object.
@HRHKingFriday: What about simply having the kids in the first place is that a “forgivable expense?” Seems like just another thing that lots of people get without being able to afford. Unfortunately it’s one of the only “investments” that society and the government thinks everyone should underwrite.
In my town as long as you have clean clothes on your back that do not look like they are from a salvation army that only stocks 10 year old clothes, you look good. I live in a city where 60% or more of the people are on welfare. People here value electronic possessions more than anything else, including more than having a clean home and a clean carpet etc. As long as your house has that big screen HDTV, Playstation 3 or Xbox360, you own an expensive smartphone to flaunt around and a beefy computer or laptop in it you are all good, no matter what the rest of the house looks like, it can be falling apart. I have seen enough houses here to know.
I don’t think I would ever want to live the lifestyle of keeping up with the Joneses because it just leads to remorse and in most cases a lot of debt. That person who has all those gadgets is likely secretly miserable inside because they are wallowing in a sea of debt.
If she was married and had kids, she probably was expecting a dual income, which I understand. Though, what part of divorce means one person gets to shoulder all of the care? If she got sole custody, there would still be child support, correct? Like K-Bo said, there are plenty of people getting child care for less than $25K. Why is this lady any different that she can’t manage, with her original paintings and her knowledge that she was living beyond her means?
Now I’m almost glad I grew up poor. Not dirt poor, but we never had the lastest fad, never went on a vacation that didn’t involve staying with family, and sometimes went hungry. It was good practice for scraping by in undergraduate and graduate school.
I do have a good job now, but my husband is still in a postdoc while looking for a “real” job. I still can’t stomach buying things full price and we don’t replace anything (stove, car) unless we absolutely have to. We save 15-20% of our income for retirement, have a three-month emergency fund, and anything that we can plan for (home renovation, vacation, car down payment) is saved for and paid in cash.
Most people earning more than minimum wage could probably live below their means, but it does require a huge change in mindset and a lot of dedication.
Boo fucking hoo. I’m not going to feel sorry for or forgive stupidity.
When we moved from the U.S. to Canadia, we decided to run as lean as possible: minimal credit card debt and best used car we could find, move downtown so that I could commute to work by walking, etc. etc. (if you’re an over-spender, get your credit limit reduced so that you fill it up quickly and are forced to use cash while waiting for your payment to catch up to the records… it’s also good to pay off the entire amount, often). Having to pay for cash for purchases ensures that you give a second-thought to items you may not actually need.
Anybody who’s insecure enough to believe that their neighbors actually care what they drive and what they’re wearing either have horrible neighbors or need to seek counseling.
@ekthesy: “The Fran Barbaro story was the most egregious. $25,000 per year for after-school studies for the kids? Come on.”
Work it out: $25k for 2 kids (let’s be charitable and include summer days) works out to less than $50 a day for each kid. Even if she’s euphemistically referring to day care, that’s still considered reasonable.
@enm4r: I would have been on the phone with 911 reporting someone trying to break into my house. I’m not going to trust some guy who has a badge that for all I know is a fake bought at a dime store. I don’t owe anything beyond a car loan that is way under the average. They’re not getting in until I have proof that they’re real police, and if they damage anything I’ll be filing a grievance to get repairs paid for. If the police can’t be assed to confirm they’re breaking down the right door, they deserve all the bad press they get.
Paranoid? No, just good sense.
@hypnotik_jello: like it or not, we are living in an appearance-ist world.
@ekthesy: ever taken a serious look at day care costs, sports costs, band costs, Scouts costs? $25K per year for 2 boys isn’t that bad.
@sixseeds: sometimes people fall into that bit of financial suicide by moving to an area of “good” schools coupled with un-affordable financial & social expenses. main reason i refuse to move to Anthem, Scottsdale, Chandler or PV. good schools mean nothing when bills cannot be paid.
@zippyzop: yes it is. not going away anytime soon either which is pathetic.
All y’all Midwesterners on here must be the only ones in the region with any sense, because I live in Michigan and I see people buying shit they can’t afford all the damn time.
Sadly, being born in the flyover states doesn’t actually make us any smarter. I agree with zippyzop — let’s cut it with the working-class hero crap, okay? It’s a nice place to live but it doesn’t confer any virtues.
Why is it when the issue is sex and violence, people blame the movies and music for making people that way, and yet when it comes to debt and loans, people blame the borrowers?
This isn’t just stupidity. It’s an addiction.
My advice:
– The Gambles: Balance transfer to a lower-interest credit card or get a relatively low-interest (with a fixed interest rate) personal loan. Take all the money you were putting towards credit card payments and pay off one loan, even if the minimum payment’s a lot lower. Save one credit card, put it in a chunk of ice at the back of the freezer, and cut the rest up. Do not get any other credit cards. Yes, that includes “no payments, no interest until 2011!” furniture financing.
- Ms. Merhaut: Pretty similar advice–you’re already paying it off, but you want to transfer to a lower interest rate so you can pay it off faster.
- Ms. Barbero: Pretty much the above, but if you can’t get a good interest rate you may want to consider a Chapter 13 repayment plan at 100% plus prime rate of interest for unsecured creditors. (Yes, I am a bankruptcy paralegal, why do you ask?) It’ll also force you to either a) justify your childcare expenses or b) realize that Jimmy and Timmy do not need one-on-one Portuguese lessons.
- The couple with $680 K in debt: I’ve read that in nineteenth-century Oregon people could legally be declared “spendthrifts” and be considered incompetent for the purposes of financial contracts. In lieu of that particular legal remedy, I suggest a Chapter 13 plan and information on a local psychiatrist who specializes in shopping addiction.
I think living in NY (and probably other high-cost urban areas) really distorts spending habbits. Most of the folks I know work long hours and make good money but despair of ever buying a place given the cost, so they (and me to a degree) end up spending a lot of money on food, entertainment, booze, clothes (mostly the girls) and electronic gadgets (mostly the guys) – the attitude is that once you’ve paid the rent, taxes and maxed the 401k, it’s all play money since there’s no point saving for a house you’ll never be able to afford. I try not to fall into that trap (and am partially successful) but it is a really easy trap to fall into. You don’t have much free time, so you justify spending a lot when you do.
@KJones: Probably because only idiots actually think that movies and music have anything to do with sex and violence in our society. I suspect most of the people who blame the borrowers also blame the consumers of “dangerous” media when they claim did it because they saw it on TV. It’s called taking responsibly for one’s actions. It ain’t complicated. YOu did it now deal with it don’t expect me to bail you out because i’m not an idiot and i won’t expect you to bail me out if i do something stupid.
I must say, I’ve never encountered such a high concentration self-congratulatory, judgmental blowhards anywhere but on the Consumerist.
Having solid finances should be rewarding in and of itself. Bravo to those who are quietly reaping the benefits of sound money management. But for the rest of you, what are you so lacking in that you must compensate by boasting and demeaning others?
@JDobbs:
I already knew the answer. I was making a rhetorical analogy.
@zippyzop: Too funny… did you forget that all Consumerist readers are completely perfect, while the rest of the world are the morons?
If so, here is your reminder.
This reminds me of that rather funny SNL commerical for a book called “Don’t Buy Stuff You Cannot Afford”
Husband: I think I got it. I buy something I want, and then hope that I can pay for it right?
Salesman: No. You make sure you have money, then you buy it.
Husband: Oh, THEN you buy it. But shouldn’t you buy it before you have the money?
Salesman: No-o-o-o.
Wife: Why not?
Salesman: It’s in the book. It’s only one page long. The advice is priceless and the book is free.
Wife: Well, I like the sound of that.
Husband: Yeah, we can put it on our credit card.
intelligent people for the most part remain as debt free as they can, and when taking loans or using credit they figure whether it’s worth it and whether the schedule is doable. Dumb/stupid/ignorant sheople don’t think much past the current moment they’re in, therefore make stupid decisions and live to face the consequences of their actions. Unless we vote more democrats into office, as they seem to think that no one should be made to live with the consequences of their stupid choices.
Why do people feel the need to make patently imbecilic statements like “democrats…blah blah…no more personal responsibility…blah blah..::drool::?
What do intelligent people do again, Banjomo? What is remotely intelligent about starting a neverending war based on false pretenses; driving the economy into a tailspin; letting supergreed and supercapitalism run unchecked until the corruption combusts on iteself; soaking up massive record profits on oil price collusion schemes; racking up the deepest, most insurmountable debt our country has ever had? That kind of supreme incompetence takes a special level of abject idiocy and insane selfishness. Who, Banjomo, is going to live with the consequences of those actions?
$25,00 in after school programs:
Well the Y doesn’t have valet parking and Kindercare didn’t have a coffee bar when I wait to pick up my children.
It wouldn’t take much to trim that budget and get the credit down and gone in 2 years by stop buying Starbucks, have the kids sit out for a year on activities, don’t go out to eat. Sell the SUV buy a 5 year old Lexus for Cash. And pay pay pay down that debt.
Instead on her income she still probably can refi the house use home equity to dump some of the credit card debt and keep going for another 3 years, only to do bankruptcy….
People: Listen to Dave Ramsey, his approach works.
That first story… they’re still not doing something right. My husband and I earned somewhat less than that per month and owed well more than that in debt and still went out to movies and to eat, occasionally. We also bought a used car while paying down the debt. So, yeah. They’re still somehow not managing their money right or something.
@MickeyMoo: http://www.ehealthinsurance.com
Understand I’m talking to people who are in reasonably good health. There seems to be a misconception that if you can’t buy health insurance through an employer that it is hopelessly unaffordable. At least that’s what the media and the socialists who want to dump government health care on us keep preaching. Keep in mind that these policies have about a ~$2500 deductible on them and usually have no prescription benefits at that price, though they’ll kick in a discount card (good for 25-30% discount). They’re not for the people who feel compelled to visit their doctor every time they get the runs from eating bad food or have anything aside from a mild headache.
Honestly, I wish my employer would give us a high deductible + HSA option here. Last place I worked at that had such an option I paid about $20 a month for myself and they kicked in $1500 a year for a flexible health spending account.
@facework: Because in all honesty, Democrats have been the ones that have rushed to bail people out of situations where they should just take their lumps and grin. Not to say Republicans haven’t had their moments, but most of the hand out programs of the past 60-70 years came primarily at the hands of a Democrat, and they’re the ones always trying to scare the bejeesus out of everyone come election season that some evil Republican is going to come take away your welfare/social secuirity/food stamps, etc., etc..
At least that’s how the politicians play their games i my neck of the woods. Going to some of these “town hall” debates for folks in the Georgia legislature can be down right entertaining.
We’re all a product of our environment. Anyone who thinks that the media doesn’t impact people’s behavior is an idiot. Still, the parents should be the circuit breaker/reality check at a young age; hopefully this carrys over to adulthood.
People don’t take responsibility for their actions (blame the Democrats) and corporations aren’t held accountable for theirs (blame the Republicans).
Kick all the bums out of office, get money out of politics, and then we can finally get to work on long term solutions to the problems that people have created.
@jds64ny: give that man some dice!
@zippyzop: I’m sure most of us made more than a few mistakes, and there are thousands of people out there that think the blue E is the Internet, managing their finances just fine, for every registered commenter here. But, everyone is going to help pay for those people that accrue such great debt: you at 150k, and me at 30k. It may take a few years to catch up to us all, but it will be part of increased taxes, increased interest rates, increased service costs, even lower dollar, and so on. Culturally, we may be insulated, but economically, we are not. Thus, those of us trying to do well with our money see that those who aren’t are going to cause us to get bitten–we’re going to have work more at it in the future because they haven’t.
All bitching aside, how do we profit from everyone’s bad debt? Outside of short selling banks and credit card co’s, trading currency against the dollar and buying up everyone else’s cheap foreclosed stuff?
We are all going to get stuck financing a mortgage bailout for people who over-bought anyways, there has to be a way to hedge. Think people, think!
@kimsama: My old stomping grounds. Fox Chapel across Market. I sold and bugged out for NC a few years ago. It got so bad that one couldn’t make a left turn during daylight hours. That and the gang problem that everyone but the cops knew about.
@barty: I’m paying off a medical bill. I kinda wish I was in Canada right now. I liked Hillary’s idea when I heard it in 94′. I still like it.
@zippyzop:
Agreed, but I suppose a lot of people need an ego boost for saving.
I don’t have cable, a car or any other monthly expense other than rent. The only thing I spend money on regularly is books and I only purchase a few used ones a month.
I’ve learned to live on the bare minimum, but I’m not going to look down upon anyone else who is mountains of debt. If you can afford the niceties in life, great! Enjoy them!
@the_wiggle: I live in Phoenix but the other readers here do not – nobody else knows or gives a shit what you mean by “Anthem” or “PV”. And if you think Anthem or Chandler have great school systems, you’re an idjut.
I think we are getting real close to the credit problem in America. Allow me to digress…(I hate that phase too).
I grew up in the midwest, raised to know that if you didn’t have cash you didn’t get it. Thrift..dang can even spell that word anymore…
so I live in the bay area now. Watching the real estate crumble. Sitting on a decent approved fixed 30 year. You know what?
I think gramps was right. Screw the banks…they screwed us for 150 years. I don’t think there are any good solid lenders anymore.
I think I’ll keep watching and renting month to month.
Anyway, I can’t wait to be 100% debt free. I can see the light at the end of the tunnel and trust me I’ll never spend a dime outside of my worth.
I can’t wait to force the banks and their minions work for my gain in a few short years.
Stop buying crap America!