Debt Slavery: Why Are Americans So Willing To Dig Themselves Deep Into Debt?

The New York Times has an article that tells the unfortunate tale of Diane McLeod and her love affair with debt. She started out “debt free” when she got married, but after a divorce she’d managed to accrue $25,000 in credit card debt. Despite not having a down payment or any assets, Diane was given a $135,000 mortgage. Over the next few years, illness, underemployment, and shockingly irresponsible spending combined disastrously with the bank’s willingness to refinance her loan as her home appreciated (for a fee, of course). 5 years later, Diane owes $237,000 on her mortgage. She’s in foreclosure now, and a recent sheriff’s auction of the home did not draw a single bidder. A similar house down the street recently sold for $84,000 less than she owes on her home.

The NYT says there is a bright spot at the end of the tunnel for Diane. She’s still getting credit card offers from “Urban Bank.”

Recently an envelope arrived offering a “pre-qualified” Salute Visa Gold card issued by Urban Bank Trust. “We think you deserve more credit!” it said in bold type.

A spokeswoman at Urban Bank said the Salute Visa is part of a program “designed to provide access to credit for folks who would not otherwise qualify for credit.”

The Salute Visa offered Ms. McLeod a $300 credit line. But a closer look at the fine print showed that $150 of that would go, as annual fees, to Urban Bank.

Why are Americans so willing to do this to themselves? The article explains that as few as 40 years ago, we were a thrifty nation full of “savers,” and that banks were focused on whether or not you could repay your loan and not the “fees” they could get from loans before they were sold to investors. We know that there were changes to the financial system. What happened to our values?

Given a Shovel, Americans Dig Deeper Into Debt [NYT]

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  1. Not sure if it is our “values” that changed. As much as the predatory practices of Credit Card companies.

    Back in “the old days” getting a credit card was a process. You went to your bank, you applied, they checked you credit–and you may or (gasp!) may not have gotten a card.

    Flash forward 40 years where credit card companies realized they could make MUCH MORE MONEY from APR then credit card fees–so they simply give a card to anyone, regardless of credit risk.

  2. foreverinbluejeans says:

    I’ll admit to some credit card debt that has been used to keep me afloat as I finish my last year of college.

    But I also have the option of living at home rent free after graduation, so I can pay it off (my mom’s condition of me living at home rent free).

    I feel bad for this lady. All it takes is one incident to send you headlong into debt.

  3. maneki neko says:

    We’re willing to do this to ourselves because our desire for stuff – electronics and that sort of thing on a smaller scale, owning our own homes and cars on a larger scale – knows no bounds, and credit offers us a way to get it fast, and worry about the consequences later. Banks are just happy to exploit this fact of human nature. Predatory fees and lending practices certainly aren’t helping matters.

  4. Burgandy says:

    Between this lady tossing money out the window on cokes, smokes, and purses I tossed away an sympathy I could possible have for her. She included her son’s income on one of those loans in order to get it. I guess it never dawned on her that they don’t really want to just give you money without some way of getting it back.

  5. l951b951 says:

    One word happened to us: Greed.

    We’ve become a greedy nation full of entitlement issues. I deserve a plasma TV (right now), even if I can’t afford it.

  6. pastabatman says:

    American Debt Discussion Cliche checklist:

    1. …using their homes as an ATM.

    2. …latest, greatest and biggest flatscreen tv.(somehow universally the pinnacle of excess)

    3. …keeping up with the Jonses.

    4. …SUV…Hummer…gas guzzle…

    5. …3000 sq ft….pool…jacuzi…

  7. Erwos says:

    IMHO, it’s like this: the lenders issuing loans and credit cards got put under more and more pressure to make higher profits. Once you’ve tapped out the market of responsible people, it’s time to hit the irresponsible ones, and overlend to the (formerly) responsible ones.

    Of course, overlending and lending money to irresponsible people is stupid, unless you can figure out some way not to lose money when they default, hence the insane fees and crazy interest rates. The problem that the lenders are now running into is that they didn’t do their math right in terms of pricing that risk into the money they were lending out – which is why they’re getting totally smashed in earnings.

    This isn’t to put all the blame on the lenders – at best, they enabled the situation to happen. There’s also a culture of conspicuous consumption involved, not to mention the marketing involved. Ultimately, both parties made their bed – now they should be laying in it – by themselves!

  8. arthurat says:

    Been there… and I’m almost out of this vicious cycle. My family finally concluded that possessions are not important. I’m sure you can guess where my stimulus check went towards.

  9. deeness says:

    I know a couple who got a five-figure cash advance on two credit cards for some home improvement work. Two months later the money is sitting in a checking account and they haven’t chosen any contractors. It makes me want to scratch my own eyeballs out.

  10. thebluepill says:

    It all boils down the increased pressure to “grow” a company by its stock holders, instead of focusing on building long-term, solid foundations on long term investments.

    The main people at fault are the investors in our society that changed the practice of investing long term, for the “glory” shot at high risk, short term investments. That fundamental change meant that publicly owned companies had to push harder for profits and take much greater risks to get them to keep investors sinking their money in them.

    Instead of buying 100 shares of “Coke” and keeping them for life to retire on, a person will buy 1,500 shares of “Google” and dump them when they have made a 15% return in one month. (for example).

    Its not so much “wrong” to maximize your profits from your investments, but people need to realize the attitude shift towards investing by the average person, wanting to be a wall street hot-shot.

    In the end, you wind up with companies like the ones we have, maximising profit at the expense of everyone, including consumers that it should rely on for stability.

  11. gibbersome says:

    It’s not just greed, it’s also the rising cost of living. People haven’t been able to adjust their spending habits to accommodate these changes. Coupled with declining wages, benefits and people now have to pay more for more things. Health insurance, food, gas, utilities all have gone up more than incomes.

  12. jst07 says:

    CitiBank was pretty quick to throw me a $1000 credit line card when I’m only 19 and have absolutely no credit history. Granted I stay on top of my bills and pay it off, but thats still quite high for someone with no credit I think. I’m sure they’re hoping I default my account so they can cancel my 6 months 0% apr and get me going on that lovely ~28% apr!

  13. Erwos says:

    @arthurat: Possessions aren’t important? Do you not like sleeping on a bed? Do you enjoy living on the streets, naked?

    There’s nothing wrong with enjoying the wonderful stuff on the market. The key is moderation and responsible spending.

  14. dragonvpm says:

    Ummm is it really that much of a mystery?

    The article explains that as few as 40 years ago, we were a thrifty nation full of “savers,” and that banks were focused on whether or not you could repay your loan and not the “fees” they could get from loans before they were sold to investors.

    Banks etc… were sold to investors, investors don’t want you pay off your loan/debt they want you to pay their fees. Why else do you think credit cards have fairly high interest and fairly low payments? For the people lending you the money, having you pay them $100 of which $99 are interest is great. From an investment point of view, the annoying thing about loans is how they eventually start making you less and less money as the interest is paid first and then the principle.

    From that perspective, why the hell wouldn’t they want you to refinance every few years forever? Aside from getting more money in closing costs etc… they get more money in interest payments and if they can get you to refinance your house every 2 or 3 years for a decade, a 30 year mortgage effectively becomes a 40 year loan with big interest payments for the first 15-20 years that you have it.

    In a nutshell, the banks were sold to investors. Greed became the name of the game, banks taught consumers to live off of credit cards, loans and implicitly got them to accept the idea that they’d be paying off their debt forever and guess who ends up winning? Think about it, how many people realistically plan to be debt free anytime in the next couple of years? next 5 years? 10? Heck, most consumers probably don’t even think that far ahead… certainly not in any concrete terms where they have a realistic plan for improving their financial situation in the long run.

  15. Youthier says:

    @Burgandy: She lost me when she bought a house with $25,000 credit card debt!

    My husband and I bought our house with no money down. I’m not sure it was the best decision but we made it. I had $0 credit card debt, he had $300 from his stupid days of “not paying makes it go away!”, which we easily paid off prior to closing. We had enough in our savings to give us a “Slush fund” to make the bank comfortable.

    If my husband had even $1000 in credit card debt, I would have said no way to buying a home until it was paid. $25,000!

  16. friendlynerd says:

    @CreativeLinks:
    Isn’t that a little easy? It’s the bank being predatory!!

    No, it’s being greedy. Just because someone offers you easy credit doesn’t mean you have to take it. Nobody put a gun to anybody’s head.

  17. The part of that feature that amazed me the most were the figures chronicling Americans’ debt to savings ratio for the past 100 years. Apparently, the average American saves less than $400 a year. That’s stunning to me.

    Commenters, how do you save? Direct deposit to your ING account? Money under the mattress? Change in the cookie jar?

  18. mindshadow says:

    I think it’s a snowball effect. Most companies, as mentioned, were sold to investors and the only thing they look at is profit. Unfortunately constant focus on profit can lead to some poor decisions which, when done in places like the financial sector, can have some major impact on the economy. All of a sudden banks are, again as mentioned in the articles, worried about the fees they can collect and you have crazy things like ARM loans and jumbo loans. Health care also seems to suffer from this as any consumerist reader is aware.

    Yes, consumers have been irresponsible. But most people want what they can’t have and want a better life with nice things. Financial institutions offered that with some nice fine print that has ended up screwing a lot of people. I have a hard time believing bankers and accountants are shocked that ARM loans, credit cards with huge interest rates, and all of these things that push irresponsible spending habits have come back to bite them in the ass. You just can’t be surprised that if you offer a guy making $20k/yr a loan for a $400K house he’s probably going to have some trouble paying for it.

    The thing is that yes, we as consumers have screwed up, but what really wrecks the economy is when big companies screw up. Now we’re in a situation where the dollar is a fraction as strong as it used to be, food costs more for less due to recession of the economy and the rising cost of transporting and producing that food, health care is insanely expensive and will drop you without a second thought if you get seriously ill, but companies are not giving raises to compromise for these raises in living.

    Yes, some folks get a 3-5% yearly “cost of living” raise, but the cost of living has risen way more than 3-5% for the past few years, especially if you factor in gas. As far as I see it the government can send out all of the stimulus packages it wants but this will all be useless until corporations shift some money from that multi-million dollar bonus/golden parachute/whatever to their employees. Unless the consumer has the spending power it doesn’t matter how much money your CEO makes, companies and banks are going to continue to tank.

    That’s just one I.T. worker opinion that’s had a few college courses in micro/macro economics and I’m sure I’m just completely off base and rambling.

  19. chikarin says:

    hurkon is exactly right.

    Surprising number of people do not think before spending money and they are really bad planning things ahead. I myself live in a pretty tight budget. Since I’m still paying back my school loans I really don’t save any money at the end of the month.

    Since I can’t save any money there really isn’t any protection for me when I get sick or lose my job and such. So as bad as it sounds I have my credit cards as my backup plan since I know that I can live for a year without working just on the credit card. Having all these readily available doesn’t mean you can just buy more things, you should really save them up so that you can get by when you are forced too.

    When you get a 2000 line of credit it doesn’t mean that you should now buy yourself a new Macbook and an iPod. Yet sooooo many people does this, again and again, until they run out of options.

  20. snowburnt says:

    @friendlynerd: It really goes hand- in-hand.

    Yes, people shouldn’t be spending outside their means, they shouldn’t be buying 300k homes on 60k a year, but when several “professionals” repeatedly tell you you can do this and show you nifty graphs and charts and “plans” that detail how you can do that, then tell them that you have to do this…That is where the banks need to take some responsibility.

    A professional shouldn’t be looking to “take advantage” of anyone, which is what banks are doing now.

  21. Erwos says:

    @mindshadow: The amount being spent on those bonuses doesn’t really add up to much on the grand scale. Labor is already the number one cost at almost all companies.

    Stagnant wages aren’t really the issue, except on the lowest end of the spectrum. People aren’t using credit cards and loans to buy flour from the store, they’re using them to buy luxury items and homes (and homes are a luxury if there are apartments available).

    *has a BS in economics*

  22. dragonvpm says:

    @friendlynerd: Eh, I don’t think it’s that easy.

    If you look at the motivation of the people lending the money, it seems pretty clear that the people really being greedy (as defined by wanting to make as much money as possible) are the ones running the banks/credit card companies etc…

    Consumer behavior is just a learned habit and it’s a function of so many people believing that it’s ok to buy everything on credit and spend the next 50 years trying to pay it off. Keeping up with the Jonses (which, don’t kid yourself, has always been around) takes on a whole new dimension when everyone else is doing the same stupid financial things largely at the insitance of the banks etc…

    Humans are social creatures and they tend to learn from their friends and families. Why do you think that places like the consumerist tend to attract so many people with comparable viewpoints? We all want to try to better our lives and not get screwed over by various companies out there and it’s nice being around people who in one way or another share that goal. Unfortunately for far too many people the folks they’re around get them thinking that it’s ok to never pay off their debt in full because that’s what everyone else is doing and the banks just facilitate this because they’re the ones making all the money.

  23. foreverinbluejeans says:

    @l951b951:

    Agree. My 19 inch Target special is holding up just fine, though I refuse to give up my Tivo.

    My mom gets a small disability check each month (not old enough for SSI), yet she manages to help me with books each semester and have savings.

    She doesn’t watch TV, so no cable. No car, all public transit or walking. No cell phone (she refuses to get one) and no credit cards. All her clothes come from thrift stores (she does her own sewing and mending). Her only vices are cigarettes and Coca Cola.

    Trust me when I say, I’m taking her advice on finances and budgeting very seriously.

  24. ScramDiggyBooBoo says:

    I consider myself quite cautious when it comes to credit cards. I have a few at the moment, but they are cards i can only use at certain merchants (Kay Jewelers, Metro Mattress). I will not get a VISA or Mastercard because i know i will be irresponsible with it. I agree that the practices of Credit Card companies could be improved, but i dont feel an ounce of sorrow towards this woman. She should be her own first line of defense at not getting screwed. People need to start realizing that companies these days are out to MAKE MONEY and NOT help the consumer. In the “old days” companies actually wanted to help people. Not the case these days. If you wanna keep screwing yourself into debt, why would these companies give a crap?

  25. CumaeanSibyl says:

    I think the problem is that our values didn’t change fast enough, because we didn’t perceive what was going on. We were still operating under the old system, thinking “if the bank lends this money to me, it must be okay to spend it,” while the banks went over to a new system without reasonable limits. We expected those limits to be there, but we never ran into them.

    It’s irresponsible as hell to lend money without the considerations that used to be in place, but at some point we really should have figured out that the game had changed — you know, before disaster struck. It’s not the bank’s job to keep us honest, though I submit that it is the bank’s job to lend only that which can be repaid.

  26. smonkey says:

    The populace finally adopted the spending habits of our government. If the a little deficit is good for the Government, it should be good for me as well. I wish Master card would understand that!

  27. Sugarless says:

    This isn’t just the fault of the borrower – this did not happen in a vacuum.
    Credit card companies offered cards to people they know are credit risks, people took the offers and were later charged outrageous APRs and fees which increases their debt even if the person is paying more than the minimum amount. (Sure the offer details arrive with the card, but try reading through that if you don’t have a financial or legal background.)
    If the card holder’s credit report changed negatively, the credit card company increased the card holder’s APR putting them into more debt.
    The issues with credit are not just the borrower’s fault, credit card companies want to increase profits by charging fees for everything and raising the interest rate for borrowing to the very people they knew were risky from the start.
    Yes, we used to be a country that valued saving money, but then there were all these ways to make more money and faster – which now means a lot of people are in danger of losing their homes and some have already lost the money they thought was safe in a savings account.
    I am looking forward to credit card reform. Sure, people need to borrow more responsibly, but credit card companies should also lend and conduct themselves more responsibly also.

  28. SadSam says:

    I say both. Banks and CC companies are focused on profits not on serving their communities and Americans are focused on keeping up (cost of housing, college education, health care has all gone up) and keeping up with the Joneses. This NYT series has a really interesting and scary graph that shows how the saving and debt rate has changed since the 1920s.

    My husband and I are off credit cards (although we still have a card for travel purposes) we paid off $50,000+ in debt (student loans, credit card debts and home improvement loan) and have resolved to live like our parents and grandparents did. We have a budget, we only spend current dollars, we have a $20,000 emergency fund, we are saving for retirement.

    When we want something above our budget we save up for it. Right now, while my peers are all driving luxury leased cars that cost them $600 – $1000 a month I’m driving my paid for car and saving for a nused car. I won’d buy the next car until I can pay cash for it. We live a good life but its not always easy to be different.

  29. snowburnt says:

    @loquaciousmusic: I’ve had my share of savings and credit problems. After I polished off my credit card debt, I joined a credit union and split my direct deposit between my bank and my credit union so that about 10% goes into my credit union account. My credit union’s branches are too inconvenient for me to drive to on most days and I don’t have access to my savings through my credit card. I’ve saved over $2000 the past year, I’m shifting things up so that I can save even more now. It’s a healthy addiction to save money. I was saving up to buy things but now that I have more than enough I don’t want to lose the money.

  30. sir_eccles says:

    I refer the honorable gentleman to the title of this blog.

  31. akalish says:

    One word: Entitlement.

  32. moneywrangler says:

    What sucks is I pay off my CC every month, I put 20% down with a fixed mortgage, I don’t have kids or new cars or Iphones because I realized I didn’t really want that expense, I’ve worked practically every day of my life since I was 15, and now I have to pay for all these f*cking idiots out there that are too stupid to do about 5 minutes of research when buying a house. So my 401k has to suffer. And my insurance goes up. And my grocery bills go up. All because America is filled with retards. I give up.

  33. jakesprincess says:

    @Burgandy: Yes, I read this artcile and the picture on the inside really bothered me. She was sitting at a table littered with soft drink cans and ashtrays. Yet she complained about health problems that led her to this point. Here is an idea: eat better and stop smoking! As for the purses, why did she have to acquire so many? She was already working two jobs through much of the events that transpired. Shouldn’t trhat have been a flag to save some money so she would not have to be in that position?

    I know it is easy to judge. I do. And I will be the first to admit that I have some vices (hello, shoes!). However, I have a budget every month and I save religiously rather than buy all the shoes I want.

  34. Balentius says:

    @Youthier: “If my husband had even $1000 in credit card debt, I would have said no way to buying a home until it was paid. $25,000!”

    Wow… When my wife and I bought our house, she had ~$10000 in student loans and together we had ~$20000 in credit card debt. That was 12 years ago, and not only have we paid off our various other debts, but we’re now ahead of the game on house payments, on a house that is now worth 2.5 times as much. If we would have waited to buy a house until we were debt free, we would have bought it ~3 years ago, and be stuck with a house that was worth less than when we purchased it.

    I’m not saying that it was smart to have that credit card debt, but buying a house when we did was the smartest thing we’ve done financially. Too many commenters here automatically assume that people that use credit cards are idiots (with a subtext of “why are those people allowed credit anyway!”), but a few years back that was the typical American, and most people survived.

    $1000 would be too much? Wow, that is one month’s apartment rent. Personally, if I was buying now that is probably what I would do – charge 2 month’s rent (if possible, which I’m pretty certain it is) so I would have SOMETHING for a down payment.

    To each their own.

  35. I’m not sure I agree with not buying a home when you have credit card debt. As long as you don’t continue your poor decision making and agree to a Variable interest rate loan.

    A mortgage for $135K at 7% is somewhere around $900 a month. You can easily pay that much for rent depending on where you live.

    Now obviously she made some startlingly bad decisions, but I think that commenting on her bad decisions is off point.

    I think the point here (which many have eloquently explained) is that even in these rough economic times the banks out there are seeing people in trouble with their debt as an opportunity to make a quick buck.

  36. maneki neko says:

    @jst07: I had a very similar experience at Chase. I recall the banker not actually explaining the APR or any other feature to me, and sort of strong-arming me into the card. I expect they were counting on me to rack up debt due to my ignorance or inexperience, so while I’m responsible and carry no debt, it makes me worry for the people my age who aren’t as knowledgeable, or aren’t as responsible, or are just not in as good a financial state as I am. Financial mistakes you make in your twenties can and will follow you for a loooooooong time.

  37. mindshadow says:

    @Erwos: Right, good point. I’m speaking more-so on the lower end of the spectrum, since I guess that’s more where I fall. There are a lot of people spending money on stupid things, but at the same time I believe that’s more of a learned habit (or a lack of learning). Also we are a very over-worked society (least vacation of any 1st word country etc etc), so can it be a big surprise that people feel they need to “reward themselves,” even if it does dig them into debt?

    What really sucks is that we have such a broad spectrum of businesses and what they can afford. McDonalds or Wal-mart could technically easily afford to pay their employees two or three times what they’re making now, but a small business may be struggle to pay minimum wage if it can afford employees at all. But consumers want the lower prices and don’t want to pay for the added cost of a local small business that cares about you and wants your business.

    What I’m saying mostly is that it’s all our fault. Until there is a shift in both consumer spending and corporate culture things are going to continue to be the way they are. People will still buy big SUVs to transport one person in, huge McMansions, and eat out every night, and the financial institutions will continue to offer that lifestyle to them knowing that it’s not sustainable.

  38. dragonvpm says:

    @SadSam: I applaud the effort you put into getting your finances in order, but it’s not always best to be entirely without debt. Student loans, investments (e.g. property), sometimes even vehicles can be reasonable places to be in debt.

    The key is to be smart about the sorts of debts you get and make sure that you’re not paying interest and whatnot on frivolous things. For example, I own rental properties that I built and financed with loans, would I rather have paid cash for them? Sure thing, could I have? Nope. However, right now I’m making a decent bit more in rental income than what I’m paying in mortgages so the net result is positive (I have assets with decreasing liabilities AND I’m getting income from them). I bought a used truck a few years back and I financed it because I realized that my then current truck was costing me about what a car payment was every month in mechanic’s fees and maintenance PLUS all the time I was losing from having it break down. Again, I would have rather bought it cash, but looking at the finances, financing it wasn’t a horrible idea and I’m almost finished paying it off, ahead of schedule.

    Finances aren’t cookie cutter. Not all debt is evil, not all debt is good. Being totally debt free can hurt you in the long run (i.e. if you’re debt free for so long that a lot of your credit history falls off your credit report it can be more difficult to borrow money if/when you need it in the future). People need to learn to evaluate their finances and make smart decisions based on their actual situation, not “rules of thumb” that don’t take into account their actual lives.

  39. boomerang86 says:

    At one time I had almost $20K in revolving charge debt, including plastic. Now I pay it off in full, every month. Our house almost half paid off.

    I put 12% of my pre-tax income into a 457-b deferred compensation account; my wife is doing 20%. Between that and my pension, we should be OK even without depending on Social Security benefits.

    To quote Vincent Pastore, host of “Repo Men: Stealing for a Living”, “If you can’t afford it, DON’T BUY IT!”

  40. jakesprincess says:

    @moneywrangler: Oh, I so agree. I am a liberal at heart but when it comes to things like this I am as conservative as it gets. I had an ARM when we first boughto ut house, and I knew that my options within five years were: buy a new house or refinance. So we did the latter after two years and locked in the same rate as we had with the ARM. Plus we had equity built up, so no more PMI. Now I am being asked to bail out people who did not plan and think…it kills me. I don’t think I should have to bail out companies, either.

    We want to move into a new house but we know now is not the time. And I am not willing to leverage every little bit of savings I have to do so. I need my rainy day fund to sleep at night. And I am not about to raid my retirment savings. I plan to NOT live on Social Security when I retire, and in all honesty it probably won’t be there for me, anyway.

  41. hypnotik_jello says:

    @loquaciousmusic: 10% of monthly after-tax income into savings, 15% of monthly pre-tax into 401k

  42. wgrune says:

    @akalish:

    Bingo. I am on the edge of a generation that believes they deserve everything for nothing. We look at our parents and see the nice things they have and don’t think about how much hard work and sacrifice it took for them to get those things. There are a lot of people who just buy buy buy…

  43. DreadPirate says:

    @Loquaciousmusic: Personally, I split my money between paying off my credit card and putting it into savings. $500 a month into savings is nothing to sneeze at, especially when it’s automatically handled by Ing. Thinking about buying a house next year, once I get more money into the bank and the car paid off.

  44. backbroken says:

    I think this is all happening because Bill Clinton had sex with an intern.

    Yup. That’s gotta be it.

  45. Rectilinear Propagation says:

    I think part of the problem is here:

    Hers was a pay-as-you-go family, she said. Although money was not discussed much around the dinner table, credit card debt was not a part of her parents’ financial plan, and sometimes personal purchases were put off.

    Discuss the money. I’m not saying you should drone on to your 3 year old about your financial problems but they aren’t going to learn by osmosis either.

  46. chuckv says:

    I see 2 ways in which the government has interfered with the market, causing people to save less. The first is inflation. When money is worth less tomorrow than it is today, people are disincentivized to save. The second is social security. Social security can’t keep you afloat through retirement, even though many expect it to. Imagine what we could do if we were allowed to keep 15% of our paycheck? If Americans were forced to be responsible with their money, and had more of it to be responsible with, they’d be better off. Sure, some people would go out and buy new TVs and houses instead of saving, but that’s their choice.

  47. It’s not just because people want to buy plasma TVs. I went to some rough years of underemployment and my debt accrued to $20,000. Once I started making a living income, I started paying it. That’s when the bank started coming up with tricky stuff, like arbitrarily changing my due dates so I’d have to pay late fees and raising the interest rate for no apparent reason. It was as if they didn’t want me to pay it off. I finally did pay it, but it took a lot of sacrifice (I lived under the same conditions as when I was underemployed) and a lot of fighting the bank. I think -for most people- the reason they get into debt is desperation, and for corporations, pure and simple greed.

  48. ex-parrot says:

    A lot of problems explode into existence when factors that used to constrain our behavior are suddenly removed. People were more thrifty in the past simply because credit was not obtained as easily. When you take away that constraint, people borrow more and become less thrifty. It’s the same with companies. Banks used to be more selective about lending because the health of their business depended on getting that money back. No longer. Now many of them make most of their money off fees because they quickly sell off their loans. Getting the money back no longer constrains their decisions; that’s someone else’s problem. The “someone else” is turning out to be the shareholders of companies that are going under or the taxpayers who will be bailing out the mortgage companies.

  49. Etoiles says:

    Not everyone in debt is as irresponsible as the subject of the article, who I admit pisses me right off.

    How is one supposed to start a massive retirement fund in one’s 20s or early 30s when one pays as much monthly in student loans as in rent & utilities? It’s a vicious, nasty cycle: without a college education, you only get low-paying jobs and stall out on the career track, but when you do go to the “better” jobs, you dump the majority of your salary into repaying your education.

    (And my grad school debt I admit was a free choice, not a requirement, but in-state rates at my state university, where I did my undergrad work, were over $20k a year when I went, by the time you add room & board and books. I worked 20-30 hours a week during the school year and 40-60 during the summer pay for much of it but there’s still only so much you can reasonably do!)

    Everyone who can afford to save in their 20s, because your parents paid for everything until you were 21… go thank your folks and make sure to do right by them in retirement. Mine would have loved to, but couldn’t, and it’s going to be another few generations before we can do any better.

  50. kwsdurango says:

    Succumbing to marketing is not an illness, it is laziness. Banks (and all businesses) exist only to make money. People (consumers) are not FORCED to purchase luxury items (i.e. handbags, designer clothes, the latest technology garbage), they CHOOSE to.

    This woman, and millions like her, made the choice to use debt to acquire material things that she did not need. As a result, her bankruptcy and inability to repay the debt will mean that the rest of us will end up paying for it in some way or another – through higher interest rates, government stimulus packages (tax redistribution), lack of liquidity, etc.

    The bottom line is that banks and all other businesses that want to sell you something will continue to try and try and try. It is up to people to put in the little bit of effort required to understand what is affordable and what is not.

    We just need to be smarter about our finances and understand that the money we work hard for is never easy – including any debt we accumulate along the way. As a nation, we have gone from disciplined and hard working to lazy and entitlement focused. Look around, even our cars are fat.

    (debt free & self employed)

  51. Stanwell says:

    I work in mortgage collections and often take financial information from past due customers in order to set up repayment agreements. It’s always amazing to me how many people do NOT have any credit card debt. Sure, I get an occasional customer with thousands of dollars on credit cards, and a few more with a couple of hundred to a couple of thousand on credit cards. The vast and overwhelming majority, however, have very little or no credit card debt at all. Keep in mind, these are people who are behind on their mortgages, people you might expect to be using credit cards to pay other bills. We get this information from credit reports too, so it’s not like they’re just neglecting to mention it so their finances look better.

    Certainly there are people with absurd credit card debt, but I kind of doubt it’s the pervasive problem that articles like this might lead you to believe.

  52. Hawk07 says:

    It’s the consumer that ultimately decides to apply for a CC, not the bank.

    Sure, the consumerist occasionally has a post where some CC company accidently issues an unwanted, unapplied for CC, but those are the exception, not the rule.

    Blaming “predatory” banking practices is a scapegoat to the real problem. It’s just the mortgage meltdown. Ultimately, it was the consumers buying those homes, not the banks. Plus, two years ago, some people would have cried racism and sexism if they were turned down for a loan.

  53. Snowblind says:

    @postnocomments:
    I know what you mean.

    When I started digging myself out about 6 years ago they tried the same trick. I got “trickier”…

    I paid the minimums again, plus a little. They quit doing the move the date trick and put me back on a normal APR after asking nicely.

    Meanwhile, I put the excess I intended in a savings account, and let it build up. Then I just paid the whole damn thing off. They did try the “you owe us $xx in interest for the last month” just to try and keep a positive balance. That took some more polite maneuvering to settle.

    Mob loan sharks => payday loans => credit cards

    The only difference is how hard the sell is!

  54. bohemian says:

    It is a combination of things. Banks started lending money to anyone with a pulse, hoping to make tons of money on fees and interest. People now had access to more money they didn’t used to have. Before the change in credit people were limited in their ability to spend beyond their means. Limits on access to credit acted as a governor on someone’s ability to spend.

    Since people now had easy access to credit even if the offers were bad ideas, marketing stepped in to try to coax that cash out of people’s hands. But we need to face the fact that many people are total sheep and believe what they are told and never question the source. Marketing can also be extremely manipulative if someone is not skeptical or more susceptible due to really poor self esteem. After a while people start thinking that living in a McCastle is normal for two people with kids working crappy call center jobs. Now add to that pushy sales people telling them they can afford it and they are missing out if they don’t buy one.

    At some point normal included an SUV, eating at restaurants daily, and owning a huge house full of high end swag. Doing otherwise started to make people feel like failures and other people started treating them like failures for not having those things. This is why I am so glad some people are wising up and embracing frugality, forms of minimalism and ways that save on gas and housing costs.

  55. SadSam says:

    @dragonvpm:

    Agree, not all debt is bad. We have a mortgage (30 year fixed, we put down 25%) on our house and we have a mortgage on an investment property (just land, 20 year fixed) which also has a mortgage. We both had student loan debt that helped us obtain better jobs but we paid it off even though it had a low interest rate (we paid my husband’s MBA off in one year even though it had a 3.5% interest rate).

    We also have a credit card that we use once in a while when we book a hotel room or a rental car and once in a while we use for internet purchases so we can keep our FICO scores up (mine is currently 805).

    On the car issue, I agree with your position. Even though I’m saving up to pay for a car with cash if my current car gets to the point that I’m paying more in repairs than I would if I had a car payment I’ll go finance a car. But there is a big difference in financing a smart car purchase and paying $1000 a month on a leased car to impress people who really could care less what you drive.

  56. bohemian says:

    @EtoilePB: Student loans and medical debt do not get enough attention in the equation. 50% of the bankruptcies are for medical debt. It is very hard to get around either of these forms of debt if you want to get a decent job or not die.

  57. mzs says:

    @pastabatman: Holy crap I now SO want a 3000 ft^2 Jacuzzi!

  58. dragonvpm says:

    @kwsdurango: Jeez, that’s not a very helpful attitude. Why don’t we just shut down the consumerist and slap this on the front page:

    “The bottom line is that banks and all other businesses that want to sell you something will continue to try and try and try. It is up to people to put in the little bit of effort required to understand what is affordable and what is not.”

    The entire point to this site is because we realize that “a little bit of effort” doesn’t always get you the fair outcome. Some companies are out to scam you, some will lie, and people need to not just put in the effort but they need to know where to do so.

    You’re right, we do need to be smarter about our finances, but part of being smarter is trying to understand how people get sucked into situations like that woman in the article so that we can see those problems before they hit us. It’s not just about being fat and lazy or stupid, and ignoring or dismissing what gets people into those situations (and the role that admittedly greeding companies have) is a perfect recipe for ending up with your very own financial disasters (i.e. learn from their mistakes and apply it to your situations, don’t just assume people were greedy and stupid)

  59. anatak says:

    @hurkon: I think this is part of the problem. The other is a reliance on credit. When everything you see and hear says that it is a good idea to use a credit card for EVERYTHING, people are going to do it. It works out great in the best case scenario. Unfortunately this can spiral out of control in a multitude of ways but ending in the same result: Debt with little recollection as to how you got there.

    Readily available credit is a fairly recent phenomenon, with mounting consumer debt following closely behind it. These problems didn’t occur 40 years ago, and there are several reasons for that.

  60. narf says:

    As many have mentioned already, it used to be that lenders were concerened about one’s ability to pay back a loan. Nowadays, it’s about how much money can be made.

    I seriously think that many folks are too stupid to understand how interest rates are factored into their payments. They just see “only $15/month” and go for it. Nevermind that if they actually looked further into the math, they’d find out that $1000 TV is really going to cost them $2500.

    Multiply this for several credit cards, car payments, etc., and it’s plain to see how one could carry so much debt.

  61. @SadSam: “We live a good life but its not always easy to be different.”

    I feel ya. One thing we did was move into a socioeconomically mixed neighborhood (more or less accidentally) so there’s a millionaire on the corner (seriously; he owns the local baseball team!) and we have a welder down the block and two service workers across the street. Our 6- and 8-year-old Ford Focuses do not look out of place. But our professional peers are often pushing us to move to “nicer” neighborhoods and buy a bigger house and newer car so we can live like we “should.” It’s nice to come home to a neighborhood where frugality is the norm and where we ARE the Joneses (and local dispensary of college advice for our neighbors whose kids will be first-in-family to higher ed) instead of trying to keep up with them.

    @wgrune: “We look at our parents and see the nice things they have and don’t think about how much hard work and sacrifice it took for them to get those things.”

    I actually get a little aggravated with my mom about these things. When she and my father got married right after law school, they had no student debt and housing was a hell of a lot cheaper. We have $100,000 in student debt and we’re LUCKY. And I REMEMBER growing up on a tight, tight budget until I was in my early teens and my parents’ frugality finally began bearing fruit (and my dad moved up the corporate ladder to a more comfortable spot).

    My mom’s always, “This carpet really needs to go,” and “You could have a much nicer dining room table!” Well, YES, the carpet is hideous, as was the table, but it covers the floor and holds the food and DID I MENTION I’M 30 WITH $100,000 IN STUDENT LOAN DEBT AND AT 30 YOU WERE LIVING MUCH THE SAME WAY? I’m not sure if she spaces on that fact or if she just wants me to have the best because I’m her kid.

    (I did get a new dining room table as our Christmas present to ourselves — the old one really was god-awful and on its last legs — and I LOVE IT! And got it clearance! But, you know, slow and steady acquisition of non-shitty furniture, as I can afford it.)

  62. Starfury says:

    My wife and I both made a major effort to cut down our extra spending. Our CC bill was 1/3 of the usual amount. Since we did it for a month it’s becoming a habit not to buy useless crap and only what we need.

    Getting as deep into debt like the person in the article: Totally her fault. Too much of the “I want it now” and “I deserve to live this way” mentality in this country any more.

  63. castlecraver says:

    @jakesprincess: The assumption that personal financial responsibility and aversion to “bailouts” is a defining characteristic of a politically conservative position and the opposite is a liberal trait is one of the more unnerving and enduring fallacies of this whole debacle.

    Everyone played their part in this, and greed doesn’t lean toward either political direction. The liberal establishment and the conservative “free marketeers” both enjoyed eating their cake and having it too for many years. Unfortunately, socializing risk to the degree we’re discussing now figures to be an awfully raw deal, just like tying a pretty bow around a huge chunk of sketchy loans and pawning them off as Triple-A investments makes that aforementioned “free market” not able to work as designed.

    The consumer should have sat down and thought about their money a little more. So should the lawmakers and the lenders, the shareholders and the investors. Perhaps we wouldn’t be having this discussion if they all worked from a happy median between high lending standards and accessibility, but as it were, both sides were greedy as hell.

  64. waldo617211 says:

    The real problem is GUN CONTROL! Take away all these companies rights to hold a gun to your head to make you do these things & all will be right in the world! There is no more personal responsibility for over-eating, over-spending or over-anything, so it must be someone else’s fault – LET’S SUE SOMEONE!

  65. dragonvpm says:

    @SadSam: Yeah, I’ve never really seen the point to leasing a car. I’d much rather buy a slightly older car (often with all the bells and whistles) that I can pay off in the same period of time (usually for less than the lease payments) and then keep for however long I want until I need/want something different.

    I’m impressed though, it sounds like you’ve done a really good job getting your finances squared away. I’m still working on mine (partially thanks to the joys of going to a college that cost $100k+) and it’s great to see how it is possible to sort things out entirely.

  66. SigmundTheSeaMonster says:

    If I were to blame one thing, it would be sales & marketing. You’ve all pretty much hit on good points, but when it comes to the human-brain’s susceptibility to entitlement and desire, marketing has you down and calculated.

    No more long-term investments. Everything is pitched, ad-driven and designed for short-term gains. This is failure.

    When I saw that a fastfood place takes credit, that was it.

    And now, I get infuriated when I see such irresponsible advertising such as VISA with “the world revolves (around credit debt) VISA and not Cash!” (you know, the commercial where one person uses cash to pay and everyone just stops).
    If I were a merchant, I’d be HAPPY to take cash. Credit just eats into my profit.

    (I’d retire early if it weren’t for past cc debt. Be smart, don’t charge what you can’t afford.)

  67. Alexander says:

    It seems some people are never learning that everything in life must be earned. Credit cards have made it so easy to buy something that would have taken years of hard work before. My wife saved for 2.5 years to buy her first car when was in her early 20s. Working at a minimum wage job and having to partly provide for her family. She saved up $3,000 and went to a dealership and bought a 1995 Ford Escort. To this day she cannot stop talking of how damn good it felt when she paid cash for her first car. It gave her great pride. At the beginning she wanted to just put in a credit card, but I advice her against it as I had learned my lesson when I got into $6,000 in credit card debt by the time I was 20. Now we have no credit card debt and whenever we want something, we make a deal to save for it for for x amount of months even if we have the money available.

  68. Jmatthew says:

    @thebluepill: THANK YOU! So few people get that… I think I may love you…

  69. RandomHookup says:

    @Eyebrows McGee: Good answer, good answer.

    I believe it’s cultural. If everyone you know thinks you should have all the things they have, it’s hard to fight. If every piece of mail offers you access to more credit and tells you that you deserve it, it’s hard to fight. If you are constantly bombarded by messages that buying stuff = happiness, it’s hard to fight.

    It’s funny to watch people who worry so much about what other people think of them. Last year’s shoes, no way! Use a coupon that is hanging right there, that’s for poor people! Save money? I might be dead tomorrow…

    or maybe you won’t and then who’s gonna take care of you?

  70. coan_net says:

    I’m sorry, but I still blame the people mostly that get into debt like this.

    JUST because a bank will give you a loan does not mean you should take it.

    JUST because a bank will give you a loan does not mean you can afford it.

    I bought a house about 1 1/2 years ago – at a time when I could have gotten a very good variable rate. I told them no.

    Let me repeat – I told the bank NO

    I told them I wanted a fixed rate. I knew it would be a little higher rate, but I want to know the exact amount that I will be paying for the next 30 years. Why? Because I know how much I can afford to pay and how much I can not. And I wanted to make sure it was fixed and I would always know what I would be paying.

    People took a chance, and that chance failed with now higher rates….. and they blame the banks?

    Blame yourself.

    Of course there are many reasons to go into debt, but if you don’t try to do everything you can to get yourself out – then don’t come crying to others. Already in debt and getting another load just because a bank would give it to you and then crying on here about it – Blaaaaaa

    About 10 years ago I was not well off financially – you know what I did:

    1. I ate peanut butter sandwiches for about 3 months strait.

    2. Instead of staying at home wasting electricity, I went for a lot of bike rides. I would ride for hours – not only was I not at home wasting electricity, but I got in great physical shape.

    3. I did not “splurge” on anything. I bought “cheap” things – food, clothes, etc…..

    All those things helped me build back up my “money” and was soon back on track.

    So if you are not willing to help yourself and continue to do stupid things – then you are to blame. (not the banks and other people who trusted that you would do the right thing)

  71. barty says:

    @chuckv: How dare you suggest that the government shouldn’t be the source of everyone’s retirement and…gasp…we should be able to opt-out of the Ponzi scheme known as Social Security.

    Nobody is putting a gun to anyone’s head to take out this debt, so spare me the predatory lending BS. If this country didn’t have the “I’ve got to have it now!” bug so badly then there wouldn’t hardly be anyone that could get taken advantage of in the first place.

    Hardly anyone speaks of personal responsibility and prioritization, which is the biggest reason why we’re outspending our incomes at a record pace. People gripe about the price of gas and healthcare, but are driving an SUV that gets 15 miles to the gallon 30 miles one way to work and are carrying $15k in credit card debt to finance lifestyle choices. The simple fact is that for 99% of the population, if you can’t afford to pay cash for it, YOU CAN’T AFFORD IT, with the SINGLE exception of the roof over your head. That takes all of the payday lenders, sleazy CC companies and title loan places out of the picture entirely. It won’t hurt people to pay cash for used vehicles (or new ones if you have the money saved up) or to wait 6-12 months to buy that new TV, laptop, etc. If circumstances dictate that you must buy something NOW to fulfill a need, such as the clothes dryer going south, buy something used for $100 that will tide you over instead of charging $600 to a credit card for a new one. Ditto with cars. If you only have $3-4k in a vehicle and it requires a $3000 repair, first off, you’re likely to have the money to begin with, since you didn’t have a car note (funny how fast you can save money without a $300-500 car note every month) and even if you don’t, you get what you can for the car as-is and downgrade for a few months.

    We, as a society, need to stop making excuses for people and let them fall and bust their asses if that’s what it will take to make them stop this self-destructive behavior. Instead our reaction is to first blame someone else, then rush to the government to make these big, bad lenders back off our bail our sorry butts out. This has got to stop!

  72. Etoiles says:

    @bohemian: Yup. And the fact that hospitals and student loan companies are almost as usurious as banks and credit cards doesn’t help matters.

    I know far too many stories — my own and my family’s among them, but hardly the only examples — of responsible, frugal people being completely and 100% screwed over when a medical emergency strikes or a student loan problem arises. (Mine’s been sold / had a company merger more than once and it gets more problematic every time.) I recognize that life’s not fair and I’ll play the hand I’m dealt, but it would be a lot easier if others didn’t start screaming that all debt woe must be due to me claiming I need consumer goods. My TV was a hand-me-down and my car was an inheritance, and I’m HARDLY the only person like that in this country.

  73. theblackdog says:

    @EtoilePB: Excuse me, but my parents did not pay for my expenses after I turned 18 and went to college, yet since I started working I am able to put away a good chunk of my paycheck to my retirement account.

    Not all of us who save money now are able to save because our parents paid our expenses, we worked for it and learned from the mistakes we made.

  74. u1itn0w2day says:

    So many reasons for this problem but it all boils down to people wanting reguardless of cost or consequences.

    Credit allows people to buy on impulse without thinking about it or shopping for a better price.As many have pointed out alot of the spending on the US economy IS about keeping up with the Jones’es.

    And the greed of the financial end compounds the problem.If a person is having trouble at lower interest & fees and they raise it for PUNATIVE reasons rather than trying to get the person to pay is nothing but piling on or gouging the customer.The penalty should be nothing but the existing monthly interest on the un-paid balance.

    It all comes down to people wanting including the banks wanting to gouge you for every penny possible.

  75. Etoiles says:

    @theblackdog: Misinterpretation. My paragraph was meant to read, “those who are in this position because of your parents, go thank them,” not, “everyone who is in this position specifically is so because of their parents.”

  76. Imaginary_Friend says:

    These NYTimes articles are so predictable. They love to put a human face on the credit card/home loan abusers so we can have someone to rage against, but where are the articles that show the faces of the irresponsible lenders who really got us into this mess?

    Let’s see them being interviewed in their multi-million dollar mansions, looking shamefully at a pile of approved subprime credit applications spread out on their gilt-bronze coffee table like porn, with a tricked-out, bejeweled trophy wife in soft focus in the background.

    In the words of the legendary Billie Jean, “Fair is fair”.

  77. failurate says:

    @friendlynerd: You don’t think people were greedy in the past? They most certainly were, they just didn’t have the plethora of opportunities to act on their greed like we do in our unregulated present.

    The general public cannot control itself. It needs rules. You may say “personal responsibility! I don’t do that!”, and that is great, but other people do and their destructive behavior will bleed onto you.

  78. johnfrombrooklyn says:

    @chuckv: Inflation has been at an all-time low over the last 10 years (with the exception of the last year). But our savings rate continued to go down and down.

  79. johnfrombrooklyn says:

    @Imaginary_Friend: How many of those applications were filled out by people making $30,000 a year who should have been smart enough to realize they can’t afford a half million dollar home? I don’t have a lot of sympathy for people that stupid.

  80. alilz says:

    The mess is more than just one thing, it’s the credit card industry, the push in advertising to get people to buy more crap, home loans gone insane, people being irresponsible in whatever way, and/or medical or unforseen circumstances.

    It would be nice to point and say “okay there’s the bad guy” but there’s no clear cut group to blame.

    I will say credit card companies got really aggressive, especially at colleges and communicty colleges where students can get a free t shirt or a free sandwich for signing up for a credit card. And there are alos store cards, sign up today and get 20% off! Even if you don’t get approved you’ll get 20% off! That pitch is every where in about every store I go to.

    Or, it’s Memorial/labor.4th of july./we don’t care some holiday sale! Buy now and no payments until 2009! People think oo that’s like free stuff! (it’s not and that’s not a great way to think of it but it does happen), or no interest until whenever. To try and get people to buy stuff.

    Or they play up fears — omigod! if you don’t have this expensive electronic gadget/car/etc your kids will get kidnapped or DIE!!! Or the stand by, get this and be sexy.

    The cost of gas is goign up so buy this! be more envorinemtally friendly and buy our product! The Stimulus checks didn’t help, it was just more — spend! who cares about your debts and your bills! spend spend spend!!! Buy own consume!

    Everything has a corporate name in front of it. Everything has a sponsorship. Everything is about sales. It’s not a staidum or a field or an Olympics. It’s the GM Exxon Field or the Country wide Stadium. Or the Olympics brought to you by several dozen companies so you only see their products.

    I worked some place with lots of public traffic and someone wanted to come in and change all our outlets on the walls to have advertisements.

    There’s such a huge pressure to buy and consume. If you don’t have this you aren’t cool or a good parent or no one will love you or like you or want to hang out with you.

    Everywhere you go almost everything is geared toward spend.

  81. lchatburn says:

    Wow… Articles like this just go to show the incredible arrogance of Consumerist visitors.

    Just because you live frugally, or manage your debt well doesn’t mean that other people who have debt problems are weak-willing, uber-consuming, greedy lemmings, ready to spend with no regard.

    Why do we have more debt than 40 years ago? Because our acceptable quality of life has changed, but the cost of living has risen as well.

    Many people don’t see credit as a means to buy a big TV, but as a safety net against difficulty, be that: unemployment, lack of money for food, utilities or basic transportation, unexpected medical bills and many other problems that are easy to fix… If you aren’t earning minimum wage at two jobs to just try and feed your family and keep a roof over your head. Y’know, folks without internet connections and time to post to the Consumerist.

    Are those people irresponsible for accepting the credit to pay for absolute necessities when they probably can’t afford to pay it back? Maybe. But that’s a hard choice when you face eviction, or have to try and feed your family, or need the money for the bus ticket to get to work.

    My grandparents lived with three families in a two-room house with a fire they could rarely afford to light, fighting illnesses that come from malnutrition that are rare these days. They faced real poverty that many people still face today. A credit card is sometimes a way to survive in a humane way.

    I don’t doubt that there are non-frugal people in this world who get into real strife because they are greedy. Goodness knows, you could look at my apartment and judge me that way if you wanted (but I only have student debt, and my wife and I both work for pretty good wages). That said, we live in a society that is rife with poverty, and the people living on the border of that poverty are the ones who are on the brink of getting credit or not, and who don’t have the opportunities for loans and other benefits that others of us enjoy, so they take what they can. Cash flow makes all the difference in the world, and especially in small amounts when you have none at all – an extra hundred dollars this month could prevent a person from facing late payment charges or unemployment, or many other problems that snowball; a little cash injection can help everything, and thousands of people are stuck on that borderline where fines, fees and other problems are so very close to being ruinous.

    As a society, we need to do better than criticise and assume the greed of others… We need to double our efforts to help the worst off amongst us, because they are the people who most often get caught in credit troubles, because they lack the means and only credit can temporarily fill that gap.

  82. kellsbells says:

    @loquaciousmusic: I am 26, a college graduate, I live IN an expensive city (Seattle), and I only went into debt a month ago – so I could start law school. And I’ve been saving so that when I DID start law school, I had almost 10 grand in a savings account that I didn’t miss. How did I do it? I live well within my means. That means I have a roommate, an economy car, no cable, eat in, a land line (gasp horror!), no credit card debt. $500 was taken out of my savings account every month and deposited into my ING Direct Account. I didn’t even notice it was gone. I was even able to take a vacation to europe last year and STILL come out in the black.

  83. ARP says:

    @coan_net: @barty:

    I agree personal responsibility is a huge part of it, but there are other factors:

    1) A general societal shift to “I need it now.” It’s just not people, its corporations trying to maximize profitability in the near term. But guess what, when corporations get in over their head, the Government often bails them out. Or, if they do go bankrupt, the idiots who caused it don’t have to suffer a bit. Their personal credit is not impacted. In fact, they’ll probably get a parachute. So, what’s good for corporations often isn’t good for people.

    2) The fact that we have a shrinking middle class and people don’t want to admit they’re now poor. Funny how in the 50′s, only one member of household had to work. Two cars, a house in the burbs, and 2.3 kids- all one salary. And guess what, tax rates were HIGHER than they are now. Let’s face, wages have not kept up with inflation (especially now). Many are in denial about that. They blame high tax rates and social programs (but see above tax rates are lower now).

    3) Greed and lack of personal responsibility.

    4) Increased emphasis on appearances.

    5) Banks, credit cards, etc. pushing loans and credit cards. Do they have to accept? No, but even the most strong willed people will have trouble fighting the sheer magnitude of marketing that is done.

  84. ARP says:

    @wgrune: “We look at our parents and see the nice things they have and don’t think about how much hard work and sacrifice it took for them to get those things.”

    It does involve sacrafice. But if you make $7.50 an hour, all the sacrafice in the world won’t help if the cost of living outpaces your salary. It’s not just being more frugal. Mean salaries (meaning don’t count the 2% of people that make gobs of money) are at some of the lowest points since the early 40′s. Our tremendous growth during the 50′s was paired with big increase in minimum wages. And guess what? Tax rates were higher back then, so its not just the tax boogeyman that most have you believe it is.

  85. Consequences
    Our “greatest generation” may have been savers, but that was because they saw the consequences as they lived through the great depression. you didn’t save for a rainy day, you might not be able to feed the kids or make the rent.

    Consequences
    Today, we see bailouts, if you are rich enough or a corporation or in debt enough. We are the same poeple fighting to get rid of the “death tax” something that will not matter to most of us. But we bought into the American Dream (nothing down, balloon payment in 5 years) that we all will be successful enough to have to worry about such things.

    The folks at the top who allowed these scams to happen- have no consequences- they walk away with their houses and golden parachutes, feeling entitled to the government bailout of the company they ravaged.

    The rest of us- we are going to feel the consequences eventually, of the bailouts, the foreclosures down the street ruining our property values.

    Will we learn to blame the people who got us in to this mess? Perhaps then we will start to look out for ourselves. save some money for that rainy day?

    For those about to respond that those taking out these loans are also to blame- a comment–

    Yes, that is true. But they are learning their lessons the hard ugly way. They leave this mess with no credit, no house, little hope for making anything better for themselves. This lesson will stay with them for years. No “bailout” for them. They were offered what looked like a winning lottery ticket, and were told a story that sounded just plausible enough to work. It was the American Dream!

  86. dragonvpm says:

    @kellsbells: Out of curiosity, how did you pay for college?

    I know that when I went to school, I couldn’t have afforded to pay the $30k/year that going to my college cost at the time. I’ve been working since I was in my early teens and even if I’d saved every penny I earned, I couldn’t have paid for my first year in college (and unfortunately my folks couldn’t afford to pay for it either).

    It sounds like you’ve done a great job of managing YOUR life, but for any one of your decisions someone else might do something differently and have a better outcome for THEM.

  87. james says:

    Not that she isn’t an ignorant moron, but as for the mortgage refinance, I must say they are very confusing.
    I have not refinanced, but my mortgage is very expensive and the housing market crash makes me worry that I will not be able to sell the house for many years without losing a bundle of cash. I can understand how people want to refinance and lower their monthly payments.

  88. dinobuddy says:

    It used to be that credit card companies would treat people declaring bankruptcy like they had the plague. If you have your debts discharged in a chapter 7 bankruptcy, you can’t declare bankruptcy again for 8 years. Then one day, the credit card companies realized, “Hey…if they get a chapter 7 discharge, they can’t do it again for 8 years!”

    THAT is the kind of customer they’re looking for. One who can’t “weasel out” of paying.

  89. Zephyr7 says:

    When did paying off debt become the main indicator of financial stability? Perhaps that’s another reason for the growth of debt in the last decades.

    I moved to the US a couple years ago. I was used to saving money and not spending what I don’t have, but when I wanted to get a home loan, I was forced to acquire two credit cards to start a “credit score and history”. My good income and history of using my savings to pay for purchases didn’t help much at all. So dependency on debt & credit cards has been institutionalized.

  90. joellevand says:

    Let me tell a little tale…5 years ago, I got divorced and ended up with $30,000 in outstanding debt myself:

    Credit Cards: $10,000
    Student Loans: $20,000
    Plus some unpaid utilities.

    The ex defaulted me in court and left me high and dry with the responsibilities.

    Today, I’ve paid down all but $2k of that debt.

    1. I swallowed my pride, admitted I should have lawyered up instead of trying to handle the situation amicably, and immediately moved in with friends, then back with family, and threw all pay checks at the debt.

    Since I still have some outstanding debt, my new husband and I are renters, not buyers. Yes, as everyone keeps telling me, this is a buyer’s market and “everyone owns a home” but here’s the thing…we can’t. My credit has 2 years to go before the last of the debt rolls off, and I still have $2000 to pay off, which means our interest rate over the life of even a 15 year mortgage would probably result in us spending more money by buying now than in two years, when we can get a better APR.

    I mean, DUH, right?

    Meanwhile, I know two recent divorcees at my work who are home owners and keep tapping that equity to pay for bigger TVs and better, newer cars. Recession-smeshion and all.

    So excuse me if I don’t blame the banks for this woman’s financial situation.

    Also, I believe based not only on my own experience but those of others here that we need a 12 step program for debt addicts.

    Step One: Admit you have a problem.

    Step Two: Admit you (at least partially) are responsible for the problem.

    Etc…

  91. ChuckECheese says:

    @pastabatman: Thank you for your list.

    After I read the article, it became clear that the reason the banks are handing out so much credit is because of the fees they can collect. Whether a mortgage or credit card, they make their money mainly from fees. It’s all the better for them if they can then pass the actual note on to somebody else (as an “investment”).

    How nice of the Times to find somebody willing to be an example of the exception to the rule for debt in this country. The main reasons, as discovered by people who actually study these things, are that the nature and the cost of essentials has changed dramatically in the past generation or 2. Some examples: Housing takes a much larger chunk of our incomes; insurance is now a major expense, when 30 years ago it cost next to nothing; health, car and child care expenses are outrageous; and wages haven’t increased for most Americans in about 30 years.

    As a couple students have mentioned here already, the cost of education is ridiculously high, considering what wages are. 40 years ago, it was absolutely possible to work at a minimum-wage job or 2, and pay your living costs and tuition. Not anymore. You’d need to make at least $35,000 a year to swing it now. What is really going on here is that the distribution of income has changed in this country in the past 30 years, and not for the better.

    Jobs are less secure and losing a job means you will become poor fast, given the cost of living and the number of things that one needs in order to get along.

    The book The Two-Income Trap makes all this clear, and also makes the point that people don’t go bankrupt buying iPods or clothes (Americans actually spend a smaller % of their income on clothing now than they used to). Frankly, it wasn’t much of a sacrifice for my parents’ generation to obtain the things they (and I as a child) had. My father’s income was enough to support a wife, 7 children, a house, and 2 cars. And it wasn’t an extraordinary income either.

  92. sean77 says:

    @EtoilePB:

    without a college education, you only get low-paying jobs and stall out on the career track,

    You’ve been lied to. If you spent 4 years gaining experience working in your field instead of 4 years racking up debt in college, not only would you be better off financially, but you’d have better job prospects.

    Experience trumps a college degree nearly every time.

  93. u1itn0w2day says:

    The@james: the mortgage refi is confusing.

    This brings up another problem,people including the professionals ASSume things will automatically go up or appreciate.That is a big fallacy.

    In her case the higher interest might have better but on the other hand some of these real estate prices will take more than decade to go back up.Even governments who based their taxes/budgets on high real estate values FAILED on this one.All that you have to do is ask yourself where the heck is the money coming from?

    I saw first hand what happend in a real estate bubble market,the politicians not only became dependent on the high taxes financially but they also became elitist actually trying to price out the average population through genderfication,code compliance or initating stupid useless ordinances.Where the heck is this money coming from? that’s all anyone had to ask.

    If prices rose or appreciated all the time that would be infinate inflation.The free marketers who talk about market corrections are right on this one anyway-the markets will correct themselves and should correct themselves.

  94. Imaginary_Friend says:

    @Gizmosmonster: Well said!

    @johnfrombrooklyn: I’m not saying you should have sympathy for them (but a little less venom would be nice); you should, however, direct a great deal of righteous anger towards the dipshits who approved en masse their subprime loans and, as a result, pushed our economy down the toilet. They’ve profited immensely at all of our expense; they get bailouts while we, hardworking, honest Americans, are left holding the bag.

  95. sean77 says:

    @Imaginary_Friend:

    In the words of the legendary Billie Jean, “Fair is fair”.

    Ironic that you’d use that quote. The movie is about the lengths a woman goes to to collect money owed to her.

    “Fair is fair” means that you should pay off your debts.

  96. Imaginary_Friend says:

    @joellevand: You should. If the banks were doing their job, these serial refinancers would never have been approved.

  97. Sugarless says:

    @coan_net: And what do you say to the people who do those things, but still can’t significantly decrease their cc debt because the banks keep increasing the interest rate, changing the due date and adding fees?
    While I agree people have to be responsible, I also agree that the banks aren’t really interested in people paying off their debt based on their behavior.
    Or what about those that lost their jobs or have medical emergencies to pay?

  98. Xay says:

    @sean77: In what field?

  99. Sugarless says:

    @sean77: Experience does not always trump a college degree. And more and more jobs are either requiring it for employment or expecting it in order to get promoted.

  100. JustThatGuy3 says:

    @dragonvpm:

    Yeah, this has always bugged me about the “lease!/don’t lease!” debate – people need to keep it apples to apples.

    Leasing can be (not is, but can be) a good idea if you were going to buy a new car anyway. In that case, looking at the economics of leasing vs. buying makes sense, because all you’re saying is “what’s the cheapest way for me to get car X.”

    If you’re looking at leasing new vs. buying used, you’re really comparing apples to oranges, though.

  101. JustThatGuy3 says:

    @sean77:

    Except for all the fields you can’t even get hired into without a college degree.

  102. Imaginary_Friend says:

    @sean77: True, after being almost raped by a nasty, greedy, older man who had no qualms about lying to the authorities to maintain his position of privilege… much like the unscrupulous bankers who got us into this mess.

    “Fair is fair” does mean the borrowers should have to pay off their debt, but so too should the lenders — without taxpayer bailouts or charging usurious interest rates to clients that should never have been approved for such large loans in the first place.

  103. JustThatGuy3 says:

    @sean77:

    The data don’t support your conclusion, by the way. On average, people with a bachelor’s degree (not including people with more advanced education) earn more than 50% more than people with only a high school diploma.

    [en.wikipedia.org]

  104. kellsbells says:

    @dragonvpm: My parents gave me a set amount and said that they’d pay that much, no more. I went to a ridiculously cheap state school that kept me under that threshold ($4500/year, I think) and worked to pay for food.

  105. EyeHeartPie says:

    @sean77:
    Yeah…that doesn’t hold for all fields. Maybe in some fields. However, no aerospace company will even accept your resume unless you have at least a bachelor’s degree.

    Now, I have a steady job and am completely debt free 6 months after graduating school. 2 main reasons were that I went to a cheap (but good) state school with a 3.5k-4k tuition a semester, and that my parents were able to pay a good chunk of my schooling costs, and I could cover most of the rest. That being said, I am profoundly thankful that my parents paid a large portion of my school tuition. No way I would be in the situation I am in without their help, and I completely intend to repay their kindness when they reach retirement age. I especially feel thankful after reading stories like this, and some of the comments on this story.

    On the other hand, one of my coworkers is $15k-20k in credit card debt (not counting student loans), and he still talks about the trip he is taking to Vegas next month, and about how he stayed in a Hilton hotel for $150 a night when visiting a city where he had family. That is the kind of spending that characterizes Americans now, and that is much of the problem. Banks have a hand in it, but so do the consumers. However, this site is called The Consumerist, so we don’t like blaming the consumers, even when it is their fault.

  106. Etoiles says:

    @sean77: Until you stall out.

    Every organization I have worked for so far will not hire anyone without a BA. And the rare people who have worked there without degrees — usually folks who temped in (same way I did, at my last job) — are denied promotions past a certain level, because of their absences of diplomas.

    Does every job in the country take a degree? No. Do you necessarily use those degrees for everything? No. But in many cases they’re simply mandatory.

  107. picardia says:

    @sean77: Not so much if you want to be a doctor, lawyer, accountant, etc.

    The woman in this article was definitely irresponsible in the extreme; I’m not entirely sympathetic to her. This does not extend to the point of letting the credit card people and banks off the hook. It’s these gougetastic credit cards and loans, done to maximize bank profit, that turn individual people’s irresponsibility into the huge social problem that ALL of us have to deal with, responsible or not.

  108. plasticredtophat says:

    hmm, my first credit card when I was 17, almost 18. I got it so I could have credit, a Capital one card for 200 bucks. I think that company will through a card at anyone! But I learned the Hard way, why not to have credit card debt, and Im still working my self out.

  109. plasticredtophat says:

    THE HARD WAY! heheh

  110. plasticredtophat says:

    @kellsbells: Wow, your lucky your parents paid! Im 22, with two kids, and they decided not to help me out, but they paid for my brother school completely! And he fricken dropped out, because He’s an idiot! I get good grades, and ERGH!

  111. plasticredtophat says:

    @sean77: My husband, who dropped out to support us at age 16, joined the military for 3 years, and Now hes a Correctional Officer, and in national guard. He makes more money then all of the college grads from my grade, and has better benifits. He does have some college credits, from taking courses while in Iraq. But thats obviously not true in all cases…

  112. barty says:

    @Zephyr7: You can get a home loan without a credit history, but it is an inconvenience to the lender, so they don’t bother telling most people that it is possible. However this almost always entails coming to the table with cash, probably 15-20% of the purchase price too. But if you don’t get sucked into making car payments, paying on credit cards, etc., coming up with that money is that much easier.

    @dragonvpm: In state tuition at a state school. Not as glamorous as a private school, but unless you’re thinking Ivy League or something similar, the quality of education at most private schools isn’t worth the price premium unless you have very high career goals, such as sitting on the Supreme Court or something to that effect. Sean77 is partially correct, but only that after you get a job AFTER college, does the experience start to matter more than the degree. Should you wish to pursue another job in 10 years, its likely that a future employer won’t even really care that you have one, apart from checking off the box under “required for this position”.

  113. ellastar says:

    @loquaciousmusic: Automatic transfer from my checking account to my savings account once a week. I had it at $25 a week, but changed it to $50 because I wanted to save more. So now I’ll be saving about $200 a month. It’s easy and I forget about it. It’s a little less than 20% of my income. Considering over half of my income goes to rent, I think I’m doing somewhat well, if not entirely well.

  114. sean77 says:

    @JustThatGuy3: Your data is correlative, not causative.

    You should compare starting salaries for companies that require a degree versus companies that don’t for the same job.

    A lot of job listings say “Bachelor’s Degree or equivalent experience required”. If a guy gets that job based on experience and later gets a degree, will he get a 50% raise?

  115. pal003 says:

    It happens too often right now – everything is going well, you buy a house, have a great paying job – then WHAM!

    You lose your job, must pay your COBRA with CC because it is now over $1000/month. Your unemployment is only $300 week – cannot pay the mortgage, utilities, – cannot sell your house in the current housing market because of Greedy Wall Street investors.

    Or you become sick and find out that your Health Insurance is denying the expensive need-it-to-live treatment so you end up with huge medical debt. See SICKO for this too-often scenario.

    It’s not always about shopping.

  116. kellsbells says:

    @plasticredtophat: I am very lucky. My parents made the exact same pitch to all of my siblings. Some chose military academies, and my parents bought them a car instead. Others chose private schools, and they had to supplement their tuition.
    I can’t believe your parents would pull that on you. I am sorry.
    Right when I was learning to drive, my dad told me something: “I have paid cash for every car I’ve ever bought.” He’s never bought a new car, but he’s always had clean cars that ran and suited our needs. As of today, I too have paid cash for every car I’ve bought. No payments necessary. A little painful at the time, but well worth it.

  117. Breach says:

    Americans love their false “high” lives, all paid for with their souls and time to afford the payments, until that one thing happens that derails their lives and fake living beyond their means.

    I only have debt from my school loans, my (cheap) car, and some from outstanding medical bills that I had put on my credit card so I could pay it off on my own time. Even the fact I have necessary debt sickens me, let alone spending on things I dont really need.

  118. sean77 says:

    Here’s some more correlative data: “The average net worth of Forbes 400 members without a college degree is 6.6% higher than members with a degree.”

  119. Cap'n Jack says:

    Current banking practices being what they are, I think that individual debt and foreclosures would be less of a problem if banks could LEND RESPONSIBLY.

    I’m tired of the banking industry blaming it all on the consumer. Here you have the top lenders in the country, begging for government handouts because the companies they own used unethical (or, in some cases, fraudulent) lending practices. With the other hand, they pull the rug out from under consumers who got in over their head due to increasing fees, APRs, refinancing terms, and loan officers who falsified income amounts on loan applications.

    At no point did these lenders take the time to correctly educate the consumer on how to effectively manage and pay off their debts. Instead, they saw an opportunity to make more money off of the middle and lower class through jacked-up interest rates and foreclosures. And, as we’ve seen, if the industry doesn’t take any responsibility in educating their customers, the industry as a whole suffers.

    And thus I submit to you: our economic crisis, not caused by Iraq or oil, but by greedy investors and bankers who tricked, trapped, and profited off of the working man.

  120. Youthier says:

    @plasticredtophat: Yes, but you just said that you are 22. Your college grad classmates are at the entry level and depending on the industry, they may have lots of opportunities and a tall ladder available to climb. Your husband may not get as many upward growth opportunities so you may not be able to say this in 10 years.

    I hope that doesn’t come off bitchy because I really wish prosperity for all hard-working people.

    @sean77: That’s a nice statistic but it’s not very practical. These aren’t the people that walk among us everyday. These are people that either invented something huge, inheirted a great deal of wealth, or are celebrities. This is not the average American.

  121. Cap'n Jack says:

    @sean77: Sorry, but that is only true for a few people who are smart enough to excel in a career without education. There’s lots of people around me who, like me, don’t have a college degree. Yet, I am the only uneducated person in the office that has excelled in my career while they are stagnant.

    EtoilePB is right, for the most part, but this is another way banks and corporations have learned how to control our society and profit from our hard work. You are told that you can’t possibly succeed and get that white house with the picket fence, unless you go to college. So after spending $80k to $300k, you’ve become an indentured servant in America and have to pay off that debt for the next 10 years, plus any other credit card debt you incurred while in college. And since most people don’t work full time while in school, you’ll surely have about $10k to $20k in credit card debt.

    So instead of just starting from $0 and financing that car, house, and TV that you want, you’re starting out of college about $150k to $350k in the hole. And the banks love that because you’ve been paying them interest all this time. Hooray for capitalism!

  122. Marshfield says:

    To quote the Clinton campaign slogan “It’s the economy, stupid!”

    Our economy is based on growth, the stock market is geared to growth, and all the advertising is geared to getting people to buy buy buy. Ending is better than mending (Brave New World). Consumer confidence numbers are broadcast on the TV and radio news.

    All that is fueled by credit spending. If we had to live on what we make day in and out, the economy would take a big hit. People wouldn’t save for luxuries as much, (like a 50″ plasma TV), they’d get by on less.

    You can’t have it both ways – a nation of savers, or a nation of spenders. Pick one.

    Our economy seems to prefer a nation of spenders.

  123. sean77 says:

    @Cap’n Jack: that’s true, but that’s sort of my point. It’s not the degree, it’s the person. That’s what I mean when I say those stats are correlative.

    Colleges trumpet the statistic that, over their lifetimes, college graduates earn more than nongraduates, but that’s terribly misleading. You could lock the collegebound in a closet for four years, and they’d still go on to earn more than the pool of non-collegebound – they’re brighter, more motivated, and have better family connections.
    [chronicle.com]

    Don’t forget that the person I was initially replying to indicated that unless you go to college, you’re going to be working low pay entry level jobs. It’s just not true.

    I have over 10 years experience in my field (Senior Software Developer), I don’t even put education on my resume anymore.. 10 years of experience trumps any education I may or may not have. People who spent a lot of money and time to get their degree don’t like to hear that.

  124. SexierThanJesus says:

    Personally, it was unemployment and my own irresponsibility that did me in. My parents also never really taught me the basics of protecting your finances, so I lived off of my credit cards between jobs when I first moved out. The pressure to go to college also drove me to take out loans that I wasn’t even sure I wanted. It kills me, because I work in a field now that has nothing to do with what I went to school for, and I didn’t need a degree. (Hollywood, FTW!!) Haven gotten the financial ass-kicking I deserve, I’ve pretty much made it my mission to teach any children I have the basics of not getting in over your head, and always reading the fine print.

    Sure, I think the banks and CC companies are predatory, but the blame goes 50/50. They got me, and they got me good. However, I signed on the dotted line, not them, and I feel stupid for letting the companies I used to rail against get one over on me.

    Wow….I just sounded dangerously close to a libertarian there. I’m going to go dunk my head in the toilet now.

  125. @sean77:
    “You’ve been lied to. If you spent 4 years gaining experience working in your field instead of 4 years racking up debt in college, not only would you be better off financially, but you’d have better job prospects.

    Experience trumps a college degree nearly every time. “

    Good luck with that. I teach community college and my classrooms are FULL of adult learners who maxed out at a business that says, “We’d LOVE to promote you, but we require a BA to promote above this level.”

    Most people aren’t lucky enough to work somewhere small & personal enough to promote without very strict guidelines, if only to keep from getting sued for discrimination — because discrimination based on a college degree is allowable.

    Finish college now or go back to school in your late 30s when you’ve got three kids and a mortgage and are juggling night classes with a full time job, it’s up to you.

  126. ChuckECheese says:

    @plasticredtophat: Although I sympathize and agree with most of your posts here, I want to point out something in this post that really bugs me. It is increasingly become the case throughout the U.S. that if you want job security, a living wage, and benefits, you must become a cop (or something related). I want that to be clear to many people here, because I think it bodes very negatively for our nation that the military is one of the only routes to employment security.

    A small personal example: My roommate has a bachelor’s degree in history (paid for with military benefits), Army experience, and makes over $60,000 a year as a Federal marshal. His job isn’t, on a daily basis, particularly strenuous or dangerous, although it is on occasion. He has staggeringly generous benefits of all types, including even a clothing allowance, and when he travels for his frequent training junkets (always to resort cities), he stays in 4-star hotels/suites, has plenty of per diem cash, and a “corporate” (U.S. Gov’t) Amex card. And he’s 30 years old.

    The vast, vast majority of Americans who aren’t willing to work for the military just don’t have such generous opportunities available.

  127. BoomhauerTX says:

    Check out PBS’s “Secret History of the Credit Card”

    [www.pbs.org]

    Whole video is available online shows how it evolved from a difficult thing to get to an every day tool.

    A consultant came in the late 70′s / early 80s encouraging the minimum 3% payment to rack up long term money.

  128. EyeHeartPie says:

    @sean77:

    I have over 10 years experience in my field (Senior Software Developer), I don’t even put education on my resume anymore.. 10 years of experience trumps any education I may or may not have. People who spent a lot of money and time to get their degree don’t like to hear that.

    You can leave your education off your resume because NOW, you have 10 years experience. However, to get that job that gave you the 10 years of experience, could you have left your degree off? No. You got started with the degree, and now you can getter better and better jobs because of that initial push, which required a degree.

    Your outlook seems to be just an offshoot symptom of the same qualities being discussed in the comments here: instant gratification. You would rather have people not go to college and instead make money for 4 years. True, that person who goes to college and gets a degree may be worse off after 4 years of paying for school than someone who skipped college and worked for 4 years. However, down the line, who will be better off? The college grad will have more opportunities, and will almost certainly be better off down the line. Keep the big picture in mind, and a college education will always do you better than a measly 4 years working in a lower level job.

  129. battra92 says:

    @Zephyr7: That’s what I’d like to know.

    I have a charge card (which is paid off in full every month and basically is for convenience because I don’t want to carry cash.)

    I hate the fact that I’m basically supposed to be spending next month’s money and that’s normal.

  130. sean77 says:

    @EyeHeartPie: except that I don’t have a degree.

  131. EyeHeartPie says:

    @sean77: Ah. Well. Looks like you made me eat my words. :p

    Anyways, you are one of the exceptions. Also, that kind of thing is only possible in certain fields. Trying to find even an entry level job in aerospace without a BS is impossible.

  132. jayde_drag0n says:

    its not just an entitlement need that makes people persue debt. How aabout the student that has no money.. the need to eat can drive someone to use a credit card they can’t afford to pay off. its still not responsible.. but when you’re hungry you’re way more willing to be irresponsible

  133. veronykah says:

    @EtoilePB: I can’t agree with you more. I went to a private school and got absolutely NO help from my parents as far as paying for college. I graduated with $70,000 in debt. That was with scholarships, all the federal aid I could get and private loans. Now I pay $500/month in student loans. How would it be possible to do anything but pay those in addition to actually paying my day to day expenses when I am essentially at the bottom of the ladder when it comes to my profession?
    I was fortunately smart and paid off all my CCs before graduation, I drive a ’91 Celica, have a roommate and paid for tuition the last 2 years of school with cash. However, I STILL am deeply, ridiculously in debt with half of it being private loans with a 7% interest rate.
    I love when people make light of the fact that their education was paid for. “My parents made me work for EVERYTHING, but they did pay for school.” Like that is insignificant. I think everyday how different my life would be if I didn’t have a $70,000 albatross around my neck.

  134. dragonvpm says:

    @JustThatGuy3: For most people’s transportation needs the comparables are used vs new vs leased and invariably new and leased should lose out particularly if you have any requirements/desires beyond 4 wheels and a some seats. It’s not apples to because you’re comparing cars in your price range, perhaps it’s not a straight up look at 2 price tags comparison, but it’s not some hugely complicated endeavor either. Car manufacturers do a lot of work to convince people that they need to buy (or lease) a brand new car and then dealers do a really hard sell to get you to sign on the dotted line, but realistically used can be a great way to get a lot of car for very little money.

    @kellsbells: So you had around $18,000 in help from your folks just to go to a “ridiculously cheap state schoo”. If not for that, or if you were going to a more expensive school you wouldn’t just be getting into debt right now. I’m glad you’re folks were able to help, but not everyone has those benefits. I know my folks couldn’t have helped me at the time I was going to college and I’ve known quite a few people who had to make the decision to get into debt just to make it through school (even in your case, if you wanted to be a lawyer and you didn’t have help from your folks, or access to student loans now, you’d be SOL regardless of how frugal you were).

    @barty: WRT state schools vs private or ivy leagues… Let me just say that having a degree from some schools can mean that you can pretty much walk into any job you want before the ink is even dry on the diploma and as you get older it only gets better once you have a that degree AND experience. Is a college diploma required to make a good life for yourself? Absolutely not. Do some degrees make it a lot easier? Hell yes. I have friends who graduated with degrees that are completely unrelated to what they’re doing now and they were still able to benefit because they came from a school with that good of a reputation.

    It’s not fair, but it’s the way things are. Just like with anything in life though you do need to evaluate your purchases and you have to think twice before you pay $30k to go to random no-name private school. On the other hand, paying $30k to go to best school in your field, might be a good purchase. College, like everything else, is about making decisions based on actual value and sadly too many people don’t make those decisions properly or as well informed as they should be.

  135. veronykah says:

    @sean77: I agree with you about getting experience rather than going to school, at least in my career path. The problem with that is, by the time I realized I could have done that it was too late.
    Its nice to have 20/20 hindsight but telling me I was stupid for going to college doesn’t really help AFTER the fact.
    At this point, I just hope that all the people I went to school with will get jobs in my industry and maybe my education expenses will pay themselves off in the form of “hookups”.

  136. verdantpine says:

    @Stanwell: Assuming that someone has gotten in trouble because of medical or another major emergency, and they’re not just going nuts at the mall, I bet most of those people you deal with, who are behind on their mortgage, yet have no CC debt… have mistaken priorities.

    These are people who feel more pressure to pay off CC than their mortgage, and mistakenly put their CC at the top of their list, when it should be fourth. That pressure comes from poor financial education plus the persistent, even aggressive collectors working for collection agencies.

    We love to point fingers and say, “How dare you stop paying your CC! Bums!” when, in an emergency, some people DO have to make a choice. They would be better off keeping their homes and dealing with the consequences of unpaid credit cards. After all, if you don’t pay your mortgage or car loan, and go into default, your credit card company can use the default to hike up your rate as a “greater risk” anyway. Without a home or transportation to a job, though, it’s much harder to have the financial ability to pay off the debt.

    Because CC debt is unsecured, the collectors push much harder and will use every stunt under the sun to get you to pay it before everything else. Obviously, pay off your debt, but if you’re strapped, every American needs to know their priorities run like this: roof over your head (mortgage or rent), transportation that you need for your job, food to keep you alive, then student loans (because they can’t be discharged in bankruptcy) and then unsecured loans and debt after that.

    Someone upthread – a recent grad – mentioned not having any savings and planning to use their credit cards in an emergency – like I did. The problem is that if you lose your job, they can use that as an excuse to hike up your rate. Most credit cards can hike up your rate at any time they please. From experience, I promise it is worth it to start a small emergency fund – even one funded at first with $25 a month.

    I have to say I learned this the hard way – when I got out of school 10+ years ago, I had a small amount of credit card debt, but was making peanuts (a little more than $10,000 on the West Coast). If my minimum payment was $15, I’d scrounge up $50-70. I was much better off freezing the card, and paying minimum payments for a couple of years, and using the small difference to stockpile an emergency fund of $1000-2000, then accelerating my payoff of the loan. Instead, every time I had an emergency, I had nowhere to go but credit cards.

  137. RandomHookup says:

    @plasticredtophat: True, he’s ahead of the college graduates now, but the advantage will usually disappear over time. In the long run, the degree *usually* (but not always) pays off, it just takes longer to get started.

  138. alilz says:

    I was thinking after I made my post.

    The other thing that’s changed is our Iwas going to say society but I think it’s more economy is driven by credit and credit ratings.

    You can pay all your bills on time, own everything out right (or rent and own or not own a car) and not have access to certain things because you have no credit history.

    Jobs look at credit, landlords look at credit. ?Your credit score is king almost. What galls me beyond belief is that there’s no way to understand exactly how it’s figured because private companies hold that information. Equifax, etc.

    It’s not how much you have in savings that counts but what’s the biggest line of credit you can have access to.

    That’s become the benchmark of wealth.

    Which is where everything is screwed up

  139. Techguy1138 says:

    People here seem foolish in thinking that the older generation were better savers and just more responsible than us.

    Here is what has changed.

    Most secure well paying jobs require at least a college degree. 30 years ago you could learn a trade or work a factory and be on your way. Today you can expect to graduate with some kind of debt.

    Medical insurance is now a luxury. Medical insurance used to be seen as the obligation of the employer to keep their workforce employed. buying your own medical insurance will cost you around $300 + a month PLUS the cost of doctor co-pays and medicines.

    Retirement was taken care of. A pension was offered on most jobs and social security was a sure thing. Now you are lucky if your company offers a decent 401k, a pension is like hitting the lottery.

    Banks were regulated! This is the big point. That older generation wasn’t given credit because they would have spent it on booze and fancy cars. A bank would make sure that the assests that backed a loan were sufficient in value to cover the loan in the event of default. Banks were regulated in the sense that they needed to actually collect on the loans. If you were a bad risk you could not get credit, the older generation was forced to save for items. Currently banks are unconnected from the debt that they issue. They only want to make you the loan and sell it off to an unrelated 3rd party. Thus there is no incentive for banks to do due diligence. They accepted over inflated estimates of properties worth as collateral on loans.

    We are in this situation because the banks sought out bad risk on purpose. They created a new ‘instrument’ that absolved them at the local level from taking responsibility for bad loans. The previous generation would have done this if given the chance.

  140. stevejust says:

    The movie & book with the same name: “Maxed Out” explains exactly what happened, if people are interested in the real history of how this came to be. (The book moreso than the movie. One word: Citigroup.)

    [www.maxedoutmovie.com]

    Also, check out anything written by Harvard Law Professor Elizabeth Warren.

  141. varro says:

    @sean77: Forbes 400 members are like professional athletes and rock stars – exceptions that prove the rule.

  142. synergy says:

    I think “values” are dependent on how much a groups allows people to get away with. If everyone is getting irresponsible credit and those handing it out have no problems with it, everyone will do it regardless of their ability to pay it.

  143. xkevin108x says:

    Our oppressive taxes take away any incentive to save.

  144. meefer says:

    I had a scholarship to my college and I was thankful for every day I spent there. I even met the main funding family behind my scholarship.

    Graduated 100% debt free and have continued as such. Heck I live with my parents to save money faster for a house when the down cycle ends. I make more than enough to rent a place and even with a promotion I would stay where I am. I slip up a bit now and again in keeping with my personal savings schedule, but since coming into the workforce I never spend more in a month then I make. Ever. I have my little allowance for “luxuries” and I stay below that as much as possible.

  145. jblack says:

    I suppose it’s easy to blame people for making bad deals that ultimately debt-spiral out of control. What excuse would they have, if both you and I were smart enough to avoid bad deals? There are plenty of reasons.

    One thing to consider is that real income has been dropping for years. Those with jobs get raises that on average do not meet the rate of inflation. Those without, well, they find out the hard way that the new jobs available are low paying.

    Next, consider the complexity of debt agreements these days. These instruments are written in both long and complex language that exceeds the reading capability of many people. Avoiding language that one cannot understand when one’s child is going without is cold comfort indeed.

    Thirdly, the current socio-economic mess was complicated that many, but certainly not all, economists did not see it likely enough to ring alarm bells over. How, exactly, would someone making $24,000 a year with a GED going to figure something out that many with PHDs couldn’t?

    On top of all these things, important laws have changed in ways that do not benefit consumers. Arbitration is currently legal, Banks that incorporate in Delaware can take advantage of the bank-friendly courts for the state. Even the last refuge, bankruptcy, has been closed off for many people.

    Lastly, public schools do not do enough of their job when it comes to teaching our children how to live with financial responsibility. Younger people, not exactly known for thinking decades in advance, are being sucked into debt spirals practically as soon as the ink on their diploma is dry. Debt spirals that they may never get out of.

    I can understand how people fall into their trap. Youngsters, used to living within the assets that their 40-50 year old parents have accumulated, are trying to replicate the life they understand and are accustomed to. They understand having a computer to email with, and a cell phone to communicate with, and cars with power steering. Many of them probably have never lived the world in which the majority of their calories came from school lunch.

    Nobody should condone unwise behaviour. We can, however, understand it and attempt to modify the rules that our society runs by to avoid poor decisions.

    We can teach the poorly educated to feed their children from restaurant garbage cans. And the dumb ones? I suppose we can just euthanize them.

  146. Jevia says:

    Techguy – exactly. And back 30-40 years, the employer paid for health care and retirement. Now employees cover those payments themselves. That’s on top of inflation that has out-paced wages and crushing student loan debt. It is sickening that our government bails out the corporations that granted more and more unregulated debt, but not the average american.

  147. stevejust says:

    @BoomhauerTX: Great post. I’m glad that I now know what Andrew Kahr and Walter Wriston look like. Maybe I can pull a Bob Novak on them if I ever see them crossing K Street.

  148. stevejust says:

  149. dallasmay says:

    A: Republicans have been in charge for the past 14 years.

  150. Ilikenumbers says:

    @ all blaming “borrowers&consumers” in general

    Honestly, of course “we’re” to blame for all of this, considering nobody but me, myself, and I have to deal with the consequences. But there is such a thing as predatory lending, and with every jumbo, super jumbo, and variable rate home loan, the sharks got fatter and fatter.

    So-called professional banking institutions and real estate agents promise you that “they’ve never seen a rate adjust above a point or two over the first few years” and then when it goes from 5% to 9%, the loan was already sold and they are nowhere to be found. Character-based lending was once the model, and now we’re all stuck with the consequences.

    re: debt in general

    Debt, by and large, is a normal, healthy financial thing. Major companies have billions of dollars in payables while still being able to earn profits and satisfy their debts.

    As an individual, we owe it to ourselves to take out credit at an early age, paying the balance in full each month (while hopefully making healthy deposits into an IRA, 401k/403b, and cash savings). In case you “cash only” consumers haven’t noticed, credit scores rule your financial life, and while it is a dance with the devil for some, it is necesarry.

    Bottom line re: mortages. Once the SEC and the FHA fell down on the job regarding mortgage backed securities, their bond rating, etc, it was only a matter of time before “this” happened. All it takes is one area of the economy to suffer (in this case, energy) and boom, the whole sorry house falls down.

    The solution is a total overhaul of the energy markets, enacting fair, consistent regulation of the market as a whole (via standard setting, not windfall taxes), and pressure from the federal government on lenders to aggresively renegotaite all upside-down mortgages.

  151. econobiker says:

    @dragonvpm: Yes, banks used to make money from positive investments (loaning money for something & getting interest back or making money on the merchant fees from credit cards.)

    Now the banking people realized that there is more money in negative penalties such as over-limit credit limit fees, changing account debits to biggest first versus in order of presentation inorder to statistically bounce more debits, etc, etc.- than there is to be made making positive investments. So they then change the game around and also institute items like “bankruptcy reform”, credit card divisions in usurious states like South Dakota, etc…

  152. ShanghaiLil says:

    I’d throw in one more consideration (which may have been touched on — I confess I didn’t read all 150 comments in detail). I grew up with a single mother raising two kids on her own. We were, by any definition you use, poor. It took some time, and more than a few substantial mistakes, for me to figure out how much about handling money I didn’t know. Hell, juggling credit card debt when I was growing up would have been an ENORMOUS luxury. With the average consumer now being involved in quite a few complex financial transactions (rather than just a checking account, mortgage and maybe one credit card), I think we could probably do a much better job of educating kids about money management than we do. I mean, I’m 40 years old, and I’ve only just (and just barely) figured out how interest payments are calculated on a thirty-year fixed-rate mortgage. Ask me to do anything more complicated, such as calculating interest payments on a variable-rate mortgage, and I am absolutely certain that my head would explode.

    I have felt a certain amount of sympathy for many of the people now suffering through foreclosure, even when they’ve made apparently insane financial decisions, because I’m sure that a lot of them had not a clue what they were getting into, and regarded the banks’ having offered them a mortgage as proof that they could, in fact, afford it.

  153. Tom Hespos says:

    Alexis de Tocqueville observed in Democracy in America that Americans would rather be equal than free. This idea extends to our buying habits as well. It’s nothing new – the expression “keeping up with the Joneses” has been around since at least the 1920s.

    The difference is that with easy access to credit, many Americans now feel ENTITLED to keep up with the Joneses. I notice it quite a bit with the people around me. I’ll save to make a major purchase, and then my less-affluent friends buy the same thing on credit, regardless of whether or not they can really afford it. The underlying attitude seems to be, “Well, Tom did it, so why can’t I?”

    Why do you think that even in our advertising- and marketing-soaked culture, the #1 purchase motivator for almost every product category is the advice of a friend? Americans just don’t want to feel like they’re a step behind the people in their social circle. And that leaves irresponsible spenders in a bad spot.

    Sure, predatory lenders are partly to blame, but ultimate responsibility lies with Americans who don’t seem to care about how badly they’re getting ripped off by predatory lending institutions – until the bill comes.

    I once had a lot of credit card debt – living outside my means while I was struggling to get a startup off the ground. I made some silly decisions in favor of short-term gratification. Eventually, I paid it all off. I cut up every credit card I had (except for one, which I use for emergencies and pay in full every month). The choice is really simple. Don’t want to get ripped off? Then learn to delay gratification and DON’T carry a balance on your credit cards.

  154. WriterWriter says:

    It looks, from some of the comments here, that the reason so many people in the US are in debt to the eyeballs and going deeper every day is that the entirely refuse to take responsibility for their own spending and that they blame, blame, blame.

    I work in financial services in another country and my mantra to ALL my clients includes this advice:

    DO NOT APPLY for any more credit that you absolutely need.
    If you cannot pay all your credit off at the end of EVERY month, you are living above your means.
    Credit is NOT an extension of your income. It is a TEMPORARY aid – and expensive temporary aid.

    The rule of thumb is this:
    Never have more than 1/3 of your before tax income available as credit. If you make $60K annually, the maximum amount of available credit you should have must not exceed $20,000 (not including your mortgage)
    Do not use more than 1/3 of your available income. Based on $20K maximum, you should never have more than $7000 used at one time.

    PAY your cards IN FULL every month.

    If you can’t do this that is your HUGE LOUD WAKE UP CALL that you are spending WAY too much on stuff I guarantee you do not NEED.

    Know the difference between “I need it,” and “I want it.”
    You need a car. You do not NEED a brand new Mercedes. You need a home. You do not need a 15 bedroom mansion.

    Screw the “Joneses.”

  155. wee0x1B says:

    I can tell you why Americans are willing to go into debt: Because they know the Federal government will use tax money to bail them out if they happen to be living above their means. Because owning a house is a divine right, apparently.

    It doesn’t matter that you are upside down on that $500K house you bought with a negative amortization loan and you only earn $35K/year. Have a second or third mortgage? Not a problem. The Fed will happily steal money from those who do happen to be fiscally responsible and will make sure that no harm comes to your financially absurd lifestyle.

    What’s 30 billion dollars between friends? If they need to bail out more under-achievers, they can just raise my taxes.

  156. Albion01 says:

    Doesn’t bother me any. My fellow Americans are ignorant, selfish, and addicted to instant gratification. I have no sympathy. When the economy collapses I can fall back on the fact that I own everything and I can grow my own food. Let them eat sawdust bread as far as I’m concerned.

  157. dragon:ONE says:

    People should *NOT* be able to pay credit cards with credit cards.

    ‘Nuff said.

  158. mikemil828 says:

    //Why are Americans so willing to do this to themselves? The article explains that as few as 40 years ago, we were a thrifty nation full of “savers,” and that banks were focused on whether or not you could repay your loan and not the “fees” they could get from loans before they were sold to investors. We know that there were changes to the financial system. What happened to our values?//

    Well we kinda had things called ‘The great depression’ and ‘World War II’ which kinda made the so called ‘greatest generation’ a bunch of savers because they didn’t have a choice. Before the great depression, American didn’t really spend all that much different than we do now, heck it can be argued that they spent worse than we do now. Baby Boomers and beyond didn’t really have any truly major financial disasters in their time, so they have not developed the urge to save like older generations do.

    In other words American’s will only be thrifty in the face of starvation or annihilation and little else.

  159. Etoiles says:

    @WriterWriter: DO NOT APPLY for any more credit that you absolutely need.

    See, there’s part of the problem: with the technical exception of my student loans, I’ve never actually applied for or really sought out any credit in my life.

    My credit card (actually a superb one; thanks to my dad, I qualify for USAA) has increased its limit to $25,000 since I got it, without me doing much of anything. In fact, a little digging through their website recently demonstrated to me that they will always do it automatically, and you have to request yourself to make it stop.

    If I had responded to every credit card offer I have received in the mail since I turned 18, I am sure I would have at least 3 different $100,000 limit cards.

    Actually, come to think of it, the first credit card offer I remember receiving was when I was 13. Then once I graduated college, I started getting 3-7 offers daily for various student loans and consolidations.

    I never do anything with my junk mail but shred’n’toss, but I do think there is much irresponsible lending in the world. No sane company on earth should give an 18-year-old working 20 hours a week, at minimum wage, a $50,000 credit limit and yet I had several clamoring to do just that.

  160. knyghtryda says:

    @WriterWriter:
    I’m not sure if I’m in agreement with the credit limit thing, if only because having an extremely high credit limit and not using a lot of it also good for your credit. I use less than 5% of my credit, and thats only because the rest of it is sitting in a 0% credit card while the money that would be there to pay for it is sitting in a 3.3% savings account.

    That also brings up the point about carrying debt. Debt is not bad, debt + interest can be bad, and debt + interest + no savings is bad. I could be in $5000 debt right now, but if that $5k was at 0% interest while the money was in stocks making %7 interest (unlikely at this point in time…) then you know what, carrying that debt has done me well. Remember… you can’t make money without money.

  161. Jevia says:

    @WriterWriter: You need a home. You do not need a 15 bedroom mansion.

    Yeah, but the 3 bedroom home that my parents bought for one year’s salary is now costing me 2.5 times my family’s salary, which is twice that of my parents. When even 3 bedroom houses are considered a “luxury” something is wrong.

  162. endless says:

    why?

    because so far it has worked.

    banks have made out like bandits, and people get awesome new toys.

    the game is always fun till someone gets hurt.

  163. SinisterMatt says:

    @lchatburn:

    “Many people don’t see credit as a means to buy a big TV, but as a safety net against difficulty, be that: unemployment, lack of money for food, utilities or basic transportation, unexpected medical bills and many other problems that are easy to fix…”

    I respectfully disagree that you need a credit card for this purpose. Why can’t you use cash and set up a reserve? Okay, I’ll agree that until you have that reserve (say six months of expenses), by all means keep a credit card around, but once you get the reserve set up, ditch the card.

    Having a credit card as an emergency fund only makes sense if you reason that bad things MAY happen to you (and using a CC as a emergency fund doesn’t encourage saving anyways, but that’s another argument). If you take the attitude that bad things ARE GOING TO HAPPEN, and it’s only a matter of time, then saving cash is the more logical choice in the end (that, and you end up paying less in the event of a major problem). There is a subtle difference between the two.

    Anyway, I think that people are so willing to dig themselves into debt up to their eyeballs because it is so appealing. Having credit is seen as acceptable, even desirable. And, in the event that you borrow too much, there is always bankruptcy. Yeah, that erases everything. We can start fresh.

    I saw an ad on TV the other day for a dipstick lawyer here in Dallas/Fort Worth who advocated bankruptcy as a way out of credit. He made it appear desirable, as it would get rid of those pesky calls from the debt collectors. Declaring chapter 7 would make the consumer happy again. What made me nauseated and really angry about the whole thing is that he was “neglecting” to mention that in the process people who chose to go that route stand a good chance to lose their homes, not to mention the fact that their credit is messed up to high heaven for the next 7 years, if they chose to get more debt. Further, they will get higher interest rates on their mortgages, and so on. Does anyone else think that that is a really stupid philosophy to take?

    The destigmatization of bankruptcy (and even the outright encouragement of it) also has something to do with Americans willingness to take on staggering amounts of debt. When the perceived consequence of an action is removed, then reckless abandon usually follows.

    Cheers!

  164. SinisterMatt says:

    @Marshfield:

    China, I think, in my little knowledge of Beijing, could be correctly classified as a nation of savers. Many of them save like 50% of their checks (I may be wrong on that number). Look where it has gotten them.

    So, with all due respect, I don’t think that there is as big a disconnect between spending and saving as you mention. If the U.S. switched more to saving, it probably wouldn’t have as big an effect as might be imagined.

    Cheers!

  165. ChuckECheese says:

    Many Americans do not save because they cannot afford to. The basics are very cheap in China. Relative to prevailing wages, the basics are quite expensive in America. There is no cheap housing here, no really cheap food, no cheap transportation, no cheap services. As an aside, I have a friend from Paraguay who makes the point clear: In the U.S., plumbers and car repairmen do very well–how did that ever happen? In Paraguay she could hire a plumber or mechanic for a couple dollars and a bottle of cana. Here, a busted pipe or car problem can easily cost a few days’ wages. When I was a child, my parents purchased a 4-bedroom home on an acre for less than one year’s wages. Something has happened to the balance between the cost of living and wages in this country, something bad. We are more 3rd-worldish now. It is not a good idea to let the “market” decide all prices and compensation, unless you want to live like Mexico or Brazil.

  166. varro says:

    @SinisterMatt: This dipstick will tell people that they should have had a 6-month cushion in place – never mind the fact that the majority of them 1.) had medical debt either not covered or partially covered by insurance; 2.) were downsized/rightsized/happysized by their jobs and unable to find something equivalent; 3.) went through a divorce.

    Most people who go through bankruptcy DO NOT lose their homes, unless it was truly unaffordable in the first place. Chapter 13 bankruptcy is a good club to use against a mortgage lender who fails to work with a homeowner who fell behind but can make up the payments. (Mortgage lenders have abysmal customer service.

    Lenders generally look at the last *2* years, not 7, in determining creditworthiness. And a number of my former clients swear off all credit after they get their discharge.

    Looks like the “dipsticks” are people who always blame the OP and fail to realize that granting credit is a calculated risk for the creditor, not a sure thing. Countrywide, Bank of America, Chase, GMAC (and all the other companies the free-market libertarian dipsticks love to blame the customers of) make mistakes in granting credit – mistakes that the United States set up a bankruptcy system to take care of.

  167. barty says:

    @ChuckECheese: IMHO, it is a MYTH that it is impossible to save money in today’s society. Its just that most people don’t WANT to do it because it might mean driving a used $4000 car instead of a new $20k one. Or they’ve got to run off and buy an iPhone (the latest excess) instead of the cheap/free phone and just basic cell service. I could go on and on, but I think you get the picture. People just don’t want to live their wage.

    It is absolutely amazing how much further your paycheck goes when you’re not making payments on lifestyle purchases. Even if my wife and I were to live solely on one income, my we’d still clear about $800 a month because we have NO debt outside our mortgage. But within a matter of a year it would be possible for someone in my position to have enough money put away to cover a big car or home repair. Better yet, people need to take advantage of the times they have two incomes coming in and put savings ahead of trying to buy every neat gadget that comes out each year. Once you’ve got a decent cushion to lean on in an emergency, it suddenly makes the credit cards less necessary.

  168. shifuimam says:

    @barty: That’s about it. I know people who make less than $35,000 a year and are living comfortably. Why? Because they live in cities where the average price of a home isn’t $500,000. They drive used cars. They don’t have cable TV or high-end cell phone plans.

    I’ve been living cash-only since the day I turned 18. I still use my single credit card, since I get cash back and it allows me to easily track and categorize my purchases via Mint.com. I’ve never had a dime of debt in my life, and at 24 years old, I’m well on my way to making a 20% down payment on a home in the town where I’m living.

    It certainly is partially the fault of predatory lending practices, but that’s almost like saying it’s the fault of the cocaine dealer than a guy found himself addicted to coke. Diane McLeod never should have applied for a $135,000 mortgage if she didn’t have the money to make a worthy down payment. Nobody forced her to pick up the phone and start calling banks until she got approved for a mortgage.

    As far as having more credit than you need goes: if you’re incapable of not maxing out your credit card, don’t have a credit card. Period. Otherwise, more credit is better – if your spending habits remain static regardless of limit increases, you’ll be spending a smaller percentage of your limit every month.

    It amazes me that people still haven’t figured this shit out. You don’t need to live in San Francisco, Seattle, or Chicago. You don’t need a new (or even mostly-new) car. You don’t need to be spending $200 a month just on entertainment resources (internet, television, phone, etc.).

    This crap about how it’s more difficult than before to find a job that provides insurance and retirement plans is total bullshit. More and more retail employers with hourly positions are starting to provide benefits to their retail-level employees. There are independent insurance plans available if your medical expenses are enough to require such a thing. You can get a traditional (tax-deferred) IRA if you don’t have a 401(k). You have options – take responsibility for your own life and quit passing the blame onto anyone but yourself.

  169. SinisterMatt says:

    @varro:

    It seems to me that my post comes off as condemning bankruptcy straight up all across the board. That was not my intention. Bankruptcy is there for a reason, as sometimes that is the only way out of a difficult situation (I’m not talking about those cases). But many times it is abused. There is a mentality that if people get into trouble then bankruptcy is the net that saves them from their irresponsible spending habits. Bankruptcy does really have consequences. It’s not the clean slate that some make it out to be. It appeared that the lawyer I saw was advocating that kind of thing, which is unethical at best.

    I would be willing to bet that some bankruptcies could be avoided if a person worked to get out of the mess they’ve created. That’s not a blame the OP attitude, that’s one advocating personal responsibility and honestly assessing one’s situation.

    @ChuckECheese:

    Ah, but it seems to me that you are assuming that they make American wages, when the vast amount of the populace makes much less than what we consider minimum wage. If that were true, then yes, my statement would be a little dubious.

    However, the general populace does make less than we do here. Saving is not an indication of a surplus of money, but it’s a cultural thing with them.

    Cheers!

  170. DarleneTuditanus says:

    I don’t think it’s a question of values, I think it’s a question of education. Students graduate high school without the slightest idea of what awaits them in terms of credit and debt. Most of them don’t even know what an income statement or balance sheet is. Why do we have such a financially illiterate populace here in the U.S. and what can be done about it? HYPERLINK “http://www.projectlibertyutah.blogspot.com/”www.projectlibertyutah.blogspot.com

    Corey Ann Curwick

    President

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  171. crashfrog says:

    Why debt? When punk kids drive over to my neighborhood and knock out two of my car windows with a baseball bat, somebody has to pay for the replacement, and it certainly isn’t them, and since it’s under the deductible on my policy my insurance isn’t going to pay for it.

    People have unexpected expenses, and if they could pay down the debt in any realistic time in the face of predatory interest rates and fee structures, they probably wouldn’t have had to put it on the card in the first place.

    The simple fact is that a lot of people are living hand-to-mouth, month-to-month, not because of bad choices but because everything but wages has skyrocketed in past decades. I remember in high school they told us never to spend more than 10% of your monthly paycheck on housing. What a joke! At anything under 10 an hour you wouldn’t be able to rent a cardboard box for that.

  172. barty says:

    @crashfrog: Frankly, its all just excuses. People either have lifestyle problems or income problems. There are VERY few people in this country who aren’t capable of addressing either, they just have to show some initiative and motivation to make it happen. Sitting around going “woe is me” is why most people live paycheck to paycheck. They won’t go out and learn a skill, get some education (or squandered what education they had) or get a 2nd job to attack the debts they have to get them out of the way.

    Actually $10/hr comes out to $1600 gross a month and someone in that situation is probably going to owe next to nothing in taxes. While its not alot, someone could put a roof over their head, provide themselves with basic transportation and food on the table for THEMSELVES with that much money. Yes, it would be tight, but it is possible. People just make the mistake of thinking they can raise kids on that much money and there are too many apologists out there that try to blame the problem on everything else except for the people making the dumb decisions.

    I forget who said it, but everything that happens to you, 10% is your environment, society, etc., and 90% are the choices and actions YOU take as an individual. That’s why I’m not so quick to excuse a vast majority of people for the situations they are in. Generally speaking, most people made the bed they sleep in, so to speak.