December 01, 2004

• We racked up $41K in unsecured debt. It wasn't luxuries, it was lazy money management. We worked to pay it down over two years, then the $18,000 hospital bill came. We had to declare Chapter 13. I have to say it was the best decision we ever made. Ironically after we filed we got a letter from the hospital saying that they bumped the debt down to $7000 as a charity case. Though we found some health insurance, I do wish we lived in Canada or Europe where medical debt is an absurdity.
• I owe around $40,000. Debt is the motivating factor in my life, and I despise it. I'm working with a Credit Service who've bought out my debt, and now I'm paying them $700 a month for the next 6 years. Because my money comes in erratically, I've spent the day avoiding my landlady because I can't cover my rent. I can get it to her tomorrow because I have a client in the afternoon, and that'll top up what I've made in the last few days to the $800 I need for rent. It's why I'm off the prescription I need to help with my fibromyalgia, and another that helps me sleep - I can't afford to pay for them. Nobody had a gun to my head to make me borrow student loans, or run up my Visa with the basic costs of living I couldn't quite cover with a crappy office job in a big city. Still. All I can say is I'm glad I am able to do something that lets me pay down my consolidated debt. Sometimes I'll make $1,800 in a couple of days; other times I won't make a dime for two weeks, but at least the possibility is there of making as much money as is made available by the market and luck, unlike a job with fixed hours and a set low wage. There's NO way I could pay my debt down with an office or cafe job.
• I use plastic only when it's more convenient than carrying cash, or when getting some big item. Otherwise, I prefer to pay in full. This means I have to carefully plan any expense, but not having lots of small debts gets me some peace of mind. Still, even with a day job and freelancing gigs, with longer workdays and weekends being just time to replenish energies, paychecks look smaller month by month... Saving? Investing? Ha! Basically just swimming to remain in the same place. My only vices are CDs, movies and light entertainment. I'm single. And still fear the event that'll throw me into debt: a family emergency, the possibility of settling down with somebody, and the financial pressure this will ensue. My family never approved of being in debt. This meant we had some lean times, eating out was an unusual event, but we always had shelter, food on the table and clean clothes. Today, I caress my fruit-label computer and wear down the remote looking for something in the 200 channels that'll ease my mind off the uncertainity of tomorrow's financial safety. I should save. I should invest wisely. I should be a little more frugal. Mhhh. Got to think about it. A nice cup of global chocolate coffee would help me... /goes off to do his duty as consumer
• I have a motgage. Sometimes I wish I only had $40k in debt 8). The debt I *do* resent is national debt, because a bunch of people voted for it before I was able to, and now it's what my taxes get pissed away on. Most of that debt was racked up by a couple of generations voting themselves subsidised homeloans, government allowances for having children, fat retirement provisions, and a massively subsidised economy to keep themselves in cushy jobs. Now that they've lost interest in everything except fat retirement packages, healthcare, and low taxes, they vote to drive down the benefits they were so happy to enjoy, while puring their income into, eg, driving up property prices by collecting houses for their investment portifolio. Not that I'm bitter, mind.
• $25k in university loans, and I haven't even left yet. On the other hand, I've also received $9k in bursaries and scholarships, and have had $3k of the loans forgiven already. I'm resigned to not owning a car for quite a while, and I plan to avoid a house for as long as possible, even though renting is a fool's game in the long term. Essentially, I'll be okay so long as no major emergencies come down the pipe. Of course, you never see the emergencies coming. I imagine a lot of my friends are in the same position.
• I'm looking at $60-70k in student loans when I get out of school. Compared to that, dropping $200 on a new camera doesn't seem so bad. Rainy day fund? Hah!
• I don't have any substantial debt (little to the parents, but that's all). And I don't have any college debt for two reasons: a) my father does pretty well for himself. While he doesn't make six figures, he makes enough. b) fortunately, one of the best schools in the nation for computer engineering is a state school. So tuition + housing was around $12k a year. Right now I'm trying to live on $15k while I'm in grad school, and it's tough. I'm at an equilibrium point right now -- I have some money in the bank, but mostly spend as much each month as I earn. A little credit card debt, but I could easily pay it off with what I have in my checking account, so I don't worry. I make a lot of sacrifices. I haven't bought new clothes in probably 3 years. Although I'd like a TV, I can't afford it right now. I could use more stuff for my apartment (shelves, lamp, chairs), but I made do with overturned boxes. I have a car but sometimes an entire week will go by between uses (I ride the bus and walk a lot). And I love to drink and eat out, but sometimes I only have two beers or a desert because it is a tight month. I think I've done pretty well prioritizing my needs, and making do with what I have. I know that a large portion of America is in debt, but I have a hard time imagining what it must feel like. I spend an endless amount of time obsessing over my finances in order to stay in the black. I don't know how people can just let themselves go.
• Right out of college, I was $20K in debt. Fortunately/unfortunately, I couldn't find a job in the field I wanted to go into (writing), so I turned my crappy part-time retail job into a crappy full-time retail job. So I had enough money that the debt didn't escalate, but it didn't go away either. And I stopped buying niceties. Then I met a girl. We fell in love. Her rich dad co-signed on a house for us. The girl eventually went away, but I held onto the house. And it went up in value. And I didn't buy any niceties. Then I met another girl. We fell in love. I refinanced my house, cashed out, and paid off my debt. I quit my crappy full-time retail job to become a crappy full-time freelance writer. The money is running out, but the girl has a good job and is going to support both of us. Now we're getting married. And I still don't buy any niceties. The moral: Don't stare at the sun because you'll go blind. And don't buy any niceties.
• I spent too much money when I was younger. Bought a car that was too expensive, and had to stretch it out into a 5-year loan with lots of interest to afford it, got a few speeding tickets and watched my insurance triple in a year. Then I got smart- switched jobs for a small pay increase, and I left my cushy apartment and moved into a cheap house w/ 3 roommates (who drive me nuts, but it's $500 cheaper...). Stopped buying clothes, learned to cook, so I ate out less. The car's almost paid off (way early so I save thousands in interest), and the speeding tickets are just starting to roll off my record. But don't even talk to me about buying a house. That just seems like some kind of distant impossibility. I feel like I'm more likely to walk on the moon than to raise enough money for a house.
• After taking 6-9 months longer than we hoped/expected to sell our house, and with one or the other of us out of work since Feb 2003, we have credit card debt and some debt to my husband's parents (much more forgiving than Visa). Even at the highest, it's less than the numbers you guys are citing: we were under $30K, not counting the mortgage. Thank $DEITY we made enough on the house to cover a 1600-mile move and the mortgage/rent combo. I don't know what the tax numbers for 2004 will do to that, though. When I find a job we'll have cash to burn--and once we pay off the remainder of our debt, it'll mostly go into savings and retirement funds. My husband and I are both in our late 30s, so we graduated from college before the days of student loans o'doom. If we'd had student loans to pay off, we'd have been seriously hosed. As it is, we pared back on buying any niceties for the last two years, and we've been OK. One of the things I learned the last time I was broke, after I got divorced, was that if you're not carrying cash, you should buy on Amex or another card that forces you to pay at the end of the month. It keeps you honest, and allows you to reserve the credit card for emergencies like the hospital, or being out of work for a year.
• I've just come off the worst unemployment experience of my life, with the resultant debt to pay off. It's left me very bitter against corporations and this country's government and now that I have money to spend, other than servicing my debts I intend to hoard every damn penny I make rather than release it back into the economy. Then when I've saved enough, I'm going back to school, finishing off my education and getting the hell out of this 'endentured servitude' nation. So much about this place and it's people is hypocritical and the way companies are allowed to rope citizens into endless debt is, quite frankly, criminal, among many, many other anti-societal policies and practices. If VISA, Mastercard, etc. were all to go belly up tomorrow, I think there would be more dancing in the streets than persons lamenting lost opportunities to 'spend, spend, spend'. So, my words to you: Boycott the U.S., whether you be citizen or foreigner. You will be doing civilization a favor.
• I have 16k in student loans, which I consider good debt, and 2k in credit cards, though a lot of that is for books for school. Still, I cut out using my full credit card lineup, payed all of them off except for the one, and now am slowly chipping away at what's left.
• Student loans, pah, I see your 40k and raise you a 700k mortgage...
• I don't count my mortagage as a debt, since with the increases in property values, my house is worth more than the loan. My divorce, however, just cost me about $10K in legal fees. Couple that with an agressive vehicle loan and some back taxes owing, and it's going to be pretty lean around here for a while. I'm very disciplined with the credit card, so at least my debts don't charge 20%-30% interest (which should be criminal, given that bank prime rates are so low)
• Yeah, but all of you homeowners remember that you've got an asset to put against that debt- those of us who are trying to get off the starting blocks already in debt are finding it hard to get an 'in'. I've an £11k student loan and £3k in credit card debts- most of the latter from the 6mths of unemployment between uni and my first 'real' job. (roughly 27k USD) So to answer HawthorneWingo, yep, it's not just you lot who are having financial worries...
• Your house is very much a debt, first while your house may have appreciated so have all the others in the area so to cash out you'd have to move away from the area you currently live in, or sell and then rent. Which depending on your career may or may not be possible. Secondly a lot of people have adjustable rate mortgages. Picture the scene, interest rates continue to rise (as they have to, and has been stated by Mr Greenspan) the bottom falls out of the housing market (and that can happen very quickly) and all of a sudden you have negative equity in the house, owing more than it's worth, but you have to sell because you can no longer make the payments as your adjustable mortgage just got too expensive. Lock in those rates folks, and if you have an interest only mortgage don't just pay the interest, make extra payments and pay some principal down.
• I after finishing grad school, I was about $42k in debt from student loans. After 6 years, I am still $37k in student loan debt. I've tried to pay consistently, but my monthly payments are $625, so I have had to take deferments, and now I am on a reduced payment program. I work in the non-profit sector, so it's not like I am ever going to score that lucrative high-paying position where I can aggressively pay down this debt. Last year, I read an article (I think in The Nation)about a movement to have the government forgive student loan debt. If you think about it, it would be a far better boon to the economy than most tax cuts. It would certainly directly benefit middle and lower class people. And as I recall, forgiving all student loan debt in the nation would have cost less than the Bush tax cuts. I've been trying to track down more information on this, but can't find the original article. I would love to see this become part of a candidate platform in 08.
• Anybody else wishing that high schools would offer a class to all juniors and seniors that showed how credit worked, how to budget, and how to plan for retirement? And while I managed to avoid college debt and get a Master's through through work and a state school (again, granted before the big escalations in price), the spouse went back for his masters and... cha ching, $20k even after a scholarship and him paying $15 while attending. yeowch. meanwhile, for those of you looking for that first foot in the door to home ownership, the master plan: if the bank of mom and dad can loan you even the most modest down payment, take advantage of lending rates and get a *small* house with roomates ready to move in. I did it, with only $4k of my own scraped up five years ago. Meanwhile, my property value has doubled, and I learned to wean myself off the roomies and just keep the spouse.
• What angers me is the racket that is the FICO score. I think if you pay all of your bills on time that should be enough; unfortunately, since they also take into account the debt potential, it can screw you from transferring balances to lower interest rate accounts. Plus, aside from bankruptcy, having one or two late payments stay on your record for seven years is ridiculous. I've also heard that auto insurers are now looking at FICO scores to determine rates. Heaven forbid people with bad credit who've fallen on hard times need to drive.
• I started out dirt poor as a young adult making 2.65 dollars an hour and with two kids to support. I managed to make it through college and owe no student loans. I now make enough to be comfortable in my opinion. Although the stock market killed my retirement fund. I married my second husband 9 years ago and we bought a house 6 years ago, after selling his house. Our debt is small compared to most Americans. Our debts are the mortage and my 2780 dollars in credit card debt. The husband has 3000 in credit card debt. The motorcycles are paid for, the car and two trucks are paid for. The credit cards are used for major purchases and emergencies. Oh and for concert tickets too. Love my concerts, rock on. My daughter and son in law though face a major dept . They had to have new vehicles, one for him and one for her. They have a mortage, student loans, hospital bills and a few other things that have set them back about 250k. That is scarey, both are in their 20's. Neither have health insurance and the son in law works a dangerous job with no life insurance. I worry about the kids.
• See also: Hello Kitty and Hillary Duff debit and gift cards. Some call these good ways to teach young people about non-cash payments like debit and credit cards, someone in the first linked story critiques them. I'm not sure which side to agree with. They didn't have such things when I was a kid, and I had to learn about credit through experience, not always so much fun, but I did learn. Reminds me very slightly of "Shirley Temple" drinks for kids. Are they drinking training-wheels, or a good lesson in how to fit in in society? Do they call 'em "Shirley Temple" drinks outside the U.S.? For that matter, I think my age is showing, perhaps they don't call them that here anymore either!
• Bouncing off what Dr. Zira said, the credit reporting agencies and the FICO score are truly the scourge of the American consumer. While one can easily file bankruptcy and leave credit card companies holding the bag, we are becoming a nation where our only identity is our SSN and our FICO number. And if your FICO score is bad, you can be discriminated against in many ways even if your intent is not to get credit. Though I supported John Kerry, he is largely bankrolled by the banking industry and I had worries that he would push legislation that further oppressed consumers. I think this is one saving grace about Bush winning re-election. I can't recommend CreditBoards enough... it is an extremely busy board that covers a lot of these topics.
• CreditBoards, sorry.
• With regard to student debt: If you paid big bucks for a degree that doesn't get you a job that earns enough to pay off the debt, maybe the education was a bad investment.
• What, discouraging those Ancient Welsh Poetry majors from fulfilling a life's dream? (And before anyone stone's me, I have a Master's in English Lit. The difference is that I *knew* it was something that wouldn't be useful, so I made sure it didn't cost me anything.)
• I also apparently have a problem with misusing possessives.
• If you paid big bucks for a degree that doesn't get you a job that earns enough to pay off the debt, maybe the education was a bad investment. And because of that perception (true or not), the current generation of US students are abandoning Computer Science degree programs.
• Please don't depress me further. I am back at school for a CS degree this time around.
• Like Immlass, I'm a little older & so avoided the student loans o'doom - to point out the difference, back in the day (I graduated from the College of Charleston, a public institution, in 1986) my tuition was only about $1200 a semester. My daughter, who is now at SUNY, is paying well over twice that. Fortunately, her father can afford most of it. I can't. I'm deeply in debt. Somewhat as a result, yes, of bad life choices: wrong husband would be one of those, and wrong career is another. But a lot of it has just been subsistence: probably $9,000 of the $10,000 of my debt is stuff like groceries, emergency car repairs, my son's broken arm, etc., etc., etc. Every day I keep putting off calling the bankruptcy lawyer and every day it gets a little worse. But what really gets me is that there is supposed to be little or no inflation: that's bullshit. Everything is expensive, rent has skyrocketed around here, housing prices are completely out of reach, groceries are more, car prices have more than doubled since I graduated from college - but my salary hasn't significantly increased in 15 years. It's damn near impossible for me just to get by and the best I can do for my kids at this point is stay poor enough for them to get Pell grants. If they still have them.
• If you paid big bucks for a degree that doesn't get you a job that earns enough to pay off the debt, maybe the education was a bad investment. Nonsense. Higher education is so much more about developing yourself as a thinker and a full member of society than it is about leveraging your way into a higher salary. I was a French Literature major and have had rewarding and high-paying jobs in Investment Banking, Software Development and BioTech. Whether you want to save a little a go to your local community college or go all out and to four + years at Yale, it's all worthwhile depending on what you're willing to put into it. Thinking that a degree is just a way to get a job is short-sighted, and by and large misses the point of what education is all about.
• This, via Mefi, seem to be relevant to this post.
• I dunno, I switched from the well-funded "hard" sciences to public health where money is scarce and as much as it sucks that I am actually paying for part of my graduate education, I am a much happier person. My family thinks it is nuts for me to spend so much when it isn't something like a law or medical degree. Current debt (all in student loans): 60k and rising.
• I'm not so sure, Tommy Gnosis... I recently applied for some Federal jobs that I had stellar qualifications and extensive experience for, but have only 3 years towards the BS. Competing with me were virgin college graduates with a BS. Guess who got the jobs?
• College loans and credit card debt, the twin burdens of youth. Credit card debt is the worst - do ANYTHING to get rid of that! Would you take out a bank loan for 20%+? No way. But that's essentially what you're doing when you charge stuff. I might even go so far as to say, take out a bank loan (at a far lower interest rate than your Visa) and pay off your credit card debt. Cut up the excess cards, saving the best interest rate one (one!) for personal use, and then pay off the loan. The difference in interest rate along between the cc debt and the loan will save you at least some money. That said? A little debt in the right spot is not a hugely bad thing. Mortgage debt is ok - if you've purchased or refinanced in the last couple-three years, your rate (and you got a FIXED rate, right? RIGHT???) is probably pretty low, and you're building equity. Do not make the mistake of thinking your home is an investment though - it's not. What other investment requires that you make regular influxes of cash or else lose the entirety, or requires periodic infusions of upkeep and repair cash? None, that's what other. If you are planning on buying a house, keep in mind that interest rate is the single most determining factor on how much your monthly payment is and how much you'll pay over the cost of the house over the life of the loan. Get the lowest (fixed!) rate that you can. And do it soon, because with the federal deficit spiking, the bond market is squeaking and interest rates are going to rise, guaranteed. Get the lowest payment you can and then overpay that sucker, with your additional payment going to principal. Also, many banks will, along with your mortgage, extend to you the option of a line of credit in the $5K to $10K ranges these days - take it, keep it safe and warm, and use it instead of credit cards when you have large purchases to make, as the interest rate of the credit line will be far below that of your credit card. Here's the other thing about debt - sometimes, if you have reasonably low interest rate debt that you can handle, it may not be a great idea of pay it off early. Example: you have $1000 of debt at 5% or so, and can easily make your payments. You acquire $1000 cash. Do you pay off the debt? Nah. Instead, take that fresh dough and buy $1000 of stocks/bonds/mutual funds, choices based on your risk tolerance. It is FAR better for that $1000 to be earning you money in the long-term than the loan will cost you short-term. Car loans? Never put any down, and try for as close to 0% interest as possible. Cars are notorious for losing huge amounts of value as they leave the lot - but is it the loan amount that goes down, the money you owe the bank? Nope, it's your down payment out-of-pocket cash that gets disappeared. Take that cash you would otherwise use as a down payment and (1) pay off credit card debt, (2) pay off high interest rate loan debt, (3) invest for the future. Talk to your banker about car financing before you go car shopping, so your financing is in order beforehand and you can deal from a position of strength. And, often as not, the dealership might be able to swing you a better interest rate through them, in which case you do that and tell your banker better luck next time.
• In the end, think of money as your would any other commodity that you buy - which is exactly what you are doing when you get a loan, you are buying the use of someone else's money, the total interest paid being the cost for that use. Shop around, get the best price, and remember, for all their feigned reluctance? Banks, finance companies, credit card companies *want* to sell you the use of their money! And they will make concessions to keep get/keep your business. Call up your credit card company and tell them you're thinking of going over to a different company with a lower interest rate, and ask them if they lower yours! Walk away from a car dealer that insists on a down payment. YOU are the customer, after all and, while sometiems it may not seem like it, it is the customer that makes the choices and drives the market, not the seller.
• I have college loans out the wazoo, but that is it. As far as thinking about education as a return on my investment, if I go back to my job as a cashier in a casino after I get my phd, I will consider grad school money well spent because it made me the person I am, and I'm happy while I'm here. I mean with my field of study, I'm either going to get a job offer right away or never and I'm ok with that.
• Is borrowing money for cars more prevalent in the US? You can do it here too, but in my mind only a moron would borrow money to buy a car. The interest is usurious, and the car depreciates rapidly. It just doesn't make sense to me why anyone would do this (and don't get me started on why anyone would buy a *new* car). I'm torn, reading the article linked. On the one hand, I feel for people who made a big bet on their student loan and can't pay it off, and I know that lenders deliberately target young people with credit offers they would be wiser to avoid. On the other hand, the very first example - a person whose credit card use is clearly out of control, she doesn't even know how much she owes when she makes a purchase - is clearly in a trap of her own making. As are the ones who shrug their shoulders and go out to dinner anyway. When I was little, my parents simply did not expect the array of consumer goodies that my peers now seem to think is the baseline for a normal life. One reason my parents' generation is not in the shit is they rarely bought on credit, and they had frugal habits. (They also lived in a more redistributive tax/spend regime too, which is an issue intimately intertwined with this one). HW, I am not in the shit here in NZ, but many of my peers are, and you can read hand-wringing articles like this in any paper in the western world right now. If there are answers, they are both individual (don't borrow!) and collective (the old bastards got state subsidies for their lives and then turned them off for us).
• vitalorgnz, I hear you. And yes, most folks borrow to buy cars in the U.S. Don't have stats at the ready, but my edumicated guess is that the majority of car purchases involve credit (and that's almost certainly the case for new cars).
• el_hombre: I'll drink to that! Well, I'll drink to about anything, but I am a personal advocate of obtaining programming/networking certifications over a C.S. college degree. I spent 7 years and a whole lotta effort getting my B.S. and Master's in Mechanical Engineering, and now I'm a computer programmer. In retrospect, once I factor in the college expenses and the lost wages, that traditional approach cost me somewhere between $500,000 - $700,000. But who knew? Life goes on; no worries. Tommy Gnosis: That's a very liberal/European attitude you have there (and I commend you for it), but can you say that you would have grown less, as a person, by traveling the world for four years instead? (Certainly seems like more fun anyhow...)
• The interest is usurious, and the car depreciates rapidly. Definitely for the latter, not so much here for the former. Many car manufaturers routinely advertise zero-percent financing on various models. The trick to beating the depreciation effect is to use the car well nigh to it's destruction - squeeze every mile out of it until repair costs become more than the payments on a newer one. And personally, I agree with you on the new car/used car debate, although there are points to be made in defense of new cars, most often related to warrantee and service packages.
• Tommy: In that case, (certain) higher education can be cosidered an expensive luxury. Best suited for those who can afford it, and not worth getting into debt over.
• I just spotted rodger's comments. To conflate and summarise: our parents were individually frugal, and collectively spendthrift. Now it's the other way around. I'm not sure which generation in aggregate will come out ahead financially, but I'm fairly sure there are more individual cases of misery now.
• but I'm fairly sure there are more individual cases of misery now. I dunno about that - our bankruptcy laws are onerous, but they pale mightily in comparison to the debtors prisons and workhouses of just a century ago. And I would bet that the standard and quality of life now, even for those in financial straits, is higher than generations as close as our grandparents.
• Also, vitalorgnz, in the U.S. at least, our parents had relative job security and greater purchasing power with their salaries.
• I finished my degree with no debt (Living at home reduced my expenses a *lot*; and working part time earned me enough to cover the cost of my education). At my worst, I had maybe $2500 of credit card debt which is pretty good in the grand scheme of things. At my best... I'm afraid you'll all beat me up :p
• had relative job security and greater purchasing power with their salaries. I dunno about that either. My thought is that, if you are in college now, your parents were young adults in the 70s. I'm 37, and I can remember LOTS of layoffs going down in the 70s, plus high rates of inflation, and high interest rates, which would have reduced their purchasing power immensely. Previous generations did, iirc, by and large have more free cash, as their housing expenditures were about half (percentage wise) of what we pay now. Housing is the big financial bugaboo these days. Everyone wants a McMansion. Of course, a cursory Googling reveals absolutely no backup for these claims, so gentlemonkeys should be aware that the previous statements came right out of my butt and may be in error.
• Fes: I actually agree, I'm thinking strictly of my parents' generation (I'm 34, Dad was born in 1938). HW: in my country, that was true also, but said job security and purchasing power were bought with heavy state subsidies/wage and price fixing/other interventionist strategies. And even then, I'm not sure about the purchasing power. Eg, compare a television from when I was 9 with the TV my daughter watches. Adjusting for inflation, the TV is much cheaper AND better quality. Sames goes for all consumer goods, and some services too (eg air travel).

• Car loans?

  Umm. Don't. Just don't. It, along with buying a computer on hire purchase, would be one of the most fiscally stupid decisions it's possible to make (in terms of paying interest on a rapidly depreciating asset), outside of believing a trip to a casino is "an investment". And WTF is it with the "must have a new car" mindset? For me, a new car or bike would be a luxury item I buy mostly likely after I've got a paid off house and some money set aside in investments and the like. Second hand, baby. Let someone else eat the first 30 - 50% depreciation. (It does seem to be a US thing, to some extent; I read US mototrcycle websites, and newbie riders all seem to want brand new bikes and "don't trust" second hand. WTF?) Incidentally, a pox on banks and credit cards for trying to pervert the meaning of the word "investment"; I now see advertising claiming that, eg, taking a loan for a holiday is "investing in a holiday". No, it fucking isn't. And investment is something that makes money. Anything that doesn't, isn't, no matter how happy it makes you.

• Housing is the big financial bugaboo these days. Everyone wants a McMansion.

  Not actually true. Or rather, it is true that housing (and cars) are the main massive increase relative to income (most other things having fallen), but it's not a "McMansion effect". Salon had an article based around the work of a researcher who did a pretty thorough debunking of the claims made about the inherant stupidity of the "kids today" on fiscal issues; it's a nice, self-serving pablum that makes the recipients of massive intergenerational wealth trasfers feel better about themselves, but it doesn't hold up to analysis.
• (Having ranted about the "selfish generation", as a local academic labelled it to sell a book 8), I will say that I am appalled by the financial insanity of some of my peers, like a friend who announced "I don't believe in depreciation". Well, whether you like it or not, it exists. If you try to do your financial planning pretending it doesnt, you gots your head up your arse).
• Fes, I can get the numbers if you want (don't have quick-n-ready access to them), but: 1. The income of the average American has dropped in the past 30 years in adjusted dollars. 2. More Americans than ever work in relatively contingent jobs, compared to their parents, thanks to megamergers, the outsourcing of jobs (first to temporary, non-benefits-receiving American workers, and more lately to offshore workers). (Think about the street you grew up on, for instance, about how many of the dads [and maybe moms, depending on when you grew up] had just one or maybe two jobs in their career; then think of yourself and your friends, and how many of you have had just one job in your career.) 3. American workers pay more of the tax load than they did a generation ago, vis-a-vis corporations. 4. Americans pay a larger percentage of health care costs out of their pockets than they did a generation ago. 5. The average American pays a greater percentage of his/her income to pay for housing than he/she did a generation ago. 6. Americans' savings rate has trended downward over the past 30 years. Yes, there were layoffs in the 1970s, many of them in the manufacturing sector, as the U.S. shifted from a manufacturing base to more of a service/knowledge economy. Yes, there were at times very high unemployment rates. Still, a way greater percentage of people could count on their jobs not disappearing than is the case today. And in terms of purchasing power, our parents could buy houses and cars and whatnot without mortgaging themselves up to the eyeballs, as is the case now. It's not "same old, same old" these days. It's worse. Thus this FPP. Not to get political, but what's happened in general over the past generation or so is that the Republicans (and the Democrats, sadly, due to the fact that the Republicans have framed the debate, and to the massive amounts of corporate money influencing both parties' behavior) have lessened regulation of corporate behavior while transfering a significant chunk of the tax burden from corporations to workers. We now have a government by, of, and for the corporations, not the people. IMHO. So, yes, we should all be careful with our borrowing and spending. But we should also fight crap like Hello Kitty credit cards (just like we fought Joe Camel), and we should consider these issues when we place our vote. Okay, I'm climbing down from the soapbox now. Carry on.
• A home is a kind of investment - speaking as someone whose family has always rented, spending thousands of dollars over the years with nothing to show for it and who could loose their home tomorrow and be on the street if they missed one month, I would always choose buying a house/condo over renting. Yes, there are costs and maitenance - and the current market is in a bubble - but if paying off a morgage is the same as renting or just a bit more, you will end up far far ahead of everyone who is renting, debt or no debt. Houses do appreciate (unlike cars), which is why a morgage (sensibly planned and within your budget) is a good idea.
• One of the things that I think of when I consider whether to buy a new car or a used car is the warranty issue. I'd consider a used car if I could get a bumper-to-bumper warranty as solid as what I can get on a new car. Until I moved up here to New Jersey (and really, it's the NYC metro part that counts), I depended on my car to get to my job. No car = no work = no money, so it's vital to have a warranty or other means of repairing the car quickly if it goes south. I mention this because a net.friend of mine just had the transmission fall out of her car. She has a significant commute and lives a part of east Texas where public transportation just won't do it for her. Replacing the transmission was not optional if she wanted to keep going to work, and it cost her more than $2K. This afternoon she was laid off.
• I don't know about needing a new car. I grew up in a very rural area (there is no wal-mart in our county and only 1 mcdonalds in it) and everyone I know drives at least half an hour to work, some much more and hardly anyone can afford new cars. My parents have never owned a new car and seem to do just fine, as do I. And there certainly ain't no public transportation, heck untill a few years ago I didn't know Greyhound really existed. So there are ways to get by without the expense of a new car.
• Bummer, immlass. Condolences through you to her.
• The greatest thing about increasing home values is getting to borrow even more money against your home!

• Houses do appreciate

  Most of the time. Sometimes there are drops in the market, and they can be awfully big. After New Zealand stopped borrowing-and-spending to prop up certain political constituencies, for example, whole chunks of the country lost value as a place to live overnight. Likewise, if inflation and rates rise rapidly, there will be mortgagee sales and plummeting prices a-plenty. Which means if you're in a marginal position and do have to sell your house, things may not be so good. Some other random real life examples: plummeting house-building standards in NZ (mostly driven by local body corruption) mean that there are large swathes of housing built in the last 5 years that most people aren't going to touch due to so-called 'leaky building syndrome'; if affected, good luck selling a property for anything like what you paid for it. It can turn out your house was on a hushed-up toxic dump. The government may decide to run a motorway far enough way they won't aquire it, but close enough your quiet diamond becomes a noisy cubic zirconia. If things go wrong, you can end up with a fuckload of debt and no house. immlass: For the price of one new car and depreciation thereon you can keep a couple of second-handers running, easy, if you want to be sure something will work. If it bugs you that much, buy an ex-fleet car with the balance of a new car warranty. You'll still save a bomb on new. Which is not to say shopping second hand is flawless, but it's generally worth it (and reason to avoid auto in favour of manual transmissions, and eschew too many gadgets).
• rogerd - can you give me some keywords to find that Salon article? It sounds interesting.
• This Frontline website, posted in the MeFi discussion, has a lot of useful info about credit cards, including info on what to do to if you are having trouble with your debts.
• I will as soon as I get around to renewing my Salon Premium membership 8-/
• I'm wondering what this whole debt situation is going to do to this generation. I wonder if they will turn out like those who came out of the Great Depression being much more frugal with their spending. Speaking for myself, I've been mostly out of work and out of unemployment benefits for almost two years now and just recently started a new job with (I hope) lots of promise. Despite that, I have every intention of saving every penny I can put away not doing the 'Hooray I'm Rich, Spend, Spend, Spend' thang anymore. I'm just to frightened to let go of my money after what I've been through. So, it's cooking meals at home, forgetting about going to the movies, reading books at the bookstore rather than buying them, embracing the subsidized bus pass my new employer is providing and saying 'goodbye' to having a car for what may be a very great while (I rode public transport for 12 years previously). And otherwise saving, saving and more saving... Anyone else out there in a similar mindset? What kinds of things are you doing to save money? Oh, I also live in a shared house where my rent is minimal ($150.00 per month, and *no* it's not a pit.)
• I think there will be a trend towards less spending from my generation (if it hasn't already started), but I think that'll go hand in hand with people thinking about investments at a younger age as well. I know I've been reading up on index bonds and the like lately, even though I have precisely no money to invest. Some of my old friends started playing the stock market in high school.
• my Salon Premium membership er, click here. Maybe bookmark the page, I don't know.