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thegman
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 Posted: 01/19/06 - 03:12 Post subject: Debt.
Financially speaking, I'm a contrarian by nature, so consider that when you read what I've posted.
I was reading the thread on credit card interest rates, and I started reading here and there, and came across some nasty information which I consolidated from several sources. It should scare everyone:
| Quote: | In 2005, one in every 53 American households filed for bankruptcy.
Every hour of every single day, the United States continues to rack up another $80 million of debt. (I Googled a debt clock. It’s entertaining - and utterly terrifying - watching how quickly the $100 and $1000 dollar columns whiz by.)
The Levy Institute estimates that the United States will owe foreigners $8 trillion by 2008 - about 60% of our gross domestic product. Put that in perspective: If we were trying to settle up on that debt, $6 out of every $10 that we earn in America has already been spent.
Our trade deficit with China alone is expected to surpass $200 billion in 2005 – it was $162 billion in 2004.
Wal-Mart’s biggest trading partner is China. Wal-Mart purchased some $18 billion in merchandise in 2004 from China, nearly 10% of all Chinese goods sold in the U.S. that year.
Banks are taking back homes almost faster than they can finance them. In December 2005, 81,290 properties across America entered some stage of foreclosure. Nationally it doesn't sound like much, but it was up 13.5% from November – and the highest for 2005.
In 2004, the annual government deficit hit $7 trillion, according to the U.S. comptroller. That's about $24,000 the government owes for every American man, woman and child.
Today, the average American household has $8,000 in credit card debt. And for every $19 Americans earn, they spend $20.
The American Bankers Association reported that gas spikes last summer actually caused 1 in 20 Americans to fall 30 days or more behind in their credit card payments – the third highest level on record.
That was also the period when, for the first time in history, the savings rate of Americans dipped into negative numbers.
Consumers’ debt continues to rise toward an all-time high of $2.16 trillion – twice the cost of the war in Iraq.
The new credit card law that hit the books on Jan. 1, 2006? Thanks to your friendly banker, your monthly minimum payment has doubled for your revolving account. “They” say the higher payments are for your own good. If you are one of the 35 million who only make the minimum payment, and had the average credit card balance of $9,200, it would take you 15 years to pay it off.
Online holiday shoppers spent more than $30.1 billion online in the weeks leading up to Christmas 2005 – a 25% increase over the same outrageously festive season in 2004. |
I grew up without money, and I can remember being angry about it when I was a kid. And because of that, I learned a few very valuable rules early in my life:
Your first inclination should be to save, not spend.
Wants aren't needs; If you buy what you want now, you might not be able to buy what you need later.
If you don't borrow money, no one ever asks to be paid back.
Reading back over this, I didn't intend this to read like a lecture as much as I did for it to be a personal vent.
Debt has always frustrated me. 
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robp
Pyromaniac
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Location: Waiting in line at the beer store...
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Posted: 01/19/06 - 08:59 Post subject:
Excellent post Gman. I have witnessed friends sinking themselves incredibly deep into debt and a couple have had to go thru bankruptcy. It's not a pretty thing.
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andydp
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Posted: 01/19/06 - 09:03 Post subject:
As a Public Administrator, I was taught the higher the debt the more money you "waste" on simply paying the interest. Being able to pay off the debt would greatly increase the amounts of money available for other programs.
When the Bush Administration started in 2001 its first effort was to give tax cuts. Overlooking the fact, with the record budget surpluses, we were paying off the national debt and would have probably had none in a couple of years. With the removal of the debt service this would have freed up billions of dollars for us to use as we saw fit: reducing taxes while at the same time provide services to all Americans.
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sonnylax
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Posted: 01/19/06 - 09:16 Post subject:
At the micro-level: I think one of the big issues is that filing for personal bankruptcy isn't viewed as a negative thing. Just wipe your debts off the board and start a new financial life.
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purple hayes
Frightened Inmate #2
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Posted: 01/19/06 - 09:42 Post subject:
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MastrBrewr
Saccharomyces cerevisiae
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Posted: 01/19/06 - 09:54 Post subject:
| sonnylax wrote: | | Just wipe your debts off the board and start a new financial life. |
Which is what it was intended to do, but only in extreme circumstances. Obviously, it's been badly abused. It's sad when people don't blink anymore when they think of Chapters 7 or 11. It costs everyone in the long run.
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runaroundsue
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Posted: 01/19/06 - 11:48 Post subject:
I was an angry child too. I grew up believing that we were extremely poor. And then I found out we really weren't when I tried to get loans for college and was denied. My father didn't have much but he just didn't owe money to anyone. I think now that I learned alot growing up that way. Now, I'm going through life trying to figure out "good debt" as my DH convinces me that in America, you simply "have" to owe someone something, or you're screwed.
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andydp
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Posted: 01/19/06 - 11:52 Post subject:
| runaroundsue wrote: | | Now, I'm going through life trying to figure out "good debt" as my DH convinces me that in America, you simply "have" to owe someone something, or you're screwed. |
Funny how we don't fit the profile of the average US Family with several thousands in credit card debt. My wife is an excellent budgeter, we haven't carried a credit card balance in over 20 years.
We do owe three car loans (two are partially paid by the kids) and a mortgage with about 4 years to go.
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MechEngDropout
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Posted: 01/19/06 - 13:52 Post subject:
At this point in my life, I absolutely refuse to go into debt. Granted I'm not big on possessions, but the things people buy just amaze me, particularly when they cannot afford it. It baffles me. I would rather work two jobs and take time off of college to save instead of taking out student loans. While this doesn't always make financial sense, it's really a matter of principle and not buying what you can't afford at the moment of purchase. I hope to never have debt, with the possible exception of purchasing a home. Even that, I'm inclined to wait until I have the savings.
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blue
your favorite weapon
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Joined: 21 May 2002
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Posted: 01/19/06 - 14:31 Post subject:
debt is scary. my brother spends his money, all the time, on the strangest things. i don't know why - but he has a lot of trouble with it.
i'm really big on saving - i just got my first credit card, but only to facilitate some internet purchases, and to build credit rating because eventually i'm going to need to pay for a car, get a house loan. etc.
i always want to have money in the bank because living paycheque to paycheque scares me. my girlfriend is stuck in that position now (not in debt to anyone, but car insurance, etc, with few hours and few pay while doing schooling) but we know we'll have to work on budgeting. as in valentines day doesn't have to have $100 gifts and dinner, weekend trips (she still wants to go somewhere this summer - but we're supposed to start saving)... if we're going to move out the "needs" & "wants" are going to have to change very quickly. ...more so hers. i already gave up hockey cards... 
that said - i'm very worried about starting a business, buying a home, getting married, buying a car... i don't really know how i'm going to be able to pay for all of it 
i do know that dining out on credit for the sake of dining out - would be a bad idea.. i will wield my credit card carefully.
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airehead
Oompa Loofah
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Posted: 01/19/06 - 14:56 Post subject:
The whole debt issue terrifies me.
My parents came to this country with $300. They own their house and their cars--and no credit debt.
Poverty will teach you something.
What chafes me: The USAF hires on all these 18 y/o kids. Then asks them to be members of the club system (worldwide access). The club card is a CREDIT CARD. You can't pay your dues in person anymore, you must have a credit card. And not one you choose, it's one they choose with exorbitant rates.
Recently I read an article on how financial managers consider it stupid to have a paid-for house. "You should be using the equity in it...yadda yadda" Yeah, I'm out of debt, out of your pocket and you want me right back in it? I don't think so, bucko.
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purple hayes
Frightened Inmate #2
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Posted: 01/19/06 - 15:05 Post subject:
| airehead wrote: | | Recently I read an article on how financial managers consider it stupid to have a paid-for house. "You should be using the equity in it...yadda yadda" Yeah, I'm out of debt, out of your pocket and you want me right back in it? I don't think so, bucko. |
What would you use the equity for if you had all your debts paid?
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airehead
Oompa Loofah
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Posted: 01/19/06 - 15:07 Post subject:
| purple hayes wrote: | | airehead wrote: | | Recently I read an article on how financial managers consider it stupid to have a paid-for house. "You should be using the equity in it...yadda yadda" Yeah, I'm out of debt, out of your pocket and you want me right back in it? I don't think so, bucko. |
What would you use the equity for if you had all your debts paid? |
They were talking about financing a whole slew of things. Vacations and other stuff.
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purple hayes
Frightened Inmate #2
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Posted: 01/19/06 - 15:15 Post subject:
| airehead wrote: | | purple hayes wrote: | | airehead wrote: | | Recently I read an article on how financial managers consider it stupid to have a paid-for house. "You should be using the equity in it...yadda yadda" Yeah, I'm out of debt, out of your pocket and you want me right back in it? I don't think so, bucko. |
What would you use the equity for if you had all your debts paid? |
They were talking about financing a whole slew of things. Vacations and other stuff. |
Any financial advisor that told me to take out a HELOC to go on vacation would be fired on the spot.
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airehead
Oompa Loofah
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Posted: 01/19/06 - 15:18 Post subject:
| purple hayes wrote: | | airehead wrote: | | purple hayes wrote: | | airehead wrote: | | Recently I read an article on how financial managers consider it stupid to have a paid-for house. "You should be using the equity in it...yadda yadda" Yeah, I'm out of debt, out of your pocket and you want me right back in it? I don't think so, bucko. |
What would you use the equity for if you had all your debts paid? |
They were talking about financing a whole slew of things. Vacations and other stuff. |
Any financial advisor that told me to take out a HELOC to go on vacation would be fired on the spot. |
No kidding. But they were advocating it as the best financial move in this article. I'm no financial wiz, but being in debt=not good. Someone owning me= not good.
They were saying that those people sitting on paid off houses were being stupid with their money. 
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