Thursday, February 5, 2009

What's interesting about all the Recession debate is what I never hear...

... and that's anybody willing to admit they personally over-extended themselves.

Don't get me wrong: I'm not ignoring greed, process issues, structural and regulatory failures, or even the impact of Statist ideology on the market economy.

But somebody, somewhere out there borrowed way too much money. A lot of somebodies, I think.

I read the screeds of my liberal and progressive friends who say that for the last eight years people in the middle class have bee so squeezed by the GOP finanical policies that they've had to go to their credit cards to make it from month to month. I read about the people driven into debt by medical bills. And I'm sure both are correct--as far as they go.

But where are the people who bought SUVs every three years, rolled the old loan into the new one, and spent the last eight years driving around at twelve miles to the gallon?

Where are the people who forked out not for basic cable, but for deluxe cable with HBO and Showtime, along with unlimited text messaging, cable internet, and cell phones for all their kids, to the tune of $275/month instead of saving a few bucks every pay period?

Where are the people who didn't establish a college fund for their own kids' education, but were willing every summer to put whatever summer camp their little darlings wanted on a credit card?

Where are the people who couldn't be bothered to make their own coffee at home?

Where are the people who couldn't pass up a vacation in order to get some damn money in the bank?

I know they are out there because I used to hear them talking. They'd say, half-seriously: "After this vacation goes on the card, we're going to have to tighten our belts a little." But they never did. Or, "Look at this great refi I got: I rolled over all my bills into it, and now I've got some breathing room. We're going to be living within our means just as soon as we get that new car." But it never happened.

Instead, we fell for candidates from both parties who absolved us all from any guilt about spending too much, consuming too much, and saving too little--because it was the fault of big government, bad bankers, or the auto mechanic, or ... somebody else.

My family was part of that irresponsible credit boom. We made bad choices for what seemed to be the best of reasons at the time. And about a year ago we started working hard to get back to being responsible before the storm hit. We think we made it, but only time will tell. I've blogged about that set of painful decisions over the past year, so I can't deny it.

I say again: we were part of the problem and we waited way too long to fix it.

So apparently you can blame the recession on us.

Because, from what I'm not hearing, the rest of the country was filled with victims living responsibly until my credit card debt caused the entire f**king house of cards to collapse.

Sorry about that


Shirley Vandever said...

Wasn't me .... I'm an old fashioned girl and never had a Starbucks coffee in my life.

I think it was my Dad's influence.

Had a problem with CC debt due to some medical issues about 5 years ago (was telling Hube about it just last weekend) ... just seeing the light at the end of the tunnel and if I can keep my job for a few more months can be debt-free.

Nope, never was one to overextend. I think if I won the lottery I wouldn't change much.

Hube said...

Count me in w/Shirley. It was my dad's influence too. Never carried credit card debt (I told Shirl this over some beers last weekend, as she already said!) always paying off balances in full ... just never, ever, living beyond his means.

My wife and I agreed it'd be best if she stayed home w/our daughter until she reached age 5 (kindergarten age). Thus, I picked up a part-time job in addition to my regular teaching gig during these years.

Was it tough? Not really. Why? As Steve said, it's called "planning." Sure, we didn't eat out hardly at all those years, kept one car for a time, clipped coupons like MFers, carried no debt except the mortgage (begun 2 yrs. after daughter was born)... but now it's paying off.

Do I get miffed when people whine about how bad their situation is -- when it was entirely of their own making and/or in their control? Damn right.

And I'm like Shirl on the lottery: If I ever won it, I'd give most it to charity keeping only enough to allow me to retire immediately to some Costa Rican sparsely populated beach.

Miko said...

I don't have even basic cable, haven't been to a Starbucks or any restaurant in years, and don't have a cell phone. I've never paid a single cent in credit card interest and I've been saving steadily. But given the existing political environment, I'm the one that's been irrational.

Fed bubble policy has destroyed my stock portfolio (for now; it'll recover unless the dollar collapses) while simultaneously ensuring that I get a low interest rate and high loss due to inflation in the money market. Even inflation-adjusted government bonds have negative return due among other factors to how inflation is calculated. The best investment I have is gold (which in reality returns by definition something slightly less than 0% due to storage costs; it just seems good post-inflation).

No, I can't blame debtors for acting rationally. I have to blame the government distortions that made profligacy rational.

Anonymous said...

I have been so financially prudent that i proposed a plan to share garbage with my neighbor. all my cars are bought used and kept till the monthly repair bills reach a level of a new car payment. my only 'luxury' is private school for my son, $5k a year. but he deserves it.

Anonymous said...

Glad to see someone admit it. But, thankfully Pop's influence on my spending/saving/investing took root. Have always lived below means, and deferred purchase until had the purchase power via real funds. My generation understood this, we had gas lines, and had trouble finding after school jobs. The 20 and 30 sumpins now have grown up with credit being the cash alternative, and not the promise to pay as soon as I get home approach. The marketing to cash alternative, and credit card marketing to college campuses fueled this. It certainly devillianized the cards, from the one and only I was raised on--SEARS for gas, and start of school year shoes and clothes only. We were cash, check,and nope. Interestingly, the delayed gratification aspect has served me well in other areas of my life too. I don't think this downturn will effect my standard negatively, but I sheepishly admit I will be acquiring short sale property because of other's choices. Please note, I did not say poor judgement. One TV, no cable, no SUV, only 2 cellphones for my kids to "check out" if they are out, or driving. No personal ones. Very generous to specific charities, so my kids know, we're not cheap, but appeal to reason and necessity in all the trappings that can destroy a budget. I insist on a warm house is my biggest "expenditure vice". It works for us.

RSmitty said...

Well, I guess I'll take the other side and maybe draw the ire of Hube in the process (this quote comes to mind Do I get miffed when people whine about how bad their situation is -- when it was entirely of their own making and/or in their control? Damn right). Of course, it was partial our control, and partial trying to (naively) cover our butt, so maybe it won't draw the ire.

I've explained this in detail elsewhere, so I'll try to keep it shorter here. Someone crossed (attempting to pass) the double-yellow, in a 50-MPH zone, and hit my wife, head-on. Miraculously, neither died.

The other person carried minimum liability and was not in a position to take care of my wife's medical bills. We had to have our insurance handle the under-insured part (goes in tandem with uninsured motorist) and they, being on your side and all, refused to acknowledge future expenses, so we got locked into a three-year battle. To avoid credit issues with the bills, we "charged" 'em. Thousands and thousands. Hube, you can appreciate this part. She's a high school teacher. Imagine being on your feet all day with a back that's been brutalized.

Three years of med bills plus not being the wisest stewards of our finances combined for a daunting outlook. Being the fools we were, but we had some justification for the thought, we figured when the conclusion of the case happened, we'd easily handle most of our debt, considering so much of it was tied into the medical bills.

Well, my wife became pregnant during the three years of hell, while trying to get " on your side" to do their thing with the under-insured coverage. Our case got riddled because they claimed she was negligent to her injuries and overstated the extent, provided she became a mother yet again. The arbitrator cited that as a reason to not handle going-forward concerns. We got the past bills, BUT...lost a huge chunk to the lawyer (services = expenses incurred). We came out of it over our head.

So, some of it was us, some of it not. We now face an excruciating decision. We can pay our mortgage, car, and daycare. We already worked out that we still have more money coming in with her working and us utilizing day care, as opposed to her quitting and not utilizing day care. Then we can afford the normal set of bills and expenses (utilities, groceries, gas, etc.). What it comes down to are the credit cards. We can still afford some, but not all. We spoke to CCCS (Consumer Credit Counseling Agency) and they said they could not help us. That was a warm and fuzzy. Right now, I am putting together a proposal with the CC companies to allow us to go on a low, fixed-pay scenario for two years and then revisit where we are at that point. We won't have much ability to save anything, but it's paying back. If they say no, then I'm really not sure what there is left to do other than you-know-what. What freaks me out the most about that is my employer. I work for a credit card bank.

That's my story.

Hube said...

Smitty: Why would that draw my ire? That situation doesn't fit into my "miffed" area as 1) The root cause wasn't your fault, 2) you actually were responsible because you wanted to pay those medical bills, 3) you devised a plan to work off your debt, and 4) I certainly never saw you bitch about your situation!

That all sounds pretty responsible to me!

And I used to work in collections at two CC banks (ironically) before I became a teacher. At one, my section was authorized to negotiate lower interest payments and/or settlements of total debt. One thing I appreciated about that company, as opposed to the other, was that if a customer was showing good faith in trying to pay his/her bill, we'd work w/them endlessly.

That's what you're doing, Smitty. The plan you've worked up IS being responsible! Many people would choose bankruptcy or just let the debt continue to the point where the bank wrote it off and it'd eventually wind up in the CC bank's recovery dept. or a private collection agency.

Steve Newton said...

I didn't mean you, or people like you. A lot of people have been driven to near despair by circumstances despite their most responsible efforts.

But isn't it amazing that you cannot find anybody willing to stand up and say, "I over-extended, I over-borrowed, I didn't save, I mortgaged my kids' future for my current happiness"?

Where the hell are all those people and why won't they just acknowledge that they did it?

I think it's because (a) there is an innate human ability to rationalize any decision, and because (b) they've been given an out: none of it was ever their fault.

Well, despite trying to be as responsible as I could be during tough times for my family, I made some bad choices and got over-extended--and that was my fault. I'm paying my debts; have paid most of my debts (with two jobs) because we started back down the path that my Dad (like Hube's and Shirley's) told me never to leave.

But I simply refuse to believe that my household was the only one in the goddamn country that caused the recession.

Anonymous said...

Smity - your circumstances are very different from the 'average joe' with the underwater mortgage, the 2 leased cars, the New York and Company credit cards, etc.

One thing i do not understand and from reading your post are the people who are wronged in an accident (as your wife was) and decide that they will sue beyond the stipulated settlement amount becuase they think their lawsuit will be their retirement and dont realize that the suit will go no where, but they are still paying huge legal fees. That, I have a problem with.