Economy Fitful, Americans Start to Pay as They Go

[ursi]

Source: New York Times

For more than half a century, Americans have proved staggeringly resourceful at finding new ways to spend money.

In the 1950s and ’60s, as credit cards grew in popularity, many began dining out when the mood struck or buying new television sets on the installment plan rather than waiting for payday. By the 1980s, millions of Americans were entrusting their savings to the booming stock market, using the winnings to spend in excess of their income. Millions more exuberantly borrowed against the value of their homes.

But now the freewheeling days of credit and risk may have run their course — at least for a while and perhaps much longer — as a period of involuntary thrift unfolds in many households. With the number of jobs shrinking, housing prices falling and debt levels swelling, the same nation that pioneered the no-money-down mortgage suddenly confronts an unfamiliar imperative: more Americans must live within their means.

“We don’t use our credit cards anymore,” said Lisa Merhaut, a professional at a telecommunications company who lives in Leesburg, Va., and whose family last year ran up credit card debt it could not handle.

Read more: http://www.nytimes.com/2008/02/05/business/05spend.html?ex=1359954000&en=6b1a8d5c0abb6d21&ei=5088&partner=rssnyt&emc=rss

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my internet service will be the last luxury to go if I have to start cutting back!

[sandnsea]

1. If things keep going like this

in 6 months a whole bunch of DUers will be sitting right beside me on my supposed "pity pot". I haven't used credit cards in years. That's why the monthly price of every single expense is very real to me. I know it's true of half the country and that's why I speak out, not because I feel sorry for myself. I find it comical that they're writing articles about living within your means. That used to be the definition of a responsible citizen, now if you don't put everything on credit, you must be a poverty stricken deadbeat trying to game the system.

[BleedingHeartPatriot]

12. Spot on.

A few weeks ago, watching the retailers essentially beg consumers, er people, to run up credit card bills to keep their sales from tanking was utterly revealing.

As you observed, paying without credit for only that which one can afford is considered sooo gauche, apparently.

[OKthatsIT]

23. Let's kick the BANKERS ASSES...simple

Move your money (no matter how little you have) out of the big corporate banks and into a local bank or credit union.

BRING THEM DOWN!!! They did this to US. The War, the defense budget, the ARMS DEALS, the mortgage crisis, the eco-destructive economic grip OIL ECONOMY, seducing our elected representatives and suppression of innovative energy research and inventions.

F*CK EM UP GOOD!

[shanti]

26. YEAH!

that's what's I'M talking about! screw them!

[daisymay1960]

36. Let's kick the BANKERS ASSES...simple

nooooooooooo

bringing down banks would spell disaster for everyone , the country would collapse , well it would here !! ( Uk )
Sorry for butting in btw , great site .

[kedrys]

2. There's been a surge of ads for check-cashing services lately

At least in my area (Houston). I'm guessing it's a combination of people being fed up with banks and not able to get credit. Now that you can carry cash in the form of a branded debit card, it's a lot more convenient to use those services than to use your mattress as a piggy bank.

[Pale Blue Dot]

3. In my area it's "Good Ol' Tom", who will buy your gold.

The ads play continuously here.

[sendero]

4. Don't those ads crack you up..

... "forget that your grandmother gave that to you, we'll give you $100 for every ounce of gold you send us!".

"Furniture, no money down, no interest and no payments until 2009!"

"This car for $199 a month, 72 months"

"Can't make it until Friday? Borrow $100 from us for only a $50 fee!".

And folks think our current economic situation is not that bad.

[Heywood J]

14. Up here, I can pick up ads for the Loan Arranger,

a jewelery and precious metal store more than happy to lend up to $100,000. No doubt at the new rates of up to 100% interest.

Between that and the CashCall Gary Coleman ads that promise $2500 at 99% interest, I almost did a spit take when I read the fine print. "Because we trust you" my ass. It's because there's no more legal escape.

[Kat45]

18. When did usury become legal?

I'd always thought it was illegal, for ages, but what I'm seeing these days sure looks like usury to me.

[anitar1]

5. I am hearing more now from friends

who are in credit card debt. They are desperate to get out of debt. I quit using cards a few years ago. It was very hard to get out of the habit. I have never regretted it though. My needs are met and I buy very little. It is a relief to be free of the habit.

[kedrys]

7. We're getting a fresh start thanks to the bankruptcy

And we keep getting letters telling us the best way to quickly reestablish our credit is to buy news cars (ours will be paid off in 2 years and have a combined mileage of just under 50K miles) and/or refinance our mortgage (we're letting the bank take the house). It's a disease.

[EnviroBat]

10. Unfortunately, you're going to get a really shitty deal on a new car.

Financing usually starts in the 19-20% range, and you'll be paying a huge car payment for about 6 years, usually double what a normal car payment would be. Remember too that by the fourth year of the loan, you'll owe more than the car is worth. I had to do all of this crap to re-establish my credit, and I can tell you from experience, it's painful.

[shanti]

27. it usually takes

about 5 years or so for the interest rates to come down after a BK.

[boricua79]

6. I've never owned a credit card

I probably should for credit-building, but I only use my debit card. My theory: if I don't have the money, I don't buy it.

Worked like a charm ALL my life.

[Dr.Phool]

8. Credit cards have become a way of life.

At my pizza shop, we do (or did)a pretty brisk lunch business. We give free delivery, and probably did $2,000 per week just in one office complex. People would call up with 8 orders, on 6 different credit cards, and 2 cash. We tried to institute a $10 minimum order on credit cards (the bank processing fees will kill you), but decided that would kill that segment of our business.

Since the first of the year, when all those credit card bills came home to roost, credit card orders, and lunch business in general is waaaay down.

[EnviroBat]

9. I need $6,500 to replace a furnace and air conditioner unit for my home.

I was turned down financing from one of the most high-risk, fly-by-night finance companies on the planet, and this is with a "good" credit rating. If American General Finance won't touch you, you know something is seriously baaaad. I consider this a blessing in disguise. Fuck em. I will set aside some money each month, and invest the couple grand I have on hand, (plus Chimps little gift money), in a 6 month CD at my bank. By next winter I should have enough to pay cash for the furnace and AC. Hopefully their "last legs" will hold out a little longer...

[aquart]

22. You might want to make sure the price won't triple by then.

[shanti]

28. thank god

my utility company will finance a new furnace/ac unit (SMUD). i did this and it saved my ass.

[pattmarty]

11. Hey, I need money so my wife and I can move to Spain.

And get out of this spiraling shithole of a country.

[Lydia Leftcoast]

13. I've noticed retailers' desperation, too

A couple of clothing retailers that I've bought from online are literally spamming me with two messages per day advertising their bargains. Mostly they are announcing that more and more of their stock is going into clearance or that they have special limited-time 50% off offers.

Last week, when I went to J.C. Penney's to pick up my new glasses, nearly the whole store was festooned with signs announcing huge markdowns and saying, "Take an additional 40% off at checkout." I took advantage of this to replace some lost winter gloves and ended up with two pairs, one of which was Isotoner, for $12.

I've never seen anything like it, but since I'm trying to pay off last year's bills, I won't be buying any clothing onlin at any price for the foreseeable future.

[Selatius]

16. It's likely due to a horrible shopping season. Reports said it was the worst holiday sales in 5 yrs.

Many retailers across the board are trying to unload excess inventory or risk high storage fees and lack of space for new goods.

[Selatius]

15. Your credit card can become the shackles of your slavery if you aren't careful.

If you cannot handle the temptation, get rid of them. If you cannot get rid of them for some reason, good luck.

[inMD]

17. "more Americans must live within their means."

ummm, why not live within your means all the time?

For most people in this situation, it's not cuz they can't since now they can, it's cuz they have an addiction to buying. (those that couldn't before, can't now either)

My daddy taught me, "when times are good you gotta save. That way when times are bad, you have savings to fall back on if you need it and if you don't that's when you get the best bargains." Thanks Dad.

I just don't get the "liquidate your equity in your house so you can buy some nice (dinners, ipod, tv, bet on some stocks...take your pick)" mentality.

BTW, these articles are all reprints of Jan 2001 (which I'm sure are themselves reprints). When will we (collectively) ever learn?

[shanti]

29. re liquidating equity...

a coworker did just that a couple of years ago (on her modest property here in cali) to buy a $40,000 acura and other goodies. i just know the s*** is gonna hit the fan and soon!

[KitSileya]

37. Yeah, I betchya there'll be a renaissance for Amy Dacyczyn

and her Tightwad Gazette. Perhaps the numbers aren't as relevant anymore, more than a decade later, but the financial philosophy certainly is! The living below your means adage is a smart one - it's easier, especially for kids, when there aren't feasts and famines in the family. Keeping things on an even keel doesn't make them feel deprived when feast inevitably turn into famine.

[LisaM]

19. Maybe layaway will come back!

I remember how we used to put big ticket things on layaway when I was little. You'd go pay a little every week or month, and when you were done, you got your couch, TV, whatever. Much more responsible.

[fascisthunter]

20. "It's those Cheap Liberals Conspiring to bring the Rich to Their Knees!!!"

pssst - ain't no conspiracy... listen carefully while "I SCREAM IN YOU EAR THAT WE ARE REALLY BROKE!"

[cottonseed]

21. Too bad we can't sell personal treasuries to China.

That would be cool.. The Bush way of borrowing money and passing it off to the next generation.

[treestar]

24. poor things

I bet people all over the world are feeling so sorry for Americans. :sarcasm:

[shanti]

25. your internet is a luxury??

NEVER! it is a NECESSITY that i am more than willing to pay for to the exclusion of other "things"! good grief, it's my library, my social outlet, my shopping center, etc.! a MUST!

[ursi]

32. I agree! It would stay before my TV cable bill would!

[DemReadingDU]

35. The Internet is a Necessity

It is my personal library. It has become something I cannot live without. I have withdrawal symptoms if I have to be gone for even a day.

:P

[Lydia Leftcoast]

38. I'm self-employed, and I get most of my work over the Internet

It's not a luxury--it's a legitimate business expense.

[Skittles]

30. I don't understand why so many people are comfortable with debt

I detest owing money

[Warpy]

31. I agree about the internet service.

Having a window to the whole world kept me at something approaching sanity when I was nearly blind and too sick to work a physical job and living on $800/month, the first $560 of which went to a mortgage. I lived on beans and rice and cheap root veggies for three years, but that cheap DSL was here to stay. It was the second bill I'd pay, after the mortgage and before the water.

I got rid of credit cards in 1991 when deregulation took place and they started insisting on those monthly payments and charging junk fees all over the place. I thought I saw the beginning of a scam and now I know I was right. I get along fine with an ATM card and a junk account to back it up so if a thief manages to hack the number he won't get much.

I still pay cash for most things as it's the easiest way to see where the money is going and how fast. The ATM card goes for online purchases, mostly, since I loathe shopping.

There really is life out there living within your means and not doing emotional shopping. One of the wisest things my mother ever taught me was "It's not a bargain unless you really need it."

Living within my means now means I have money left over to be generous with. Generosity is one of the greatest benefits of having inherited. Plus, I really love beans and rice and the root veggies turn into sweet heaven when they're roasted.

[krkaufman]

33. There may be a resurgence of dial-up users. n/t

[sendero]

34. I use credit cards all the time...

.. but I pay them off monthly. I developed a distaste for paying interest at a pretty young age, I haven't paid any since 1991.

As bad as this downturn is going to be (and it IS going to be bad) there is a silver lining or two.

People are going to learn the value of living within their means, and the value of NOT having Republicans run the economy.