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My parents paid the huge sum of $15k for their house on a 1 acre lot in 1975. If you wanted that today in the same area you'd pay $150k (thats a 1000% increase). That's an outrageous growth in price.
How about the price of cars? In 1975 you could buy an average new car for what? $3k? Now the average new car costs close to $30k. That's a 1000% increase.
Did their salaries increase by that amount over the same period?
YEAH RIGHT!
My mom's salary in 1975 was roughly $10k....when she retired in 2005 it was $36k. So her salary grew by 360% over approximately the same time period. That's a huge disparity. Her salary should have been $100k to actually keep up with the growth in price.
One problem vs 1975, is that people are making poorer choices now. Leasing that $30 k car? Buying one and trading it in every 3 or 4 years? Trading up or down models that are $25 or $35k (when they really can only afford $23)?
People made sounder choices in 1975 and stayed with their cars longer. People understood money better in 1975, they understood what they wanted better.
Also in 1975, people went to cheap colleges that were virtually free. Instead of paying $500-800 a month in student loans (the way so many are now), they were paying 500-800 a month for a home, or they were building a downpayment.
A whole different reality. People had assets and money in 1975. And now the bank has it.
The danger with Cramer IMO is that you waste so much time. He advocates (or he use to) listening to conference calls, following earnings and all this "stuff" in an attempt to be a good investor.But time is money, and it doesn't make sense for most people. The concept of trying to outperform the market year after year is futile to most people, because they don't have the time or inclination.
Suze Orman is a better entertainer, but still its entertainment. I'd rather know the fundamentals of *what's* going on, and *how* vs who presents. If you can grasp the fundamentals, it doesn't matter who's presenting it to you.
-It's true people have short attention spans. And Cramer, Orman are giving people what they want(like the world wrestling federation giving people what they want). But do you want wrestlers giving you financial advise?
Considering the financial mess we're in (a $1.6 trillion deficit), wrestlers shouldn't be our main source of financial information.
Suze Orman doesn't really give investment advice, except at a very superficial level. Most people who watch her aren't even at the level where they could conceive of picking stocks. Her viewers' issues are more about how much money they should spend paying down credit card debt vs. putting it into a savings account so they'll have $100 in the bank in case they lose their job.
Well credit card is a convenience. The problem is people take this convenience and the freedom it offers for granted.
This type of thinking would definitley become a problem. I also think the best way is to paying off the due amount fully in every month.
I think most people know they have to pay the money back, but just keep deferring paying off the CC bills because they don't want to deal with the costs, as it would require them to cut back. Once they get used the the cable with the 100 HD channels, the big screen TV, the 2000sqft+ house, the nice cars, the cappuccinos or the lattes, it makes it hard for them to cut back (it is undesirable) , they think that as long as the balance doesn't get too high they can still pay it back.
Then something bad happens like an accident, or job loss or divorce, and that is what puts them over the edge. There are some cases where they just let the balances grow, and then they go through stages of denial, and so on.
The problem with credit cards was it allowed people to live a lifestyle that wasn't related to their income.
They could max out many credit cards achieving to live the lifestyle they desired.
When credit cards were maxed ,they could re-finance their house cuz houses were increasing in value fast.
The good thing about house values crashing, was that bailout of credit card debt ( refinancing your house/ home equity loan) has ended for many and they will be forced to live their lifestyle based on income/wages rather than credit cards.
The problem with credit cards was it allowed people to live a lifestyle that wasn't related to their income.
They could max out many credit cards achieving to live the lifestyle they desired.
When credit cards were maxed ,they could re-finance their house cuz houses were increasing in value fast.
The good thing about house values crashing, was that bailout of credit card debt ( refinancing your house/ home equity loan) has ended for many and they will be forced to live their lifestyle based on income/wages rather than credit cards.
Great point, that last one. I happen to think that home equity loans are the creation of the devil. Borrowing against a house should be restricted in most cases to making improvements to the house, as it used to be. We made it way too easy for people to use their houses as cash registers, with devastating results for a lot of people. We went on a wild spending spree with borrowed money created from a bubble, and we will be impoverished for a long time afterward as a result. Add what our government is doing on top of that, and we're sunk.
i honestly think that our government is literally trying to sink this country anymore. i can't see any LOGICAL reason for their actions, including the recently enacted health insurance bill. this will FORCE americans to pay MORE for insurance at the same time that we are dealing with incredible overspending with this government.
my question is, what the heck is this government doing? Are there limits? Is there a place where the willpower runs out and sanity takes over? A place where the government draws a line and says "$170 billion is fine, and we'll do $800 billion if we have to, but no way will we do a trillion." Or a place where the government says "OK, we'll do a trillion after all, but no way we will do $10 trillion. The amount of inflation that would create and the damage that would do to people's investments and savings is just unthinkable."
Last edited by floridasandy; 04-04-2010 at 06:29 AM..
To the OP: The problem is convenience. It's convenient to swipe something and pay it off later. The counter to that is management. There's nothing wrong with the convenience provided you manage it properly. Most don't know, or don't care, how to manage their finances. I have friends who go to the movies or to parties or bars every night like clockwork, right after work, and I always ask myself how that's possible. When I come home the first thing I do is review my finances and make sure everything is working in proper order; bills were paid, nothing upcoming that I don't expect, checks cleared, etc. If something seems off, I get it taken care of. Now granted, a lot of these people have roommates which offsets what would probably be their largest expense. I refuse to share living spaces with someone I'm not dating, so every dollar I pay is for my own benefit and is thus higher than most others.
Just recently I made a rather hefty purchase which wasn't immediately necessary, but was good for my health in the long term. I paid that using half with my own cash, half on credit, because my next paycheck will be substantially higher than normal and I know I can afford to pay it off with change.
I also essentially added another ~$300 in ETF fees on credit to my Verizon bill, closing accounts before the contract term was up, because doing so would result in a long term net savings of over $400, probably more once I sell the devices.
I also spent a significant amount of money that I got from my taxes in order to close four of my credit cards, including the one I've had for the longest time and my second highest credit limit. That's going to hurt my credit score temporarily as well as take money away from me that I don't have access to for other purposes. But in the long term it will save me thousands of dollars every year in payments I no longer have to make.
I had the foresight to sit down and do that math and then make those hard decisions to swallow a short term deficit in order to realize a long term savings. Most people only think about short term expenses and would rather pay the low minimum monthlies without realizing that doing so will guarantee you never get out of the hole. I speak from direct experience on the matter.
Like someone said, it's about working credit, sure. But it's also about forecasting and managing your income versus your credit. It's about understanding:
- where you are now (current debt load vs. income); versus
- were you will be (current income vs. future debt, i.e. a home purchase); versus
- where you could end up (i.e. what if you got laid off or disabled or your income went down).
There's nothing wrong with spending money you don't have today if you know for a fact that you will have it in the future. The problem is that people spend and spend and spend without a proper plan for managing the spending. It's not just about the money in your pocket.
To the OP: The problem is convenience. It's convenient to swipe something and pay it off later. The counter to that is management. There's nothing wrong with the convenience provided you manage it properly. Most don't know, or don't care, how to manage their finances. I have friends who go to the movies or to parties or bars every night like clockwork, right after work, and I always ask myself how that's possible. When I come home the first thing I do is review my finances and make sure everything is working in proper order; bills were paid, nothing upcoming that I don't expect, checks cleared, etc. If something seems off, I get it taken care of. Now granted, a lot of these people have roommates which offsets what would probably be their largest expense. I refuse to share living spaces with someone I'm not dating, so every dollar I pay is for my own benefit and is thus higher than most others.
Just recently I made a rather hefty purchase which wasn't immediately necessary, but was good for my health in the long term. I paid that using half with my own cash, half on credit, because my next paycheck will be substantially higher than normal and I know I can afford to pay it off with change.
I also essentially added another ~$300 in ETF fees on credit to my Verizon bill, closing accounts before the contract term was up, because doing so would result in a long term net savings of over $400, probably more once I sell the devices.
I also spent a significant amount of money that I got from my taxes in order to close four of my credit cards, including the one I've had for the longest time and my second highest credit limit. That's going to hurt my credit score temporarily as well as take money away from me that I don't have access to for other purposes. But in the long term it will save me thousands of dollars every year in payments I no longer have to make.
I had the foresight to sit down and do that math and then make those hard decisions to swallow a short term deficit in order to realize a long term savings. Most people only think about short term expenses and would rather pay the low minimum monthlies without realizing that doing so will guarantee you never get out of the hole. I speak from direct experience on the matter.
Like someone said, it's about working credit, sure. But it's also about forecasting and managing your income versus your credit. It's about understanding:
- where you are now (current debt load vs. income); versus
- were you will be (current income vs. future debt, i.e. a home purchase); versus
- where you could end up (i.e. what if you got laid off or disabled or your income went down).
There's nothing wrong with spending money you don't have today if you know for a fact that you will have it in the future. The problem is that people spend and spend and spend without a proper plan for managing the spending. It's not just about the money in your pocket.
People just don't make enough money anymore....wages have not gone up with everything else. That's why people are living off credit cards. Take a loon at Canada, wages are higher than the US , people are more fiscal conservative , its working. Following the example of the Government, Canadians have the most stable Banking system in the world. That reflects on the population as well.
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