Quote:
Originally Posted by GreyWolf
Never really asked friends in the US what they earn  but the majority "appear" to be fairly OK financially - but, looks can be deceptive. There are exceptions where people can be working for the govt - some of these salaries are fairly bad, but they chose that path not for the money tho they deserve much more for the type of work they do.
That savings or contingency ratio is low in comparison to probably most other western countries. Tho noticed in the US, elderly people seem to have a degree of savings set aside for problems - that is prob much the same as other countries and is prob more related to their upbringing and "money values" - old school
Sure... impluse buying based on plastic cards is a killer. Had a meet with a guy who manages assets mainly for US and Canadian people. The meeting was really about potential currency changes, but drifted into the background reasons for this. One thing which has apparently emerged over the last 6-12 months was that there was a change of spending patterns on cards. There is a reduction in impulse/mall spending and the card balances are slanting towards being used to buy necessities - food etc. and also to pay off other debts (or possibly interest on these debts). The conclusion was a tightening up of "free money" and the cards were being used to actually live off.
In your example of $700 "free money" to pay for basics like insurance and food, that sounds very tight and unless that $700 is increased - the next step would probably be to live off cards. If this was remotely near an "average" - it sure does not look good.
There is card debt everywhere - not just the US and some card debt is Europe is totally crazy - can think of one "financial wizard" who, last I heard, is now carrying around $900K debts spread over cards and not one hope in hell of paying them. (He actually won a prize from Amex for being the "spender of the month" or something similar ) But.. that is an exception and although debt balances can be higher - salaries and living costs are pro rata - and probably less chance of defaulting. It may be a Euro culture thing, but there is also a tendency to hit towards debit card use and not credit cards - tho that is slowly changing.
Sounds like it may be time for an advanced look at what matters and possible lifestyle change if the figures don't add up |
I think much our debt problem stems from a few places.
First is that we are raised in a spend first culture. Our entire economy is based on people buying things so from a very young age you are barraged with advertising and sent offers to get credit cards. When you are young and stupid you don't think about the long term problems so it's not hard to find yourself being 22 years old with over 10K in credit card debt that you blew on a stereo, TV and junk you don't need. I was one of those people. When I got out of high school I bought a new car. It was a cheap car that I could afford. within about 3 years I had about 10K in other debt. I just got offered credit cards and lines of credit and I took them all and eventually spent them all and it took me years to pay them all off. now I know better. Many people seem to have what I call the "installment" mentality. They don't look at a car as a 20K purchase, they see it as a $400 a month payment. Never mind that they will end up paying 60K for the car once it is all said and done. I know a lot of people that get a raise and bring in another few hundred a month and then buy something that takes up that money each month. They leave themselves nothing to fall back on. It is almost like having a savings account is a bad thing.
Second, our economy is shifting. Our middle class was built on manufacturing jobs. These were/are jobs that anyone could get with a high school education and after putting in 3-5 years they could earn enough to make a nice middle class living. They could buy a house, get married and raise a couple of kids and be okay. Now those jobs are leaving. Every day companies are shipping those jobs overseas where they can pay some $1 an hour as opposed to $25 an hour and get the same work done. The jobs that are replacing these manufacturing jobs are mostly customer service, sales and retail type jobs. Most of these jobs don't pay anywhere near what the manufacturing jobs do and so people find themselves making less, but with a lot of debt and no way to pay for it and if they want to make more money they will need to go to school and learn a new skill or start a business on their own which is hard to do if you have no money.
Third, people just don't think ahead. A few years back interest rates on home loans were at an all time low so a lot of people bought houses. They bought more house than they really could afford and they bought it on an adjustable rate mortgage. So when rates were low they were fine. now that rates are climbing again and their $1100 a month house payment is now $1600 a month they are not so fine. A friend of mine lives near a new housing development, a few years ago the new houses in a development were bought up as fast as they could build them. Now 40% of them are for sale because the people overspent and can't afford it now.
Ultimately I see our middle class having some serious problems as we shift from being a manufacturing society to an information and technology society. The blame can fall across many different people, but ultimately it falls on the individual who just assumes that everything will stay the same forever, they don't plan for the future and they spend every penny they ever make. I always tell people to live 40% below your means and save the extra money, but for most the allure of the nicer house and cooler car is just too much.