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-- America's Debt = "We're Screwed!"
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Ah good, at least I'm not the only one who thinks there is a distinct lack of financial responsibility amongst the public to curb their excessive spending impulses.
It's not always so much big things like homes, shares and investments that are the problem, but the smaller loans of 'plastic' money and sub primes that are a real killer it seems... and accordingly the ones with the highest interest rates.
I don't know if there's any single reason why people are running out and deciding they need a 50' TV screen, 10 sub woofers in their Honda Civic and spend 15k on designer clothes... when they only earn 30k a year! More than likely a number of factors, high employment, social pressure from peers, influence from the media and especially, easy availability of credit from financial institutions. = all combined
Like all businesses and there's no business like the finance business, forget show business , which sees the market trend and adjusts it's practice to make money out of the trend.

People are generally (though there will always be exceptions) a bit more careful when it comes to the bigger loans as they're in there for the long run and the line of credit is more difficult to get.
There is a real, disturbing trend though even in the normal loans industry to be offering people very long terms credit for housing at a very young age, prime loans that run for 40, even 50 years! Sure the payments are easier but oh dear, they amass an enormous amount of interest, sometimes 2-3x more than the loan was for!!!
If you get offered one of those, say NO.
They even offered someone I know who's a part time law student one for an apartment that was going to run for 40 years, on top of the loans she's already got for university it could left her in debt until she's in her mid 60's. That's a terribly long time.

Another real shock to me is people taking out loans to buy shares, stocks and play around on the share markets, if you do not know what you're doing here you could end up with nothing but debt.
If you're thinking of doing this and you're not 100% sure you know what you're doing, say NO.
Share markets are a bit like a 10 horse race really.
Only 1 horse will win and it's been groomed to do that, there's also the horses that come in 2nd and 3rd, they get a little pocket money to keep them in hay and they're happy.
Then there's the other 7 horses... well, they're lucky if they break even, which is about 3 of the 7 will do that and then there's the other 5 rolling on in like a stroll in the park. Sniffing the grass and there for bragging rights, like most casual punters, they came to try their luck... and what they win won't even pay for the haulage to and from.
Stock markets work when people behave in a certain way, they're bolstered by the tons of faceless punters who turn up for a go and they know what they'll do, how they'll do it and they'll cash in because casual punters are like sheep... sheep in a horse race
They'll bolt and run in certain directions if you entice or frighten them, it's a rough game and like most forms of punting, you're not meant to win.
Yes I know you hear stories about someone who made big on shares, I've made big on shares but that was only because I basically buried myself in a portfolio for years and I tell you what, it's real easy to listen to the trends floating around and dip in. If it's anything to go by and I don't expect anyone to take me seriously (because I'm just some neurotic confused approval seeking mess of a woman /unquote), but I punched out of that early this year before the asian market went splat.
I will not be going near it for at least 18-24 months.

This is turning into a bit longer than I intended, I just feel it's important for people to read and learn about this, because it's a lot more personally relevant to them and will affect their lives much more than some dead people in a foreign country they don't even know and never seen, ever will.
Yes I know it's boring but you will become a fundamental part of your life and how much you enjoy life.
Time to go to bed...

Short version-
Have one credit card, have it with a limit of half what they will give you.
Don't take out sub prime loans
Don't take out loans for the purposes of gambling
Educate yourself on financial responsible activities
Get advice from professional non-associated financial people before dipping your toe into debt.

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Originally posted by Lilith Don't take out loans for the purposes of gambling

ohh ok.

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Originally posted by Sunsnail ohh ok.

You'd be surprised by how many people will do this.
Be it for 'sure fire' investments, shares or even just so their bookie doesn't take out their knees.

I know it sounds like repetitive common sense, but it's also surprising to see how un-common sense is.

To be fair, there were plenty of people on the consumer side of the business who knew very well that they were taking advantage of a unique opportunity (even though they were contributing to the bubble). Recommended reading: Extraordinary Popular Delusions and the Madness of Crowds by Charles MacKay. However, I think that most of the responsibility certainly lies in the hands of the loan originators/backers/securitizers who were so busy chasing yield at any cost that they threw underwriting standards and business ethics out the window (as conveyed so well by the long article I posted on the previous page). It's amazing that www.condoflip.com is still up!

quote:

Originally posted by Lilith You'd be surprised by how many people will do this. Be it for 'sure fire' investments, shares or even just so their bookie doesn't take out their knees.

WOW! I think you hit on a trend that I never even thought of!

I'm not a gambler, so I don't really pay attention, but now that I think about it... POKER! Both online, casino, basement and televised! This is a new trend within the last 10-15 years.

I just remembered the last time I was inside a casino, I saw rows and rows of cash advance terminals and people advancing as much as their card will let them.


Duh! it's so obvious! GOOD post Lilith!

Re: America's Debt = "We're Screwed!"

I think the problem is that too few Americans really know anything about finances. They think wealth comes from getting paid more, getting a raise, promotion, or winning the lottery. No one knows what an asset and liability are.

Problem gamblers aren't something people like to talk about and the behaviour, the high risk, high loss for potential gain takes many forms. The one armed bandits, card machines are the most obvious, a lot of my favorite pubs in Sydney where live bands used to play where gone overnight by publicans simply packing those areas with machines and making a more in a week than a month of saturdays.
The less obvious and to some degree 'invisible' is the online gambling market and share investments (by people who don't know what they're doing), which is done in the home and out of the public eye.
The actual operators of those sites aren't running them as a charity, given some of them are probably away from domestic government regulation and accountability overseas, makes it even more shady... like just who are these obfuscated people running them?

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Originally posted by Shakka However, I think that most of the responsibility certainly lies in the hands of the loan originators/backers/securitizers who were so busy chasing yield at any cost that they threw underwriting standards and business ethics out the window (as conveyed so well by the long article I posted on the previous page). It's amazing that www.condoflip.com is still up!

I agree completely, way back when even
I'm still convinced that the government needs to step in on this at some point to at least control the damage being done which we'll start seeing the worst effects of about 5-10 years from now.
A large amount of people will literally lack the free capital to throw towards investments and we'll start seeing a big downturn as the public neither want to spend (either or credit or otherwise out of fear of getting burned) or have the ability to spend because they'll be locked into the credit cycle of economic poverty.

A real fear is the only real reform I expect to see is pressure from the banks to make debt consolidation and reclamation a much more vicious activity which garnishes wages and makes things like declaring bankruptcy all that bit harder. It'll go to court, they'll look at what you earn, what you have and decide, well there's no need for you to be declaring bankruptcy sir/ma'am so what we'll do is take some of your assets you don't need for employment and living. Then what we'll do is take ##% of your wages you owe to the bank out of each pay check and this will continue for ## years until it's paid back.

quote:

Originally posted by Lilith I'm still convinced that the government needs to step in on this at some point to at least control the damage being done which we'll start seeing the worst effects of about 5-10 years from now.

Mmmmm...Don't know if I agree with ya' on that one. I always get nervous when "The Government" is called in to fix anything (at least in the U.S.) it usually gets bungled, and we end up worse and with a larger federal power base. ie: Dept. of Homeland Security

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A large amount of people will literally lack the free capital to throw towards investments and we'll start seeing a big downturn as the public neither want to spend (either or credit or otherwise out of fear of getting burned) or have the ability to spend because they'll be locked into the credit cycle of economic poverty.

Yes, this is my point exactly, people reaching a point where all credit lines are at maximum and they are unable to pay cash for anything. ie: People who regularly buy groceries with a credit card are reallly at the end of the elastic. Without (responsible)spending, capitalism doesn't work. With irresponsible spending, it "works" all too well.

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It'll go to court, they'll look at what you earn, what you have and decide, well there's no need for you to be declaring bankruptcy sir/ma'am so what we'll do is take some of your assets you don't need for employment and living. Then what we'll do is take ##% of your wages you owe to the bank out of each pay check and this will continue for ## years until it's paid back.

If your scenario happens, this could be a proverbial slippery slope with "The Government" deciding how you live your life and what your spending habits would be. Could you imagine the role of the banking special interest groups, pushing representatives to decide which banks will be paid first.

...But you do have a point..."children" may need to be treated like children.

quote:

Originally posted by zookeeper ...But you do have a point..."children" may need to be treated like children.

I'm still surprised though that governments could do a lot more than they do to at least educate people in spending behaviour, starting precisely with that- children.
Responsible budget management and household finance being taught as a mandatory subject in schools at a very simple and practical level at a young age and go into the more complicated things as they get older like understanding credit systems and how they work, practical management of those and consequences of using them.
Both good and bad.
(Don't get me wrong about saying easily available credit is an 'all bad thing' at all. In the right circumstances you really can make it work in your favour)
Don't know how it is now, but that kind of thing was never really touched on much in high school, I was lucky to pick up business practice at community college and off relatives. With a large percentage of responsible borrowers it will offset the deadbeats so finance institutions don't have to be so pushy about it, it also negates the dodgy credit sales by having an educated populace which know how it works and what to avoid- they'll dry up in short order with no customers

And most importantly, a mandatory education will cross social boundaries which are otherwise limiting people's experience to that of their family and peer behaviour. There's a lot of reasons poor people stay poor and rich stay rich and a lot of it has to do with how they're raised.

Enough 'dirty socialist' ramblings from me though

quote:

Originally posted by Lilith that kind of thing was never really touched on much in high school

All I learned was the basics of managing a checkbook and a some definition of banking terms...that's it really.

quote:

And most importantly, a mandatory education will cross social boundaries which are otherwise limiting people's experience to that of their family and peer behaviour. There's a lot of reasons poor people stay poor and rich stay rich and a lot of it has to do with how they're raised.

The poor and middle class would need to be the most educated, because they need manage their finances directly. Rich people have entire teams of lawyers, financial advisors, power of attorney people, trust officers and so on...

ie: Why is Paris Hilton so stupid?....She can afford to be.

quote:

Enough 'dirty socialist' ramblings from me though

quote:

Originally posted by zookeeper All I learned was the basics of managing a checkbook and a some definition of banking terms...that's it really.

Same here.
Sad really considering how far in debt. my generation is. :sad:
I've learned more about managing personal finances from books and successful business people than school ever did.

I've always believed school only prepares you, truly, for more school.
As soon as you step out of that bubble, you're pretty much on your own.

quote:

The poor and middle class would need to be the most educated, because they need manage their finances directly. Rich people have entire teams of lawyers, financial advisors, power of attorney people, trust officers and so on...

While it's true that the rich can afford others to manage their money, the poor and middle class just don't do the same things the rich do.
It's more a mindset when it comes to managing money more than dumb luck or inheritance (aka Hilton).
Those that come across a windfall but never knew the basics of handling money to begin with almost always end up broke in the end anyways. (Just look up past lotto winners and see where they've ended up after 5 yrs or so).

quote:

Originally posted by Fir3start3r Those that come across a windfall but never knew the basics of handling money to begin with almost always end up broke in the end anyways. (Just look up past lotto winners and see where they've ended up after 5 yrs or so).

Yup. To an extent those uber rich just have a ridiculous cushion of wealth to pad their spending, but at the end of the day they can be equally, if not more, reckless with their finances and can end up in plenty of hot water. Just take a look at Mike Tyson--broke. I mean who blows a fat wad of cash on their own personal bengal tiger for chrissakes? Michael Jackson--supposedly so swamped in debt that he's got very little to his name. Even Donald Trump was once apparently on the verge of bankruptcy not too long ago. Of course one thing those rich celebs can do when they're in a bind is to simply try to use their celebrity power to get back on their feet whether it's by going on the Surreal Life (awful show), celebrity boxing, or some other god awful sellout.

I guess what I'm trying to say is that just cuz they're rich, doesn't mean they don't make horrendous financial decisions, despite having a team of accountants to run their books. They just seem to have more levers they can pull than the average Joe if they get themselves into a bit of trouble.

quote:

Originally posted by Shakka . They just seem to have more levers they can pull than the average Joe if they get themselves into a bit of trouble.

Donald Trump has been in financial trouble before (several times, since 1985) but he does seem to get someone to back him.

If our situations were the same, who would get a loan, me or him? I'd be talking to some banking branch manager, he be talking to the president of the bank. I think that if you make "The Million Club" just once, your social circle can protect you, so if you blow it, they figure you can make it back.

quote:

Originally posted by Fir3start3r inheritance

You made me think of something...

I would love to know the real number of people, in our generation, who are secretly (or not) depending on money they will hopefully receive from dying relatives. Having a plan that kinda' goes like...."Once Great Auntie kicks the bucket, my money woes (credit cards) will be all gone!"

...and who would admit that?


(My relatives all borrow money from me ...uh oh)

quote:

Originally posted by zookeeper You made me think of something... I would love to know the real number of people, in our generation, who are secretly (or not) depending on money they will hopefully receive from dying relatives. Having a plan that kinda' goes like...."Once Great Auntie kicks the bucket, my money woes (credit cards) will be all gone!" ...and who would admit that? (My relatives all borrow money from me ...uh oh)

Where did you say you lived?

quote:

Originally posted by Shakka I guess what I'm trying to say is that just cuz they're rich, doesn't mean they don't make horrendous financial decisions, despite having a team of accountants to run their books. They just seem to have more levers they can pull than the average Joe if they get themselves into a bit of trouble.

It's called offshore, undeclared assets which can't be touched (and taxed) by the domestic government. Risky sometimes depending on the corporate law where you live, but that's why lawyers or even shadier people come into it.
So, if you do manage to burn down the farm so to speak, tap into other sources you have in addition to social networking.

Not that I know anything about it myself!

quote:

Originally posted by zookeeper Donald Trump has been in financial trouble before (several times, since 1985) but he does seem to get someone to back him. If our situations were the same, who would get a loan, me or him? I'd be talking to some banking branch manager, he be talking to the president of the bank. I think that if you make "The Million Club" just once, your social circle can protect you, so if you blow it, they figure you can make it back.

A very good point indeed.

quote:

Originally posted by zookeeper You made me think of something... I would love to know the real number of people, in our generation, who are secretly (or not) depending on money they will hopefully receive from dying relatives. Having a plan that kinda' goes like...."Once Great Auntie kicks the bucket, my money woes (credit cards) will be all gone!"

I actually have been to a business seminar where they did bring up stats like that.
Percentage that believed that before they retire, they'd win the lottery, find a windfall, have family to take care of them or receive an inheritance as part of their financial plan.
It's a lot larger number than you may be thinking...it's sad really...

quote:

Originally posted by Fir3start3r Percentage that believed that before they retire, they'd win the lottery, find a windfall, have family to take care of them or receive an inheritance

***sound of steam escaping***

THIS is the poisoned thinking that is going to lead to BIG, BIG problems in the future!!

Do people know that you have a better chance of FINDING a bag of money, than winning the lottery!! I call the lottery "A Tax on Being Stupid"!

***sound of hair being pulled out***

"Someone to take care of me..." I think this is the single phrase that makes me NUTS! When the HELL did this mode of thought become the norm! I once heard a college speaker advising students to live with Mom and Dad for as long as they would let you. A 35 year old man living in the basement of his Mom's house IS NOT FUNNY!
Even if you are living in a "one room closet", you are living by your own wits and you will be MUCH MUCH better prepared for the various waves of excrement that life throws at you.

AND another thing!....

***bile and blood pressure rising***

Insurance is very high because no one wants to be responsible for anything.

"My insurance will TAKE CARE of that..."

How many people have a ZERO deductable on their car/home insurance?

The first thing asked in business, medical, contracting, entertainment, fundraisers, school dances etc...IS "we need a copy of your insurance certificate"

I don't care for the pop term of "Entitlement Generation" but it does seem to hold a little water.

GIMMIE, GIMMIE, GIMMIE!! I'm here so I deserve it! WHAAhhh

***end of fractured rant***

There is no free lunch, much as many would like to believe it. Gotta love the entitlement mentality. Yeah, we need more entitlement spending! An adult that still needs a babysitter and a nipple to suckle on is absolutely pathetic.

Living in New York, my state, entitlement spending is totally out of control. Gov. Pataki made two medical laws that will put SUCH a hurtin' on the taxpayer and upstate counties, just to please all of the little socialists in New York City, by giving them FREE HEALTH CARE!...on my nickle!

It's not my fault that they choose to live in a city where $30,000 a year is considered "poverty line" and they can qualify for these benefits, where as I have to pay full price for my health care

But healthcare is a whole other thread worthy topic...

I certainly don't don't want this thread to degrade into an Us vs. Them, Rich vs. Poor or a woe-is-me bitchin' session.

I have a prime example of bad spending ideas, in the media....

Has anyone seen the "Life Takes Visa" commercials? Where everyone is going about their business, shopping away, happy music playing, and swiping their visa cards.
A person goes to pay with cash, and the whole scene shudders to a halt, and everyone is mad at the person who doesn't use visa.

This is sending the WRONG MESSAGE to everyone!...and I don't see an end in sight.

Stanley Johnson is my hero.

quote:

Originally posted by Shakka Stanley Johnson is my hero.

I'm not sure what part I should feel the worst about...

1. I watched that 5 times

2. I laughed harder each time

3. I personally know 4 people living like that

4. How the terrible truth is making me laugh

My favorite part is the look he has on his face, and the goofy smile, when he says "I'm in debt up to my eyeballs."

Stanley Johnson is American Dream/American Illusion.

(I've tried Lending Tree...I'm not that impressed)

Stanley's lucky on a couple of counts, the most important being he has a source of equity and would be able to go around looking for premium loans anyway to do some consolidation.
If you're not like Stanley in the add and don't have a source of equity and still up to your eyeballs in debt, you're basically still utterly screwed and will be locked into the cycle of paying off interest without making a dent into your actual loan.

It's why the financially naive come up and say to me-
"Oh Lilith you're in so much debt! I'd never pay that off and how do you sleep at night being caught up in the mechanism of financial interest?"

Admittedly, some nights, I don't sleep crunching numbers and yes that debt is fairly staggeringly large number when I think about it, but I've not been out spending it on Ferrari's, clothes and home entertainment systems. No, my debt is covered by the fact that my properties are worth equity and the income they generate is covering both the interest and the actual loan + associated expenses like insurance, rates and so on. Why I still work is to offset things like inflation and to provide some income for myself and my partner who's still at uni, it's not perfect by any stretch of the situation, but by 35 I don't intend to be working and those debts will be paid off, perhaps sooner if house prices go up and I can make a large enough profit off them.
Debt is a good thing for me and it can be a good thing for other people, if they don't live beyond their financial/asset means and it's given me opportunities to otherwise give myself an income which, given I'm not well educated/qualified, would limit me to a fairly standard working class income.

And I'm still more or less on a working class income and still spend as if I'm on that, but it won't always have to be that way in the future. If Stanley in the advert still refuses to lower his financial bleeding out after consolidation, it's still not going to help him one iota.
It's simply one thing to living how you'd like, making a means to do so to keep that standard of living as a process which is work in of itself outside your day job. But a lot of people skip that process and move straight onto living how they think they deserve, without putting in place the mechanism to do so.

quote:

Originally posted by Lilith I've not been out spending it on Ferrari's, clothes and home entertainment systems.

Americans do have a debilitating addiction to clothes and big screen tv's. Do you know what the mark-up on clothes and shoes is?! These items are the usual fare of the credit card, impulse purchasing.

quote:

but by 35 I don't intend to be working

Ohhh?! Do share your early retirement plan, please.

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living how they think they deserve

That's the main issue/problem with "entitlement thinking"

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