I am 25, married and middle class. My wife and I have always been really careful with our money.
We have no loans other than our house and one of our cars, and both of the loans will be paid off in 1 year.
I have no credit card debit and I don’t buy things (other than my house and car) unless I HAVE the money in the bank.
A friend of mine bought a huge house, has a house loan and two equity lines of credit, two car payments and tons of credit card debt.
He has about $600,000 in debt for everything with a middle class salary and a stay at home wife.
He told me he won’t be out of debt until he is at least 60 and lives pay check to pay check.
Everyone I know has SUVs, big houses, and vacations that they can’t afford and can’t pay off.
Why do Americans have so many high purchases when they can’t afford them?
What happened to buying what you could afford, or a smaller house or car?
Why is everyone in competition with having the most stuff?
2006-09-20 05:54:19 · 10 answers · asked by Anonymous in Business & Finance ➔ Personal Finance
Easy credit lines:
Credit available normally to high wage earners made available to to lower wage earners.
Recently, Adjustable Credit lines ( ALM) for the rich, in practice years ago, made for the common folk. Low starting interest rates that escalate within a small period of say, 12 months. Debt amount runs into the billions. The loan ideal for home buyers with intention to pay the principal and interest within 1 to 4 months.
The Federal bank has yet to tighten lines of credit against the protest of all the other banks. Companies that sold ALM find that even the loan interest payment are in arrears and creates accounting problems.
Hope and hope:
The fallacy of equating equity ownership (house) with increased financial wealth. No one heard of Negative equity ?
Now UK house prices in certain areas are soaring sky high; the present US housing market has difficulty moving property. The result of buying a house in the US when prices were up and up, is that one may subsequently find that market value is less than the purchas price. With loan interest rates, people may well have dug a hole they cannot get out of. That is negative equity.
"Consumables"
US has long travelling distances to cover.
Granted, it may be essential to own a near to new car rather than an aging car where your maintenance expenses such as insurance may cost more than your purchase.
Holidays
There are lots of interest free holiday financing.
"I can pay with next month's wages" is ok if your wages do not fluctuate from month to month.
Concept of maximising the line of credit
Buy now, pay later. Works in some instances provided there is a cushion to bail out on.
Case of buying a house is most likely to wait for prices to rise, then sell and make the difference. Provided prices rise and the interest payment does not wipe out any gains from the increase in the price of the house.
Lastly, its the age of self realisation that man is an island.
"I can do it all alone without anyone", a by product of the Thatcherite era, expounded out of context.
2006-09-20 07:03:43 · answer #1 · answered by pax veritas 4 · 0⤊ 0⤋
Nobody is taught to be responsible any more. It's too easy to rack up debt then file bankruptcy and start over again. Also, I think you learn by example and the more people who live in debt, the more children will grow up thinking that's normal and living their own lives that way when they're grown. I don't even believe in borrowing money for a car. A house is the only thing I would go into debt for. I'd rather drive a 5-year-old car that's fully paid for than a 2-year-old car that costs me 50% more than the sticker price by the time I've paid it off with interest and is then worth only a fraction of what I paid. Also, you have an older car and no loan and you have the option of full insurance or limited.
2006-09-20 06:05:09 · answer #2 · answered by auskan2002 4 · 0⤊ 0⤋
Good for you - bad for the economy. There was a generation or so back that did not discuss money - so there is a sever lack of knowledge passed on to the next generation. Credit cards are easy and we like immediate gratification. We mimic what we have seen our parents do. I once saw my father's pride the day he bought his first NEW car for cash. That is the lesson that stuck for me and now I have no debts either. An employee I know only saw his parents buy with credit cards and never saw them pay those cards - honestly he was really surprised when he ended up in the kind of debt you listed. Duh!
So keep up the responsibility and you will live well in retirement - you just won't be driving a private jet now, and that is worth the trade off.
2006-09-20 06:07:03 · answer #3 · answered by justwondering 6 · 1⤊ 0⤋
I am not American BUT am living here for good and I must agree with you.................it is FRIGHTENING how bad it has become, we have other than our normal outgoings NO other things on credit,,,,,.both are our cars are a few years old but are both paid for, plus we have our mortgage which we are trying to knock out as quick as we can, currently 3 months ahead so the next payment will be of the principal, I only work part time and all my money goes to little extras as well as I buy all the presents out of this so Christmas / birthdays do not come as a shock to anyone.
Basically if we can not afford it then we dont get it............but then I lived as a single parent for 13 years and learnt how to be frugal now we have a bit more money am still sort of frugal JUST IN CASE we hit hard times together...........
2006-09-20 06:07:43 · answer #4 · answered by candy g 7 · 0⤊ 0⤋
It's sad, isn't it.
There are several reasons people put themselves in debt--but overspending is just pathetic.
Things like medical bills, though, those can't be helped. The healthcare system in this country is faulty since so many people can't afford it (and insurance is very expensive unless you have a good job that offers it at a good rate). I've heard the #1 cause of bankruptcy in the USA is a medical bill that can't be paid.
I growl every time I see a Hummer. Such a waste!!
2006-09-20 06:03:20 · answer #5 · answered by willow oak 5 · 1⤊ 0⤋
I'm with you. No cash no carry. I am dept free have the clear title to both cars and the house I live in
2006-09-20 06:05:58 · answer #6 · answered by norsmen 5 · 0⤊ 0⤋
Vanity - one the deadly sins
No belief in a higher power
Insecurity
and too much TV
Teh heh hehh - add stupidity
2006-09-20 05:58:07 · answer #7 · answered by Jazz 4 · 1⤊ 0⤋
It's been that way since time began and money was created. It's called,"Keeping up with the Joneses".
2006-09-20 06:03:09 · answer #8 · answered by Anonymous · 0⤊ 0⤋
MAINLY CAUSE THEY WANT IT NOW , KEEPING UP WITH THE JONES , EYES BIGGER THAN THEIR WALLET AND THEN LASTLY PLAIN STUPID . YOU SEE THESE MORONS ON THE FORUM ALL THE TIME LOOKING FOR GRANTS , FREE MONEY , OR A SCAM TO GET OUT OF DEBT . IT IS REALLY COMICAL . I READ THEM FOR THE GOOD LAUGHS .
2006-09-20 12:12:23 · answer #9 · answered by Anonymous · 3⤊ 0⤋
blah blah blah, coming from someone who's generalizing and not thinking.
ever hear of medical bills? emergencies?
taking care of family situations, other family emergencies.
buy a CLUE before you insult people you don't even know.
kids!
2006-09-20 06:32:00 · answer #10 · answered by Anonymous · 0⤊ 3⤋