The "New Normal" for our Economy...

Discussion in 'Budget Board' started by dvcgirl, Jun 23, 2009.

  1. dvcgirl

    dvcgirl DIS Veteran

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    I read financial news and listen to the talking heads on CNBC....and the deeper analysis on Bloomberg.....and I hear some talking about this "new normal" that we're going to see in our economy. Basically, a much slower rate of growth. Then there are those that simply see this is as a bad recession from which we'll emerge and go back to our happy spending and consuming ways.

    Well, I'm in the "new normal" camp. I just read two articles....back to back on MSNBC about people in massive credit card debt. And still, they don't seem to fully comprehend how much trouble they are in. One woman is 65K in CC debt. A full 2/3 of her net income goes to paying her minimums. She's 43 and a state worker in California.....not exactly a good employer to have these days. Her pension is about as safe as that of a GM retiree. Mary Uhazi seems almost baffled that she has nothing to show for the 60K in debt. Oh well, the good news is that the reporter tells us that Mary has cut back on eating out. I had to laugh out loud.

    The next couple is pictured sitting in their RV....62 years old and $87,000 in CC debt. The first line of that piece was this...."Julie Hamman knew she had too much credit card debt." Oh, do ya think??!!??? Geez, what exacty does Julie expect will happen?

    And I listen to Dave Ramsey and callers phone in with tales of incredible debt. For as much as some of us have been talking about this for years around here.....and waiting for "the day of reckoning" to come.....well, now that it's here, it's pretty darned sobering.

    I just think that there are so many Americans carrying so much debt and that many are still sort of walking through life in a fog thinking....."is this really happening?". They've been cut off in most cases, and their interest rates are climbing. They simply can't spend anymore.

    Sure, it seems like we've averted the complete market meltdown that we were facing in September and October of 2008. But the effects of those days and the massive credit contraction that is a direct result of that event....well, we're going to be feeling that for a long, long time.
     
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  3. blaze1599

    blaze1599 Earning My Ears

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    What scares me the most about this is in 30 years or so that people so far in debt that the government will have to help them exist. Not that this is wrong but for those of us who try to live right and save money to take care of ourselves will be penalized in some way for this effort and sacrifice earlier in our lives. This seems to be the way things go now. Just completely screw up the govt will bail/help/something to fix the mess you yourself have created and then those that struggled and sacrificed will get no help since they are not in as much trouble. Maybe its time to let them got to complete ruin and let those that can stand stay standing and those that cannot must make choices to get themselves back up.

    My two cents
     
  4. jennyopenny

    jennyopenny Mouseketeer

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    It really is scary.
    I am by no means perfect, but at at least I try. No c/c's, but not great at building up a large savings either.

    My parents got a travel trailer/rv thing a few years back. After a down payment, they will make payments for another three years. (a total of five) It in no way stretches their budget. On the flip side, their friends got one-
    a much nicer, bus type rv. They will pay around $1000 a month for the next 15 years!!! Thes people will be dead, or too old to drive, and still paying on this monster.
    It just blows my mind. :scared1:
     
  5. secretpantssam

    secretpantssam DIS Veteran

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    I can't imagine being in that kind of debt. $60k?? That's insane! But I do fear that some people are trying to change their habits now, but once they pay down their debt and get better jobs in the future, they'll go right back to spending.

    I just really hope that everyone learns from this and we can start being more financially responsible as a country.
     
  6. MrsPete

    MrsPete DIS Veteran

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    I am with you in the "new normal" camp. Well, actually, I think it's more of getting back to the "old normal".

    For the last 20-25 years we've been in a bubble of excess spending-consuming. It's easy to see things that triggered the change: Much of it started in the 70s when large numbers of women joined the workforce (and families had greater resources at their fingertips), and it was fueled by the deregulation of banking, Clinton's rulings that essentially made it impossible for banks not to loan money, and credit cards became easy and accessible to everyone -- even people who couldn't pay. Technology provided us with an ever-increasing array of products that we "needed", and advertisers fanned the flames by convincing many people that they "deserve" this or that item. The nail in the coffin was the general public's acceptance that "everybody has debt" and the loss of the idea that one should work towards being debt-free.

    Our experiences over the last 20-25 years have not been normal. As a country, we have been leading a lifestyle that cannot continue. We cannot borrow, borrow, borrow and expect it not to catch up to us. We as a nation -- and specifically the people like the ones you mentioned in your post -- are going to have to adopt frugality again. I do not think we're going to be able to return to the bubble in which we've been living; our wallets coudln't support it then, and as a nation our credit can no longer stretch that far.

    So the "new normal" is really more of a matter of getting back to old-fashioned values. We have to accept that our toddlers might not wear leather jackets. We might have to cook at home occasionally. We might have to accept that cruising the Caribbean is a splurge rather than an every-year vacation. We might not be able to trade in our car every two years.

    We're going to have to live within our means -- that's the new normal. Just like Americans did for generations before us.
     
  7. extremesoccermom

    extremesoccermom DIS Veteran

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    I just can't imagine. My parents were and are savers they paid for things with cash. I am the same way. I may buy a big purchase with free financing (like my car- 10 years ago) but I make sure I can pay if off before the end date.
    However, I see this distructive pattern in both of my brothers and to a smaller degree my sister. I just don't get it. One even filed for bankrupcy and had done it again. He now has a failing business and is getting married to a very nice woman with 2 daughters and no job.
    They all owe my parents for items they have bought and no longer have (cars, homes..) I can't believe my parents keep bailing them out! My parents are in their 70's and the kids are in their 40's. Get real!!

    My son 19 in college wants to move out. He has no job and I refuse to cosign anything. He shows no inititive and I refuse to pay for anything other than food and shelter. WE are very lucky that he is able to go to school for free (I have worked for the university for 19 years). All we pay for are lab fees, books and parking. He was whinning to me yesterday about not having any money. I listened and I will help him make a budget but the money well is empty as of high school graduation. He has known this since he started high school and I do not feel one bit sorry for him. (Thank goodness he doesn't have a credit card).
     
  8. punkin

    punkin <font color=purple>Went through pain just to look

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    I am not sure there is a "new normal." Those of us who hang out on the budget boards never bought into the old normal, but the majority of the people out there are still spending like there's no tomorrow. In my area, some stores and restaurants are going out of business while others are still filled to the rafters. I figure the people who lost income are going to tighten their belts, but the vast majority who still have income coming in will continue to party.
     
  9. luvmy3

    luvmy3 <font color=green>When I drink I find its easier t

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    I hope so :thumbsup2
     
  10. MrsJD

    MrsJD Boat...I saw a boat...

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    My Dh and I have not yet felt too much of the economic stress. We own his business and I work for a small business...either of which could go sour at any given time. I feel very lucky to be in the position we are in when I see all the doom and gloom on the TV. But with that being said, when I look around at my friends and family, none of them have lost thier jobs or suffered terribly. So it makes me wonder if it's really as bad as everyones makes it out to be.

    As for the "new normal" I agree with the posters that said it is more just going back to traditional values and ideas. We've never bought anything we can't afford. Sure I have a mortgage on my house and a boat payment, but both are within reason. When I see people buying houses with $1400 a month payments, and they only have an income of $40,000- I have to wonder what the heck they are thinking. The only people that can be blamed for this situation in the American public in general. Most of us are in debt. And I fear that those of us that have been responsible for our whole lives are going to be the ones that pay for the mistakes that were made by others. On one hand I feel confidant b/c my assets far out way my debt, but on the other I fear that the social crisis will drag me down.

    So, I try to ignore it all and concentrate on my personal finances and live my life the best I can.

    I think I have no point here, but wanted to add my two cents!
     
  11. kelleigh1

    kelleigh1 <font color=purple>Disney Baby<br><font color=gree

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    I have been in debt for far longer than I'd like to think about, but I am at the point now where I can see the light at the end of the tunnel. And that feels great!

    I am angry at myself for getting to this point and I refuse to let it happen again. I have 2 sisters. The older had some financial issues in the past, including a bankruptcy, but she worked out of it and her family is in a good place financially. She doesn't have to worry every time she goes to the grocery about what she can afford. She still uses coupons and shops smart, but if she sees something she really craves, she knows she can afford to buy it.

    My younger sister is the opposite end of the spectrum. They are in terrible debt and can barely live paycheck to paycheck. In fact, they play the game of which bills get paid each month - and yet they don't seem to know how to stop the unnecessary spending. They get lazy and don't feel like cooking dinner, so they order out. She just doesn't get it.

    So I see how both sides live and I know how I live, and I refuse, absolutely refuse to fall to the bottom where my younger sister is. And I've promised myself that when I get my debt paid off, I will not fall into that trap again. The credit card will be for emergencies only (car repairs, etc.) and everything else will be paid with cash. I will plan vacations on what we have or can put away between the time we plan and the time we leave. (We did that for our last Disney trip and it felt amazing!)

    I'm glad that I started making changes long before the current financial crisis. I just wish that I hadn't allowed myself to get into this trouble in the first place. But I can proudly say that I have never missed a payment, been late, or had to borrow money from someone else to pay a bill.
     
  12. EthansMom

    EthansMom <font color=red>spare yourself from asking me to d

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    At least half the people I personally know who are in their late 30s and early 40s (my peers) have been living beyond their means (funded with debt) and have given little to no thought to funding their retirement or saving for their kids' college. It's not that these folks don't make good money because the ones I know are largely making good incomes and could be living well enough. But they feel entitled to have everything that the Jones' AND the Smith's have... and aren't willing to delay their gratification one minute.

    I can easily forsee us having a society in about 20-30 years where we have a large population of folks who are "have-nots" whose children can't afford college, who aren't able to retire, and who have very little equity due to many bad financial decisions in their 20s, 30s or 40s and a smaller population of "haves" who have lived within their means and saved diligently and who will be taxed at dramatically higher rates than currently in order to help bailout our less prudent citizens.
     
  13. gilby

    gilby DIS Veteran

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    We need to teach our kids from the time they are small, that they don't need everything that every other kid has. This is part of the reason why people are so far in debt, the neighbors bought a new vehicle, we need one, they are building a 400,000 dollar house, we will build a 500,000 and the list goes on. People can only blame themselves not anyone else, there is a point in your life that you just have to say NO. We live in a 114,000 dollar house and you know what, it does the purpose, It is fixed up and does the purpose of a house that is 300,000 and guess what we can still enjoy life, pay groceries with cash, buy furniture with cash.
    AND WE ARE HAPPY AND WE CAN SLEEP AT NIGHT NOT WONDERING WHERE THE NEXT DOLLAR IS COMING.
     
  14. thebeesknees

    thebeesknees DIS Veteran

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    I agree. My parents taught us this when we were little and I am so grateful to them for it. If we wanted a toy, movie, etc., we were told, "It's your money, honey." My mom cooked at home every night so we hardly ever ate out, we used lots of coupons, drove older cars, and hardly ever felt like we were missing out on stuff. Now that I have my own family, I'm glad I have my parents' example of living within a budget. Even with lean times, my DH and I have been able to meet our obligations because we were trained to live within our means since we were small. I hope I can teach my children the same.
     
  15. disykat

    disykat DIS Veteran

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    Exactly! I'm old enough that I just shake my head at what people consider normal.
    When I was a college student, things like vacations, new furniture, eating out, etc. just weren't things that were even in my peers vocabulary.
    When I was in my 20's, everyone I knew had roommates and still had bricks and boards bookshelves. The switchover to an "adult" lifestyle was gradual. In order to get a credit card, I had to start with a store credit card (I applied for several before getting one), then get a gas credit card, and finally, after establishing a trail of credit - I was able to get a VISA card.
    When I bought my first house (at age 30) everyone I knew was buying fixer upper "starter homes."
    Although there were certainly technological advances etc., my experiences were somewhat similar - in terms of my expectations for living style - to those my parents experienced decades before.

    THAT used to be normal!
     
  16. kelleigh1

    kelleigh1 <font color=purple>Disney Baby<br><font color=gree

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    :thumbsup2

    My parents taught us how to earn the money to get the things that really mattered to us. We didn't have the biggest and the best. We had what we needed. As teens, designer jeans and name brand sneakers were the big things. If we wanted Calvin Kleins or Nike, the deal was that my parents would pay up to what they would have spent on the KMart brands and we had to come up with the rest. It really taught us how to save and how to work for what we wanted.

    It is very important to teach kids these lessons now. For everyone who wants to give their kids everything, they aren't doing them any favors for the future.
     
  17. m&m's mom

    m&m's mom <font color=deeppink>Waiting for the waterless cru

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    I just feel so frustrated. It was sooo not easy doing the right thing.
    We bought a much cheaper 1st house than our friends and our 2nd is cheaper than others.
    Now we owe way less on our house than our friends and neighbors. We bought a $225,000 house and put down $80,000. I know a lot of people that would have put nothing down and bought a $305,000 house.
    There is a couple one house down that the wife has always stayed home and they are HUGELY in debt w/ CC. Now their ARM is readjusting and they do not have the rating and income to re-finance. They will probably file for bankruptcy and keep the same house, cars etc they have now except they will "have a clean slate".
    Make homebuyers put at least 10%. That way you have a vested interest in the house and you have a little more wiggle room if the value decreases.
     
  18. Ava

    Ava DIS Veteran

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    :thumbsup2

    My parents didn't teach me a lot about budgeting (so I'm trying to learn now), but they did teach me that I can't have everything I want. I learned to make choices, and to save my own money to buy things I wanted. I also learned to value and take care of the things I had, because I knew if something broke or was lost I wouldn't just get a new one.

    I hope I can teach my children the same values, because I know more than one adult who needs the lesson. Let's just say that a person in her late 20s with a full-time job should be paying all of her own bills, not charging designer bags and the new iPhone on daddy's credit card. :sad2:

    I actually take pride in supporting myself and my family. Sometimes I wish I was a trust fund kid, or had parents who could afford to support me, but then I realize what a different person I would be if that were the case.
     
  19. crisi

    crisi DIS Veteran

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    Hopefully, this means that credit will tighten, that credit card companies may finally be forced to take some responsibility for the credit they extended, and it will no longer be possible for a dog to get a credit card. Short term, that means a lot of pain as the economy "rightsizes" itself - but long term that is a much healthier situation.
     
  20. PrincessDadx2

    PrincessDadx2 Openly has the hots for Wuv Tigger

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    Well, the good news is if these two people owe $152,000 in credit card debt and the US average is ~ $8,000 then there are 17 other families with $0 CC debt :goodvibes

    Most are probably on this board :lmao:

    I feel sorry for people born after 1980. I lived through the oil shocks, Carter inflation, and Reagan 20% interest rates and learned that the good times won't go on forever. Save in the good times so you can make it through the bad times.

    I am amazed by the people who made $500k per year selling real estate or making mortgages and spent all of it plus extra going into debt. Now they are bankrupt, stupid :confused3
     
  21. wall*e2008

    wall*e2008 DIS Veteran

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    They are. Look at all the complaints here on the BB where the CC was near it's limit, the person makes a huge payment so they have "room" on the card for the next purchase and then the CC company lowers the limit the day after the payment is made.

    The person is mad they are not "out" the money and don't ahve the item they wanted to buy. In reality they have less debt, but they don't see it that way.
     

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