The "New Normal" for our Economy...

[dvcgirl]

No need to worry about me.

I live for both today and tomorrow. Over saving is sacrificing today for tomorrow and tomorrow may never come.

True, and I'll admit, we make enough that we feel fulfilled in our day to day life while being able to save over half of what we make. But that's not possible for everyone. And so as a result, we've got too many people who have been living for today....saving next to nothing for tomorrow.

Let's face it, if a family is earning 50K a year (household income), it's way more fun to spend that 5K a year you should be saving on a new car payment, a trip to Disney world and at the mall. There will always be time to start saving later.....

 

[Colleen27]

You know, hubby and I never took shop or home ec but we are budgeters and savers (w/ nothing but a fairly small home loan and no cc debt) and know a lot about taking care of our home. We learned from our parents. Thus, I don't think home ec or shop should be mandatory. Perhaps, instead, high schoolers should have to take a life-skills placement test (much like a math-placement test) to see IF they need home ec and/or shop. If the skills are not there, then they need to take these courses.

That said, I agree with most of the "gloaters" here on this board. We deserve pats on the back since most of us were giving up "things" while our spend-thrift friends and family had it all (and the debt to go with it). I didn't even have a house until I was 37! But, when hubby and I did buy, we put 25% down and took only a 15 year fixed-rate mortgage that we'll have paid off in 7 years.

I sincerely HOPE that more Americans are going to start living frugally and saving. there could be hope for us all yet.

The problem with expecting parents to teach those lessons is that so many parents these days never learned them! I don't think it would hurt any student, even if they have been taught the basics at home, to spend a semester on basic life skills, but an option to test out of the class is a good idea. Here, kids can "test out" (not via a test, but an exemption) of PE if they play a varsity or junior varsity sport. Creating a similar option for a life skills class would hopefully encourage more parents to go over these kinds of things at home, or barring that, encourage students to get together with friends to learn the material to test out.

I personally don't feel like I have any right to gloat. Yes, we made better choices with our money than many of our friends, but we also had better luck to help us along the way. We're in a good position now, partly because of the things we did without but also partly because we've never experienced a layoff or other job loss, never been hit with an expensive emergency that would have consumed our savings, never been in a position where we can't work. And I just can't ignore that "But for the grace of God" element in our success.

I certainly hope America can adjust to a more sustainable, responsible "new normal", both on an individual and collective level. I'm encouraged by the trends I see around me right now, but it remains to be seen if the frugality of the moment is here to stay or if it is just a passing fad.

 

[Colleen27]

We spend the most money in our lives within the last 6 months. That is where we need to reform our healthcare system. Another place is the high cost of bringing some into the world.

I agree. We went through that with my grandmother in her last years - doctors trying to order invasive and expensive tests to diagnose conditions that we wouldn't have been willing to treat at that point (or for which she couldn't have survived treatment because of other medical issues), wanting to try new treatments when we were very clear on just wanting comfort care, etc. It sometimes felt like the medical profession in general was at war with the very idea of death; the notion that we would allow our beloved grandmother to pass on without trying everything possible to keep her alive just a little longer seemed difficult for some to comprehend. Throw a family that is having a hard time letting go into the mix rather than one who has accepted saying goodbye and you've got a recipe for tens or even hundreds of thousands of dollars of dollars wasted on medical costs at the taxpayers' expense.

I can better understand health care dollars spent at the other end, to bring life into the world or nurture a new life that got off to a difficult start. What I don't understand is the "spare no expense" approach to postponing natural death. There is nothing tragic about a situation like my grandmother's - she lived 90 years surrounded by family, celebrated her 50th wedding anniversary to a husband she loved right until the end, got to see her children and grandchildren grow up and played with her great-grandchildren, and in the end she was ready to let go and be reunited with my grandfather in the next life. It was a long, full life, but all lives come to an end. I'm not sure why we as a culture are so uncomfortable with accepting that or why we fight so hard to delay it by any small measure of time.

 

[fkj2]

You do realize that we are graduating the largest classes ever in the US.

In 2007 we had the most babies born EVER!

http://www.nytimes.com/2009/03/19/health/19birth.html?ref=us


We are in the new baby boom

http://www.examiner.com/x-2370-Denv...ting-Examiner~y2009m3d18-The-new-US-baby-boom

No, I wasn't aware we were in a new baby boom.

How long will it take before the new crop begins producing and consuming? If it's going to take like 18+ years, well, I dunno if I can wait that long.

So, you're pretty confident the trend will continue?

 

[Colleen27]

No, I wasn't aware we were in a new baby boom.

How long will it take before the new crop begins producing and consuming? If it's going to take like 18+ years, well, I dunno if I can wait that long.

And that's why it isn't likely to have much impact on the SS situation. By the time the "new boomers" are seeking full time employment, the oldest of the baby boomers will by pushing 90.

 

[wall*e2008]

No, I wasn't aware we were in a new baby boom.

How long will it take before the new crop begins producing and consuming? If it's going to take like 18+ years, well, I dunno if I can wait that long.

So, you're pretty confident the trend will continue?

And that's why it isn't likely to have much impact on the SS situation. By the time the "new boomers" are seeking full time employment, the oldest of the baby boomers will by pushing 90.

But we are also seeing the baby boom of 20 years ago graduation high school and entering college right now. Why do you think it is so hard to get into many colleges. There are far more applicants than openings.

This current group will help and the ones being made now will help in the future.

The youngest BBers were born in 1964. In 18 years they will be 63 and just starting into the cycle.

 

[Chicago526]

How 'bout us "kids" that were born in the 70's???? (to be more specific the late 70's) (lol) But seriously, I was lucky enough to be raised by my grandparents who were a product of the great depression. Sure we had $$$$ and I had all the trappings of it.... private school, my own car at 16, a horse...etc, the list can go on and on. But, ya know what??? My grandmother NEVER missed the opportunity to use coupons, save her "egg" money and they NEVER let me forget that these "things" were just that... THINGS, and that I was blessed to have them and they had to work very hard to come to the point that they were at.
When DH and I got married (I was 20) I naturally assumed that we would be moving into their large home.... HA! Guess again! In the words of my grandpa, "If your old enough to get married your old enough to live on your own." That was the hardest and best advise I could have been given. They made it very clear that they loved me and that they were always there for me, but it was time for me to be an adult... and I did. Was it always pretty? Nope. (I found out that they sell panties at Walmart and they come in plastic packages... they never came that way at Victoria's Secret ) They offered (and we accepted) to help us set up a budget and that is how we got to where we are today. A lot of work, sweat and tears, but we are succeeding now. "Gamer" has long since passed away but to this day we still take grandpa to Disney with us every year (our treat) as a thank you for teaching me (us) so much.
I think most of it comes from what you are taught as a child, not what you have. Now, my DD has most anything a child could want, but we stress the importance of saving (and she's only 5). Hopefully she will learn, as I did, and not only have nice things, but appreciate where they come from and know what it takes to get there.

I'm a bicentenial baby, so I hear you! My older brothers remember powdered milk and keeping the heat at 55, but I remember having a/c in the summer and my parents taking trips to Hawaii every 3-4 years. By the time I was old enough to notice, my parents were in a much better financial situation and so I'd missed the early "lean" times of building the family finances.

I wasn't spoiled though. I got my first car loan at 22 and bought my first home at 25, my 2nd home at 29. All on my own, no co-signing. I haven't borrowed a dime from my parents since I was 20. I even paid my way through community college and travel agent school.

Yes, I have CC debt, all from our wedding and not from living beyond our means month to month(and I'd do it again in a minute, to use the wedding was worth it), but we're working our way through it and plan to be CC debt free in about 18 months. We'll be car loan free in 6 months.

Most of my friends are similar, they have some debt but nothing huge like you see on financial shows. I know all these young, entitled people are out there, but I sure don't know any personally! I watch these shows, and there are plenty of 40-60 year olds in same boat as the 20-30 year old over spenders. I don't think it's a generational thing at all, really.

 

[Juliet25]

I personally don't feel like I have any right to gloat. Yes, we made better choices with our money than many of our friends, but we also had better luck to help us along the way. We're in a good position now, partly because of the things we did without but also partly because we've never experienced a layoff or other job loss, never been hit with an expensive emergency that would have consumed our savings, never been in a position where we can't work. And I just can't ignore that "But for the grace of God" element in our success.

That's a very good point. I hate the fact that my DH and I have CC debt, but I always realize it could be far, far worse. My DH was diagnosed with cancer six months after graduating from law school. He was working as a law clerk with a very accomodating boss and a supportive co-clerk. He was able to draw his full salary the entire year of his clerkship, even though he was absent 50% of the time. Six months after his diagnosis, I lost my job, and a year later, DH lost his post-clerkship law job. It was just one blow after another.

So while I certainly congratulate others on smart financial decisions, don't assume that those who aren't in your position are in the hole b/c they bought a McMansion they couldn't afford or a drive a tricked out Lexus SUV when a used Ford Escort would suffice.

We all make mistakes, but sometimes it's a run of good fortune or a string of bad luck that determines our circumstances. I feel for those who are out of work right now. When DH and I were unemployed it was frustrating, but the jobs were out there. I decided to be a SAHM, but was able to find a job pretty quickly when I went back into the workforce. Now, I just don't know what these people are going to do.

 

[Juliet25]

Most of my friends are similar, they have some debt but nothing huge like you see on financial shows. I know all these young, entitled people are out there, but I sure don't know any personally!

I'm 33 and I don't know these people either. A lot of my friends have CC debt. A lot of it is from day-to-day expenses...not fancy vacations or nice cars. It has nothing to do with entitlement. Child care, mortgages, and student loans are expensive. Much, much more expensive then they were years ago.

 

[eliza61]

For the last 20-25 years this country has encourage credit spending and we (Americans in general) have gone happily along.

Now I know every one here lives within their means I read all these glorious post about every one here drives a 12 year old car, has tineey tiney houses and kids never want the latest gadgets and no one every buys stuff on credit(and I'm not knocking it, thats your choice) but you must realize that 65-70% of the American population has some sort of consumer debt. That's not saying every one is in financial trouble, just that most americans use credit cards.

The average American household with at least one credit card has nearly $10,700 in credit-card debt, according to CardWeb.com, and the average interest rate runs in the mid- to high teens at any given time.

Here are some interesting facts about our young kids, so it's obvious for all our gloat we haven't done a very good job of passing on our supposedly spend thrift ways.

Adults between the ages of 18 and 24 saw an even sharper rise in credit card debt from 1992 to 2001 -- 104 percent to be precise. It's gotten worse in the last 7 years

Among the youngest adult households with incomes below $50,000 (that's two-thirds of this demographic), nearly one in seven with credit card debt is in debt hardship.

This youngest segment spends close to 30 percent of its income on debt payments, double the percentage spent on average in 1992. http://www.bankrate.com/brm/news/debt/20050117a1.asp full data

We didn't just "Arrive" to this point, our economy runs on spending. So in answer to the OP question, yes we will go back to our spend happy ways. we have no choice, we have created an economy that is driven by consumer spending and unfortunately the only way out of this recession is going to be by shopping, at least in some part.

As soon as the American public feels their jobs are safe, they will be back to spending.

 

[wall*e2008]

For the last 20-25 years this country has encourage credit spending and we (Americans in general) have gone happily along.

Now I know every one here lives within their means I read all these glorious post about every one here drives a 12 year old car, has tineey tiney houses and kids never want the latest gadgets and no one every buys stuff on credit(and I'm not knocking it, thats your choice) but you must realize that 65-70% of the American population has some sort of consumer debt. That's not saying every one is in financial trouble, just that most americans use credit cards.

I for one am not gloating. I do not drive a 12 year old car. I have a 6 year old car and DH has a 4 year old car. Both are approaching 100K in miles. It is obvious that we will be replacing both before they are 12 years old. I do not want to be on a an interstate doing 65 in a car that have over 200K in miles. That is a choice we both make. Newer cars also have the newest safety features and that is important when you drive as much as we do and so much of it on the highways. We also do not live in a small home. We have been lucky to never have to put stuff on a credit card just to make ends meet. We use CCs often and would hate to go to an all cash basis. I would not feel safe carrying that amount of cash. This weekend I have to buy an appliance and I will be charging it. There is no way I am going to be carrying almost $1K in cash and I never bring my checkbook since I would not want to lose it.

The average American household with at least one credit card has nearly $10,700 in credit-card debt, according to CardWeb.com, and the average interest rate runs in the mid- to high teens at any given time.

During the month that I charge my health insurance, car insurance, home owners insurance and our monthly expenses, my CC balance is almost that high. I have the money to pay it off, but my credit report and I am sure the CC debt reporters say I have $10K in CC debt. They have no way to know if I will pay it off or not, so it is considered debt. I think people like myself tend to inflate the CC debt numbers.

Here are some interesting facts about our young kids, so it's obvious for all our gloat we haven't done a very good job of passing on our supposedly spend thrift ways.

Adults between the ages of 18 and 24 saw an even sharper rise in credit card debt from 1992 to 2001 -- 104 percent to be precise. It's gotten worse in the last 7 years

Among the youngest adult households with incomes below $50,000 (that's two-thirds of this demographic), nearly one in seven with credit card debt is in debt hardship.

This youngest segment spends close to 30 percent of its income on debt payments, double the percentage spent on average in 1992. http://www.bankrate.com/brm/news/debt/20050117a1.asp full data

ITA Look at how many say they save but their sibling(s) do not. They had the same parents, upbringing and lesson yet they turned out different. Some lessons one can only learn the hard way.

We didn't just "Arrive" to this point, our economy runs on spending. So in answer to the OP question, yes we will go back to our spend happy ways. we have no choice, we have created an economy that is driven by consumer spending and unfortunately the only way out of this recession is going to be by shopping, at least in some part.

As soon as the American public feels their jobs are safe, they will be back to spending.

ITA we will start ramping up our spending when we feel more secure and we realize we have not bought anything in a while.

The other day they were talking about GM on the news and they said that if the worldwide car sales continued at the present rate it would take us 24 years to replace all the existing cars in the world. I know I will not be waiting 18 years to replace my car and 20 to replace DH's car. Both will probably be replaced in the next 4-8 years. I am sure I am not the only one who will "need" to replace the car.

Forget about getting a used car, since you need a person to buy a new one to get them to sell theirs as a used car.

 

[DISdreamin']

During the month that I charge my health insurance, car insurance, home owners insurance and our monthly expenses, my CC balance is almost that high. I have the money to pay it off, but my credit report and I am sure the CC debt reporters say I have $10K in CC debt. They have no way to know if I will pay it off or not, so it is considered debt. I think people like myself tend to inflate the CC debt numbers.

I always wondered about the same thing! DH and I typically charged anywhere between $2500 and $3500 a month on our credit card, but always paid it in full. Our credit reports always showed high revolving credit balances as the reason our FICO scores weren't higher, thus they interpreted this as us carrying a revolving credit balance of ~$3K continually, where it really went up, then back to zero, then up again. This scenario would certainly inflate the numbers if people doing the statistics interpreted the data the same way!

 

[Colleen27]

Here are some interesting facts about our young kids, so it's obvious for all our gloat we haven't done a very good job of passing on our supposedly spend thrift ways.

Adults between the ages of 18 and 24 saw an even sharper rise in credit card debt from 1992 to 2001 -- 104 percent to be precise. It's gotten worse in the last 7 years

Among the youngest adult households with incomes below $50,000 (that's two-thirds of this demographic), nearly one in seven with credit card debt is in debt hardship.

This youngest segment spends close to 30 percent of its income on debt payments, double the percentage spent on average in 1992. http://www.bankrate.com/brm/news/debt/20050117a1.asp full data

Those numbers surprise me a bit, mainly because that's my generation. Most of my friends are a lot like me - living fairly modestly compared to how we were raised because we all saw first hand the trouble our (mostly single) parents got into with debt. My own family is a rather extreme example, because of our dedication to having time with the kids at the expense of extra income and our decision to live small at home so we can vacation big, but none of my friends are living in McMansions, driving new cars every 2 years, or boosting the latest and greatest electronics thanks to Visa. Somewhere there are a lot of folks my age living it up, but I don't know many of them!

I don't know that American spending will rebound as quickly as some think/hope. For years now, there have been studies going on attempting to measure the relationship between money, spending, and happiness, and the conclusion seems to be that we as a society are so buried in stuff that it is actually making us less happy. I'd like to think that the lesson we'll learn from this is moderation and more thoughtful spending, putting our money to better use overall rather than buying gadgets and trendy objects that we really don't want, won't ever use, and will feel bad about tossing or giving away.

 

[Jennia]

I'll admit that I DO know people like that (all in their 20s). There are quite a few people in my mom's group who go out to lunch every single day and then complain about having no money for a vacation. Or they'll talk about putting everything on the credit cards and paying the minimum, etc. I also see some of these same women NOT saving or being frugal because they're certain that THEIR husbands won't lose their jobs, so why should they bother? In at least one case the family has absolutely nothing in savings, has nothing left in checking at the end of the paycheck, and is still going on outings to the zoo, buying new cell phones, etc, and they don't seem concerned at all.

 

[Ava]

I think a big part of the problem is that our society (in general) has become used to instant gratification. If we want something we want to buy it now, not in a month when we've saved the cash for it. Or we see something that is such a good "deal" we simply can't pass it up, even if we don't have the cash for it at the moment. I'm guilty of this myself, and justify it by figuring I can save the money for it by the time the CC bill is due. So far I've been alright and am CC-debt free, but money is tighter now so I'm trying to reverse my thinking. Save the cash first, then make the purchase. I still want to use my CCs for the rewards, but want to have the cash in the bank to pay them off immediately instead of banking on being able to save the money in the weeks between purchase and bill due date.

 

[fkj2]

But we are also seeing the baby boom of 20 years ago graduation high school and entering college right now. Why do you think it is so hard to get into many colleges. There are far more applicants than openings.

This current group will help and the ones being made now will help in the future.

The youngest BBers were born in 1964. In 18 years they will be 63 and just starting into the cycle.

Perhaps, but you're also seeing an influx of nontraditional students who are returning to university settings and trade schools to acquire additional job skillls. Talk to nearly anyone over age 50 who's seeking employment and I'm sure most will tell you their age is working against them in obtaining employment. Between age 50 and the then full Social Security retirement age of almost 67, well, that's a lot of years to be under employed, if employment can be found at all. Wait until people begin offering in earnest to work for less just to get a job at all. We're already seeing cutbacks in benefits that are being offered.

Those currently graduating will be competing with not only those returning nontraditional students but also with theoretical retirees who actually won't be retiring because they can't afford to.

Graduates won't easily find available positions to fill.

 

[eliza61]

I




ITA we will start ramping up our spending when we feel more secure and we realize we have not bought anything in a while.

The other day they were talking about GM on the news and they said that if the worldwide car sales continued at the present rate it would take us 24 years to replace all the existing cars in the world. I know I will not be waiting 18 years to replace my car and 20 to replace DH's car. Both will probably be replaced in the next 4-8 years. I am sure I am not the only one who will "need" to replace the car.

Forget about getting a used car, since you need a person to buy a new one to get them to sell theirs as a used car.

I don't know that American spending will rebound as quickly as some think/hope. For years now, there have been studies going on attempting to measure the relationship between money, spending, and happiness, and the conclusion seems to be that we as a society are so buried in stuff that it is actually making us less happy. I'd like to think that the lesson we'll learn from this is moderation and more thoughtful spending, putting our money to better use overall rather than buying gadgets and trendy objects that we really don't want, won't ever use, and will feel bad about tossing or giving away.

I don't think it will happen quickly either but I think it will. I'm a sociologist by education so I always look at Americans "attitudes" (drives my dh crazzzzy ) I think one thing that concerns me Colleen is that unfortunately we are old I mean old as in an earlier generation where we can remember old adages like "saving for a rainy day" Heck I remember when banks gave out toasters if you opened a savings account.
Right now, the young adults don't remember so much "saving". They are use to the "I want it now" How did teenagers come to expect $300 coach and prada bags, how did 3000 square feet houses become "Starter" homes.

I'm not sure we can go back to frugality.

 

[Colleen27]

I don't think it will happen quickly either but I think it will. I'm a sociologist by education so I always look at Americans "attitudes" (drives my dh crazzzzy ) I think one thing that concerns me Colleen is that unfortunately we are old I mean old as in an earlier generation where we can remember old adages like "saving for a rainy day" Heck I remember when banks gave out toasters if you opened a savings account.
Right now, the young adults don't remember so much "saving". They are use to the "I want it now" How did teenagers come to expect $300 coach and prada bags, how did 3000 square feet houses become "Starter" homes.

I'm not sure we can go back to frugality.

Interesting. Sociology is a component of my education too, though I haven't finished my degree yet (journalism/sociology double major). And it drives my DH crazy too! I don't think I'm old, though - I just turned 30! That's the new 20, right?

I'll admit, the "starter home" thing puzzles me. I'm guilty of it too, to a degree - our starter home was bigger than the house I was raised in, and our permanent home is bigger still, but they're both smaller than the 2400sq ft houses being billed as starter homes in the new developments in my area. I have 3 kids and don't know what I'd do with that kind of space. I'm practically giddy over having one extra room and a basement with a root cellar at the new house! But I do think that a large and growing segment of the population is ready to embrace a new sort of frugality. I think the language will be very different - "simplicity" not savings as the reason not to buy every latest-and-greatest, "peak oil" and "climate change" as the reasons for trading in the SUV for a car, "energy conservation" as the reason for weatherproofing and turning down the thermostat, "food miles" and "sustainability" as the reason for planting the veggie gardens. But in the end the effect is the same - a less spending-focused lifestyle, which is likely to be painful in the near term but better and more responsible in the long run.

Or maybe I'm just spending too much time in my small town, at the community garden and on sustainable living/urban homesteading sites, and hiding from the more materialistic existence that we moved out here in part to get away from.

 

[dvcgirl]

We didn't just "Arrive" to this point, our economy runs on spending. So in answer to the OP question, yes we will go back to our spend happy ways. we have no choice, we have created an economy that is driven by consumer spending and unfortunately the only way out of this recession is going to be by shopping, at least in some part.

As soon as the American public feels their jobs are safe, they will be back to spending.

Oh, I'm under no illusion that most Americans won't want to go back to their "happy spending" ways. The real issue is whether or not the credit will be available to them. In the short to medium term....it just won't be there.

And like I mentioned in an earlier post...800 Billion was pulled out in the form of home equity in 2005....and just spent. The Mother of All ATM machines churned out 800 Billion bucks. 6% of GDP.....

Four short years later and a little more than 25% of mortgages in this nation are under water. No equity there to be pulled. Lots of other folks aren't under water but probably close to break-even. That's a big deal.

Then read this board alone and see thread after thread where people are complaining about their credit lines being cut.....rates being raised. Factor in the massive amount of regulation occurring in Washington right now that will take a good deal of leverage out of the system.

Will we end up like our Depression Era Grandparents? No, certainly not. And people will spend as long as they feel that their jobs are secure. But I don't think we're heading back to the insanity of the mid 90s through mid 2000s.

 

[MrsPete]

I'll admit, the "starter home" thing puzzles me. I'm guilty of it too, to a degree - our starter home was bigger than the house I was raised in, and our permanent home is bigger still, but they're both smaller than the 2400sq ft houses being billed as starter homes in the new developments in my area.

I think people started buying "more house" because housing was (is) a good investment: You spend the money, you get the practical use out of the house, and you sell it for MORE than you paid! What's not to love? When we were married in 1990 the housing mantra was, "Buy as much as you can as soon as you can." Somehow we convinced ourselves that "maxing out" our mortgage potential was a good idea, and since moderation isn't America's greatest strength . . . a good idea was taken to the extreme.

It's kind of like the concept of student loans being "good debt". I don't know why people buy into that idea. Do you have to pay it back? Then it's NOT good!