The "New Normal" for our Economy...

[Ava]

Of course there are individuals in every generation who are better (or worse) off than their peers, but LARGE NUMBERS of the people born in "your time" don't have a clue and DO have an attitude of entitlement.

Oh I know that. I have more than one friend around my age who's parents still support them, because their own salary cannot possibly sustain the lifestyle they want/expect.

I learned LOTS from my parents about budgeting . . . but it was sort of backwards. As a teen I realized that though they're good people, they didn't have a clue when it comes to money, and I didn't want to follow in their footsteps. So I read all I could and educated myself.

Same here. My parents were not budgeters or savers, and are just now getting their act together financially in their 50s. My father works for the government, so he should have a pension when he retires, but I've gotten the impression that they don't have much more than that saved for retirement. I'd like to do things differently with my own finances, be able to have a comfortable retirement and not have to work until I'm 70.

 

[Gretchen3ajoshmom]

Sorry if I am gloating, I think I deserve it!

With that said I am planning to go all out on not one, but two trips to Orlando in the next year!!! We can afford to do it and yes, we DESERVE it


Gloat away!!! You are doing great! I will be their in 2012....at least one trip!!

Enjoy!!!

 

[cats mom]

And on a larger scale....how this massive debt burden by Americans in general will impact us all. For selfish reasons, that's why this topic interests me so much. I really and truly believe that we all need to live a balanced lifestyle.....it's not healthy to save every penny we earn. What fun would that be? However, because of the events unfolding right in front of our eyes, whatever you're saving....plan on saving more....because we're just not going to see the the kind of returns we have in the past.

I'm no genius, not by a long shot, but on this front I feel like I can see the future...and it's not a pleasant one for many. And even for people like me and my DH...who have been fortunate and are mega-savers....we'll all be impacted by the deflation of this massive debt bubble.

And I'm afraid our national economy is so dependant on debt, that any type of return to the old rules (or the new normal if you will) is going to cause so much pain in the system, that said rules may be all too quickly abandoned.

Thus my comment regarding what my mortgage broker acquaintance is telling me he is seeing in his line of work vs. what the media is reporting. ie: government funded programs allowing people to buy houses they can't really afford, and also helping put a floor under prices that need to decline, if anyone is going to buy using conventional financing rules that is.

Unfortunately I think the whole financial system is still so awash in ponzi schemes and cheap money that those who are savers; but are interested in safe money investments, will watch their dollars die from inflation.

What to do, what to do?

 

[melancholywings]

As I child of the 80's I think the education system is also partly to blame.
High School doesn't really prepare us to be able to function as an adult - to much of it is focused on prepping kids for collage. Home Ec and Shop should be considered as important as English Lit. But socially they are ranked up there with PE - required but not important. Some people have never been exposed to home and life management. And then these same kids go off to college where they are practically handed a free credit card - on my campus every year they handed out little boxes with a swag item and a credit card. They'd even give you extra swag if you applied on the spot.

 

[Colleen27]

As I child of the 80's I think the education system is also partly to blame.
High School doesn't really prepare us to be able to function as an adult - to much of it is focused on prepping kids for collage. Home Ec and Shop should be considered as important as English Lit. But socially they are ranked up there with PE - required but not important. Some people have never been exposed to home and life management. And then these same kids go off to college where they are practically handed a free credit card - on my campus every year they handed out little boxes with a swag item and a credit card. They'd even give you extra swag if you applied on the spot.

I agree! Here, shop and home ec don't even rank as high as PE - PE is required, the others are not, and in fact kids who are involved in a dedicated elective like band, orchestra, or chorus don't even have the opportunity to take home ec or shop at the schools I attended. The district we live in now doesn't even offer them, having instead consolidated both into an optional, 1/2 year "life skills" class that attempts to cover everything from planning a nutritious menu to sewing on a button to changing a tire to balancing a checkbook. My impression from the kids I know is that only slackers who aren't interested in AP, arts/music, or tech electives take it.

It isn't just the school system's fault. Around here, parents have been the driving force behind that change - they don't want their kids "wasting time" on basic skills that every person really should know when they could be doing something else that would give a leg up in competitive college admissions. Our society in general has come to a point where work is valued by what it pays, and the unpaid work that keeps a household running smoothly and on budget is often degraded and devalued.

 

[Princess_Pris85]

I completely agree with the above two posts. As a recent college graduate, I'm positive that while some of my peers are aware of looming debt and money management, the majority are just not fully aware of what debt really means. We never took home ec or any "practical" home skills - something as practical as budgeting early on, would've probably helped a ton. I can't fault the 18 year old who thinks they've got a great deal going on with Stafford loans when their parents (along with the rest of society) are the ones pushing them to go to the best school they can get in to, not necessarily the cheapest.

 

[wall*e2008]

I agree! Here, shop and home ec don't even rank as high as PE - PE is required, the others are not, and in fact kids who are involved in a dedicated elective like band, orchestra, or chorus don't even have the opportunity to take home ec or shop at the schools I attended. The district we live in now doesn't even offer them, having instead consolidated both into an optional, 1/2 year "life skills" class that attempts to cover everything from planning a nutritious menu to sewing on a button to changing a tire to balancing a checkbook. My impression from the kids I know is that only slackers who aren't interested in AP, arts/music, or tech electives take it.

It isn't just the school system's fault. Around here, parents have been the driving force behind that change - they don't want their kids "wasting time" on basic skills that every person really should know when they could be doing something else that would give a leg up in competitive college admissions. Our society in general has come to a point where work is valued by what it pays, and the unpaid work that keeps a household running smoothly and on budget is often degraded and devalued.

Do you really think home ec taught you anything in the 70s? All we did was make chocolate chip cookies each class.

 

[Colleen27]

Do you really think home ec taught you anything in the 70s? All we did was make chocolate chip cookies each class.

That's an argument for better planning, IMO, not for doing away with the class. I never took home ec because it didn't fit into my schedule, but from friends who did I understand that it covered balancing a checkbook, budgeting, savings/credit & compound interest, energy use/conservation, basic nutrition & cooking, and hand sewing/mending. In a perfect world it would be parents passing on that knowledge, but just as with sex ed, we're seeing that many don't take the time to teach the lessons kids need to be prepared for young adulthood.

 

[fkj2]

Had an interesting discussion with my physical therapist today. He presented a viewpoint that I don't see mentioned often.

As we know, the US GDP is about 70% driven by consumer spending. Demographically, the US has an aging population. While there're still things we'd all like to buy, our biggest shopping days (as boomers) are probably behind us. Not to mention the associated loss (perceived vs. real) that homewners and investors have taken in the markets. As to the younger--and smaller--generations, they've not the financial wherewithall to assume the role as the driver of consumption.

He questioned how the economy could possibly return to its "glory days" when boomers won't buy and younger generations can't. He has a friend who studies behavioral patterns. According to him--and it's all just opinion--he believes this rally the market has currently experienced will be short-lived.

As others here have already mentioned, I don't think the powers that be have grasped the concept that consuming behavior has changed so dramatically, and still think that things will go back to the way they were.

 

[Took]

I agree! Here, shop and home ec don't even rank as high as PE - PE is required, the others are not, and in fact kids who are involved in a dedicated elective like band, orchestra, or chorus don't even have the opportunity to take home ec or shop at the schools I attended. The district we live in now doesn't even offer them, having instead consolidated both into an optional, 1/2 year "life skills" class that attempts to cover everything from planning a nutritious menu to sewing on a button to changing a tire to balancing a checkbook. My impression from the kids I know is that only slackers who aren't interested in AP, arts/music, or tech electives take it.

It isn't just the school system's fault. Around here, parents have been the driving force behind that change - they don't want their kids "wasting time" on basic skills that every person really should know when they could be doing something else that would give a leg up in competitive college admissions. Our society in general has come to a point where work is valued by what it pays, and the unpaid work that keeps a household running smoothly and on budget is often degraded and devalued.

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.

BTW, did anyone see the comments from the Pope on greed? Timely message?

Took

 

[dvcgirl]

Had an interesting discussion with my physical therapist today. He presented a viewpoint that I don't see mentioned often.

As we know, the US GDP is about 70% driven by consumer spending. Demographically, the US has an aging population. While there're still things we'd all like to buy, our biggest shopping days (as boomers) are probably behind us. Not to mention the associated loss (perceived vs. real) that homewners and investors have taken in the markets. As to the younger--and smaller--generations, they've not the financial wherewithall to assume the role as the driver of consumption.

He questioned how the economy could possibly return to its "glory days" when boomers won't buy and younger generations can't. He has a friend who studies behavioral patterns. According to him--and it's all just opinion--he believes this rally the market has currently experienced will be short-lived.

As others here have already mentioned, I don't think the powers that be have grasped the concept that consuming behavior has changed so dramatically, and still think that things will go back to the way they were.

Well, I agree with your physical therapist. The "theory" about how we get back to our "old ways" is to save and invest. And yes, that's wonderful....but how to we get back to 3-4% year over year GDP growth?

The one stat that always blows me away (and it's right from the FED) is how at the peak of the insanity....in 2005, Americans pulled 800 Billion dollars in equity out of their homes....and they spent it. That's nearly 6% of GDP right there. Plus, collectively, we were spending every nickel we made and were carrying a couple of TRillion in consumer debt.

Guess who was doing most of that spending? Baby Boomers. Now the BB are hurting....been burned not once but twice, and are going to have cut back, way back on spending. American business needs to figure out a plan that doesn't involve being the "middle man" between China and customers at Walmart.

 

[wall*e2008]

That's an argument for better planning, IMO, not for doing away with the class. I never took home ec because it didn't fit into my schedule, but from friends who did I understand that it covered balancing a checkbook, budgeting, savings/credit & compound interest, energy use/conservation, basic nutrition & cooking, and hand sewing/mending. In a perfect world it would be parents passing on that knowledge, but just as with sex ed, we're seeing that many don't take the time to teach the lessons kids need to be prepared for young adulthood.

In our school it was manditory and every 7th grader took it. We had four full sized kitchens and we were to cook each class. The only thing an hour age you was time for cookies. So cookies we made. We then took them with us to our next class. The boys would be waiting for us each time to try to get a cookie.

"balancing a checkbook, budgeting, savings/credit & compound interest" should be part of basic math class.

Nutrition was covered in our health classes.

HomeEc was only about cooking.

 

[wall*e2008]

Had an interesting discussion with my physical therapist today. He presented a viewpoint that I don't see mentioned often.

As we know, the US GDP is about 70% driven by consumer spending. Demographically, the US has an aging population. While there're still things we'd all like to buy, our biggest shopping days (as boomers) are probably behind us. Not to mention the associated loss (perceived vs. real) that homewners and investors have taken in the markets. As to the younger--and smaller--generations, they've not the financial wherewithall to assume the role as the driver of consumption.

He questioned how the economy could possibly return to its "glory days" when boomers won't buy and younger generations can't. He has a friend who studies behavioral patterns. According to him--and it's all just opinion--he believes this rally the market has currently experienced will be short-lived.

As others here have already mentioned, I don't think the powers that be have grasped the concept that consuming behavior has changed so dramatically, and still think that things will go back to the way they were.

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

 

[dvcgirl]

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

Well, our new little baby boom aside, it won't skew the numbers much when it comes to our current glut of Baby Boomers hitting retirement age. They'll move through the system like a pig through a python......

Remember, in 1950 we had 16 workers for every American collecting Social Security. By 2008 it was just 3.3 workers per retiree. In twenty years, we're down to 2 workers per retiree. We need to be procreating a whole lot more if we're going to pay 65 year olds a government pension and replace their hips.

And still, SS is relatively easy to fix. Raise the age to 70 or so and drop the benefits....raise taxes a small amount, throw in a little means testing. We'll probably see all of the above by the time they get around to it (if they ever do).

It's the Medicare nightmare that cripples us if we don't cut that *way* back. This is the big problem.....and must be dealt with. Still both programs combined will cost 25% of our tax dollars in ten years if not dealt with.....by 2030 (half way through the BB retirement years), we're at 50%. So, half of our tax dollars will go to caring for the Boomers.

And so, it would be a pretty good idea to be saving as much as you can .

 

[wall*e2008]

And so, it would be a pretty good idea to be saving as much as you can .

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.

 

[Colleen27]

Well, our new little baby boom aside, it won't skew the numbers much when it comes to our current glut of Baby Boomers hitting retirement age. They'll move through the system like a pig through a python......

Remember, in 1950 we had 16 workers for every American collecting Social Security. By 2008 it was just 3.3 workers per retiree. In twenty years, we're down to 2 workers per retiree. We need to be procreating a whole lot more if we're going to pay 65 year olds a government pension and replace their hips.

And still, SS is relatively easy to fix. Raise the age to 70 or so and drop the benefits....raise taxes a small amount, throw in a little means testing. We'll probably see all of the above by the time they get around to it (if they ever do).

It's the Medicare nightmare that cripples us if we don't cut that *way* back. This is the big problem.....and must be dealt with. Still both programs combined will cost 25% of our tax dollars in ten years if not dealt with.....by 2030 (half way through the BB retirement years), we're at 50%. So, half of our tax dollars will go to caring for the Boomers.

And so, it would be a pretty good idea to be saving as much as you can .

I wonder how the current state of American health in general will effect those projections. Will we end up paying more as overweight/obese boomers hit the Medicare rolls as predicted, or will enough of them drop dead prematurely that it actually lessens the anticipated load? My parents and inlaws are at the older end of the baby boom generation (in their early 60s), and I cannot believe how many of their friends are dying or being diagnosed with terminal conditions already. It doesn't seem to me like they're old enough yet to be having heart attacks and fatal strokes and end-stage cancers.

 

[MoniqueU]

I am one of the stupid people that was living beyond my means. The new normal has been quite a shocker to me.For us with kids headed to college and drained 401k due to job losses we are probablu in worse shape then some peple in that article.We are just one job loss away from the cards in our house falling to pieces. I would build up an emergency fund but there is NOTHING left over for that to happen. It seems we are operating on deficit spending andt that is without credit cards to fall back on.

 

[MermaidsMom]

Well, our new little baby boom aside, it won't skew the numbers much when it comes to our current glut of Baby Boomers hitting retirement age. They'll move through the system like a pig through a python......

Remember, in 1950 we had 16 workers for every American collecting Social Security. By 2008 it was just 3.3 workers per retiree. In twenty years, we're down to 2 workers per retiree. We need to be procreating a whole lot more if we're going to pay 65 year olds a government pension and replace their hips.

And still, SS is relatively easy to fix. Raise the age to 70 or so and drop the benefits....raise taxes a small amount, throw in a little means testing. We'll probably see all of the above by the time they get around to it (if they ever do).

It's the Medicare nightmare that cripples us if we don't cut that *way* back. This is the big problem.....and must be dealt with. Still both programs combined will cost 25% of our tax dollars in ten years if not dealt with.....by 2030 (half way through the BB retirement years), we're at 50%. So, half of our tax dollars will go to caring for the Boomers.

And so, it would be a pretty good idea to be saving as much as you can .

Please give us back all of the cash we have been forced to give to the system before they change the rules and decide we are now too rich to receive the benefits from it. We have given the maximum amount into the system for 40 years....with the understanding that it's OUR money, a savings account for our retirement years.

Please don't be so quick to give away other peoples money. That's how we got into this mess.

Just because politicians have used it to get themselves reelected does not mean we deserve to have it confiscated from us now that we are nearing retirement age.

 

[wall*e2008]

I wonder how the current state of American health in general will effect those projections. Will we end up paying more as overweight/obese boomers hit the Medicare rolls as predicted, or will enough of them drop dead prematurely that it actually lessens the anticipated load? My parents and inlaws are at the older end of the baby boom generation (in their early 60s), and I cannot believe how many of their friends are dying or being diagnosed with terminal conditions already. It doesn't seem to me like they're old enough yet to be having heart attacks and fatal strokes and end-stage cancers.

My grandfather once told me (not sure of his source) that if he got to 65 then he had a high probability to get to 75. Many of his generation passed in their early 60s. My uncle died of cancer (and he had great health insurance) in his early 60s as did his father (my grandfather). So far all the rest have lived past their early 60s. Many are into their 70s now and of the other grandparents all were into their 80s. For my DH his dad dies in his early 60s (we make sure he is seen often by a Dr. to get him past his early 60s) and the rest of the mom, aunts and uncles were into their 80 and some even into their 90s. From the people I know my grandfathers statement does hold true.

I once read an article that replace smoker with obese in your statement. About 1/3 of all smokers die before retirement. FIL was the only smoker of the ones I have talked about.

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.

 

[wall*e2008]

I am one of the stupid people that was living beyond my means. The new normal has been quite a shocker to me.For us with kids headed to college and drained 401k due to job losses we are probablu in worse shape then some peple in that article.We are just one job loss away from the cards in our house falling to pieces. I would build up an emergency fund but there is NOTHING left over for that to happen. It seems we are operating on deficit spending andt that is without credit cards to fall back on.

I wish you the best of luck.