Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
"consumers rein in borrowing"
Old 10-07-2008, 03:19 PM   #1
Full time employment: Posting here.
Urchina's Avatar
 
Join Date: Feb 2008
Location: Central Coast, California
Posts: 891
"consumers rein in borrowing"

From CNN.com:

Consumer borrowing down for first time in 10 years - Oct. 7, 2008

I wonder how many of the folks who are "reining in borrowing" are doing it by choice, and how many are simply unable to get loans due to the liquidity crunch in the credit markets.

I'm hopeful it's the former, and not the latter....
__________________

__________________
"You'd be surprised at how much it costs to look this cheap." -- Dolly Parton
Urchina is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 10-07-2008, 03:21 PM   #2
Thinks s/he gets paid by the post
OAG's Avatar
 
Join Date: Jun 2006
Location: Central, Ohio, USA
Posts: 2,598
Do not know the reason; but I see it as a GOOD sign anyway.
__________________

__________________
Vietnam Veteran, CW4 USA, Retired 1979
OAG is offline   Reply With Quote
Old 10-07-2008, 03:30 PM   #3
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
This is one of those things that causes pain in the near term but can be very good for economic stability in the much longer term.

It's just unfortunate that it takes something this ugly to teach people about the wisdom of living within their means.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 10-07-2008, 04:04 PM   #4
Full time employment: Posting here.
Urchina's Avatar
 
Join Date: Feb 2008
Location: Central Coast, California
Posts: 891
Quote:
Originally Posted by ziggy29 View Post
It's just unfortunate that it takes something this ugly to teach people about the wisdom of living within their means.
But does it? If the reason you're not out there financing a new Suburban is because they won't give you the financing, you're being forced to wait on a purchase you by definition can't afford. My guess is, though, that no "lesson" is being instilled -- since it's an external set of factors that's affecting your spending power, it seems unlikely that you're internalizing the moral of the story, and as soon as the credit markets open back up you'll be out there playing interest-rate roulette again.
__________________
"You'd be surprised at how much it costs to look this cheap." -- Dolly Parton
Urchina is offline   Reply With Quote
Old 10-07-2008, 04:08 PM   #5
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
Quote:
Originally Posted by Urchina View Post
But does it? If the reason you're not out there financing a new Suburban is because they won't give you the financing, you're being forced to wait on a purchase you by definition can't afford. My guess is, though, that no "lesson" is being instilled -- since it's an external set of factors that's affecting your spending power, it seems unlikely that you're internalizing the moral of the story, and as soon as the credit markets open back up you'll be out there playing interest-rate roulette again.
Some will, some won't. I don't want to throw the D-word around willy nilly, but many people who lived through the 1930s were changed forever. They became much more conservative financially -- saved more, spent less, invested less, stuck more under a mattress, et cetera.

I have no doubt some of this is people who want to overspend but can't get the loan. But I do think at least some of this, if the current economic and market downturns last for any period of time, is "getting religion" about the value of living below your means and having a solid emergency fund, among other things.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 10-07-2008, 10:53 PM   #6
Thinks s/he gets paid by the post
Finance Dave's Avatar
 
Join Date: Mar 2007
Posts: 1,046
Quote:
Originally Posted by ziggy29 View Post
This is one of those things that causes pain in the near term but can be very good for economic stability in the much longer term.

It's just unfortunate that it takes something this ugly to teach people about the wisdom of living within their means.
I read this and thought it was my post. Exactly what I've been saying the past few weeks ziggy, well stated.

This is one reason I did not want the bailout to pass. We need a heavy dose of reality. If the bailout cures everything soon (which I doubt it will), then likely all the yahoos that lived beyond their means before will go right back to it. I think learning this lesson the hard way would be good for us...I'd love to see a lot of people moving in with relatives, fewer people buying SUVs, more Kmart clothes vs. Tommy Hilfiger, more Miller Light and less Heineken, etc.
__________________
Finance Dave is offline   Reply With Quote
Old 10-07-2008, 11:21 PM   #7
Recycles dryer sheets
Gardnr's Avatar
 
Join Date: Jul 2008
Location: ENE MO - near STL
Posts: 424
Quote:
Originally Posted by ziggy29 View Post
Some will, some won't. I don't want to throw the D-word around willy nilly, but many people who lived through the 1930s were changed forever. They became much more conservative financially -- saved more, spent less, invested less, stuck more under a mattress, et cetera.

I have no doubt some of this is people who want to overspend but can't get the loan. But I do think at least some of this, if the current economic and market downturns last for any period of time, is "getting religion" about the value of living below your means and having a solid emergency fund, among other things.
Agreed again on the value of learning lessons in hard times. I just don't think that the average debt-driven consuming American has gone through enough yet (or understands well enough yet) the gravity of our situation to significantly modify their behavior. They're used to relatively mild economic downturns that are softened by lowering interest rates and injecting more easy money and debt into their pockets and our economy.

It will take more of this, for longer, before they truly start getting that new religion. But I'm terribly cynical about this topic.
__________________
Gardnr is offline   Reply With Quote
Old 10-08-2008, 09:02 AM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,484
I think the folks with marginal and bad credit should be thankful for the large screen TVs, vacations, and homes they got they probably didn't deserve.........

I talked to a banker I know, and he said that the HELOC business is on life support, and his bank is only loaning to folks that have stellar credit and a long-term relationship with the bank...........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Old 10-08-2008, 09:37 AM   #9
Moderator
Sarah in SC's Avatar
 
Join Date: Sep 2005
Location: Charleston, SC
Posts: 13,457
This article from our local Charleston SC paper had some interesting insights from the director of a non-profit counseling company as to what brings people to her door:
Charleston, SC Latest Local News: Lowcountry feeling squeeze

There are many others, however, who don't have enough money to worry about losing it in a bearish market. The nonprofit Family Services Inc. in North Charleston has never been busier. Hundreds of folks are coming in every month for help with their home foreclosures and credit counseling.
Debbie Kidd, the director, might be the only person in town hiring. They have 25 people doing the work that five people used to handle, and they could use a few extra hands. She says the instant gratification generation has caught up with people. They have the big houses, the flat-screen plasma TVs, the $600 car payments — and no way to pay for them. Six out of 10 of them, Kidd said, are juggling at least five payday loans.
"To be quite blunt, families are overextended," Kidd said. "They have the I-want-it-now syndrome. They've got all these things but can't afford to pay for them."
Family Services offers credit counseling in Kidd's Homeownership Resource Center, and says they are teaching folks how to budget. The first thing that goes is entertainment and superfluous stuff, like daily trips to Starbucks for some frappin' cappucino thingy that costs $3.50.
People eat out for lunch every day, go out to eat at night, and go to the movies every weekend. Entertainment budgets, Kidd said, add up. When you show that to folks, they are amazed and sometimes horrified.

The fact that 6 out of 10 of them are juggling at least 5 payday loans is remarkable. Let's hope the current "cold turkey" credit cutoff for these folks has a good effect in the end.
__________________
“One day your life will flash before your eyes. Make sure it's worth watching.”
Gerard Arthur Way

Sarah in SC is offline   Reply With Quote
Old 10-08-2008, 11:11 AM   #10
Full time employment: Posting here.
Urchina's Avatar
 
Join Date: Feb 2008
Location: Central Coast, California
Posts: 891
I hate payday loan places. I've never used one but I think they prey on the poor choices and tight spaces people get into, and they charge truly horrific levels of interest. I can't imagine juggling five of those sharks.

I have a lot of sympathy for people who are trapped in a consumer lifestyle (I'm fighting that battle myself to some extent). I don't feel sorry that they aren't going to get their goodies, but I am sorry that they struggle so. My hope is that more are reining in spending because they choose to, because to me that signifies a wider cultural change that I think we need.

Sarah in SC, I've wondered about working for one of those counseling services, because it could be so fantastic to help people make real and lasting change that leads them to a freer life. But then I wonder, would spending all day helping people in horrible messes be a major downer instead? (Moot point, I've already got a full-time job with the kiddos)...
__________________
"You'd be surprised at how much it costs to look this cheap." -- Dolly Parton
Urchina is offline   Reply With Quote
Old 10-08-2008, 11:29 AM   #11
Moderator
Sarah in SC's Avatar
 
Join Date: Sep 2005
Location: Charleston, SC
Posts: 13,457
Urchina, that is interesting, because it is one of the reasons I did the CFP, was the idea that I could work in consumer credit counseling at some point, either paid or as a volunteer.

I think that my frustration level with what I call "stupid spending" would have to be dialed back considerably to be able to assist folks, though. Like my DH has said, "Sarah's got some good information, if you can get past her presentation skills!"
__________________
“One day your life will flash before your eyes. Make sure it's worth watching.”
Gerard Arthur Way

Sarah in SC is offline   Reply With Quote
Old 10-08-2008, 11:33 AM   #12
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,149
Quote:
Originally Posted by Sarah in SC View Post
Like my DH has said, "Sarah's got some good information, if you can get past her presentation skills!"
You mean like looking the client in the eye and screaming, "WTF were you thinking!!!"?
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 10-08-2008, 12:01 PM   #13
Moderator
Sarah in SC's Avatar
 
Join Date: Sep 2005
Location: Charleston, SC
Posts: 13,457
Yeah, well, there's that.
And the chilling look of "you really are a moron, huh?". I'm working on a poker face, but no luck thus far.

I sure hope there is a hell, because payday lenders should roast like chestnuts.
__________________
“One day your life will flash before your eyes. Make sure it's worth watching.”
Gerard Arthur Way

Sarah in SC is offline   Reply With Quote
Old 10-08-2008, 12:06 PM   #14
Thinks s/he gets paid by the post
OAG's Avatar
 
Join Date: Jun 2006
Location: Central, Ohio, USA
Posts: 2,598
There is actually a Ballot Initiative here in OH trying to "limit" these things. The limit is way too little, but it is an attempt to rein them in a bit. Have to see if it passes or not on the November voting.
__________________
Vietnam Veteran, CW4 USA, Retired 1979
OAG is offline   Reply With Quote
Old 10-08-2008, 12:07 PM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
dex's Avatar
 
Join Date: Oct 2003
Posts: 5,105
Quote:
Originally Posted by Urchina View Post
I hate payday loan places. I've never used one but I think they prey on the poor choices and tight spaces people get into, and they charge truly horrific levels of interest. I can't imagine juggling five of those sharks.
If a person is going to a payday loan place they are in trouble. But without them we would be back to organized crime loan sharks. To get rid of them would be like prohibition - people didn't stop drinking instead they went to organized crime.

Credit card interest rates, penalties and other fees are also outrageous.

Payday loan - Wikipedia, the free encyclopedia
Net profitability

A study by the FDIC Center for Financial Research[citation needed] found “operating costs lie in the range of advance fees” collected and that, after subtracting fixed operating costs and “unusually high rate of default losses,” payday loans “may not necessarily yield extraordinary profits.” Based on the annual reports of publicly traded payday loan companies, loan losses can average 15% or more of loan revenue. Underwriters of payday loans must also deal with people presenting fraudulent checks as security or making stop payments.
Critics concede that some borrowers may default on the loans, but point to the industry's pace of growth as an indication of its profitability. Consumer advocates condemn the practice as a whole, regardless of its profitability, because it "takes advantage of consumers who are already hard-pressed to pay their debts".[26]

[edit] Proponents' stance

Proponents claim that cash advance loans provide a service that is not available from other sources. Many credit unions have attempted to offer similar products, but have been unable to do so without government subsidies or grants, a fact that many lenders and reports have highlighted. Furthermore, most of these programs offered by credit unions have ended due to the high default rates of borrowers.[citation needed]
A staff report released by the Federal Reserve Bank of New York concluded that payday loans should not be categorized as "predatory" since they may improve household welfare.[27] "Defining and Detecting Predatory Lending" reports "if payday lenders raise household welfare by relaxing credit constraints, anti-predatory legislation may lower it." The author of the report, Donald P. Morgan, defined predatory lending as "a welfare reducing provision of credit." However, he also noted that loans are very expensive, and that they are likely to be made to under-educated households or households of uncertain income.
__________________
Sometimes death is not as tragic as not knowing how to live. This man knew how to live--and how to make others glad they were living. - Jack Benny at Nat King Cole's funeral
dex is offline   Reply With Quote
Old 10-08-2008, 12:17 PM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by FinanceDude View Post
I talked to a banker I know, and he said that the HELOC business is on life support, and his bank is only loaning to folks that have stellar credit and a long-term relationship with the bank...........
Geee.... just like the "good ole days!"
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 10-08-2008, 12:32 PM   #17
Recycles dryer sheets
Ultimate Cheapskate's Avatar
 
Join Date: Jun 2008
Posts: 134
Quote:
Originally Posted by ziggy29 View Post
This is one of those things that causes pain in the near term but can be very good for economic stability in the much longer term.

It's just unfortunate that it takes something this ugly to teach people about the wisdom of living within their means.
Amen to that. Not to make light of the situation facing those who are truly in need (which isn't, thankfully, the vast majority of Americans), but I think we'll see a number of positive things come out of this downturn, not just a hard earned less about living beyond your means. As I'm fond of saying these days, "I think the current market corrections will trigger some long overdue lifestyle corrections."

In addition to Americans taking on less debt, they're also driving less and starting to eat lower on the food chain (which is not just cheaper, but healthier). They're also staying around home more and spending more time with family.

Gosh, I hate to think of the dire headlines in the months ahead if this continues. Things like: "American Obesity Epidemic Declines" "U.S. Families Closer than in Decades" "Environmental Qulaity Improves and Oil Prices Drop as Demand Decreases" (actually, that last headline is already making its way into the news).

Stay Cheap!
-Jeff Yeager
__________________
Ultimate Cheapskate is offline   Reply With Quote
Old 10-08-2008, 01:18 PM   #18
Recycles dryer sheets
 
Join Date: May 2006
Posts: 144
My parents grew up during the Depression and never forgot the lessons they learned from living through it. My brother and I were raised hearing the stories of unbelievable poverty and struggle. There were no food stamps or welfare. My grandparents did whatever they could to get food on the table and the rent paid. These were horrific times.

Those of us with parents like mine and my husband's, who suffered greatly, taught us to avoid debt and always have a nest egg in a safe place for tough times. My brother and I and my husband's siblings all learned the lessons of our parents and grandparents as I'm sure many of you have. LBYM is survival.

What we need to do for future generations is teach them the same lessons of survival and self sufficiency that have been lost over time. I hope our schools and media and places of worship will rise to the challenge. I'm not sure many parents are up to the task.
__________________
BarbaraAnne is offline   Reply With Quote
Old 10-08-2008, 01:39 PM   #19
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
Quote:
Originally Posted by BarbaraAnne View Post
Those of us with parents like mine and my husband's, who suffered greatly, taught us to avoid debt and always have a nest egg in a safe place for tough times. My brother and I and my husband's siblings all learned the lessons of our parents and grandparents as I'm sure many of you have. LBYM is survival.

What we need to do for future generations is teach them the same lessons of survival and self sufficiency that have been lost over time. I hope our schools and media and places of worship will rise to the challenge. I'm not sure many parents are up to the task.
As I've said here before -- I don't think it's a coincidence that we started repeating a lot of the same reckless mistakes of the 1920s once your parents' generation was increasingly no longer around to serve as a first-hand reminder of the economic hangover that comes from a debt-fueled consumer binge and speculation with borrowed money.

They were, to a large degree, the compass that guided prudent personal finance -- and once they started dying off in large numbers, we were seduced into steering off that course and right back into the abyss that we sailed into nearly 80 years ago.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 10-08-2008, 03:33 PM   #20
Recycles dryer sheets
 
Join Date: May 2006
Posts: 144
Quote:
Originally Posted by ziggy29 View Post
As I've said here before -- I don't think it's a coincidence that we started repeating a lot of the same reckless mistakes of the 1920s once your parents' generation was increasingly no longer around to serve as a first-hand reminder of the economic hangover that comes from a debt-fueled consumer binge and speculation with borrowed money.

They were, to a large degree, the compass that guided prudent personal finance -- and once they started dying off in large numbers, we were seduced into steering off that course and right back into the abyss that we sailed into nearly 80 years ago.
Couldn't agree more, Ziggy.

For those who have never seen "Cinderella Man" with Russell Crowe, it is an excellent depiction of true desperation during the Depression. I highly recommend it. It also paints a positive picture of what true "character" is all about.
__________________

__________________
BarbaraAnne is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
"Four Season" or "Arctic Package" RV reasonable? bamsphd Travel Information 27 03-24-2010 12:36 PM
tiny button fix: "Save" edited comment sometimes = "Vote Now" ladelfina Forum Admin 0 09-24-2008 02:22 AM
"Gut feel" versus "evidence-based" medicine Buckeye Health and Early Retirement 10 11-08-2007 11:21 AM
Anyone notice "Osama" sounds like "Obama" ? Mr._johngalt Other topics 50 10-29-2006 06:41 AM
Book reports: "Blink" & "Tipping Point" Nords Other topics 2 12-04-2005 05:15 PM

 

 
All times are GMT -6. The time now is 07:23 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.