Yet another stupid debtor and retirement account raider!

[ladypatriot]

I read the article by Morgenson, watched the videos, read David Brooks' opinion on the article, and finally read through the posts on this thread. I spared myself the slog of reading through the article's comments section.

I feel compassion for Diane McLeod, and for the millions of other people just like her. It must be frightening to lose everything because of one's own foolishness. We cannot see the weight of that reality through a video or sense it through the reporter's words.

While I feel compassion for this woman, she alone bears responsibility for her situation. I honestly don't blame the credit card companies; they do what they do to increase profits for their shareholders. Without shareholders, the company collapses. If the company collapes, shareholders lose their money. Without credit companies, people who need money for unforeseen situations (emergency car repair, emergency dental work, etc.) can't get a legal loan. Credit card companies are supplying a product people demand.

Buyers of products are responsible for understanding what they are purchasing, and in accepting the terms of payment. Did Diane McLeod understand the type of handbags she was purchasing? It seems so; but it also seems that she gave less consideration and thought to the credit product she was purchasing than the handbags.

When the reporter, Morgenson, comments that people need credit cards to "make ends meet," I wonder why those "ends" are so far apart. People who need credit cards to "make ends meet" are different from people who use credit cards to cover a temporary cash shortage due to an emergency situation. The former are those for whom credit card debt is a way of life.

DH and I have financial independence. We are completely debt-free; no mortage, no car payments, no credit card debt. And while I feel good about that, I also remember what it was like to be ass-deep in debt. I never want to be in that place again. So I can't bring myself to sneer at Diane McLeod. She is a foolish woman, and she's likely very frightened.

 

[rs0460a]

cut her at least that slack. That is "all I ask".

I'm getting too old ...

When I executed my first mortgage/note, I had to have 20% down (no exceptions). This was in the early '70's.

There was no such thing as PMI (I had to laugh when I first read about it).

Had no credit cards until the mid '70's, after being married, owning my own home, and being on my own. I'll admit that I ran into "trouble" early on. Did not understand that CC's actually represented money (duh) and had to be repaid.

While I can easily "condem" the women in the article, I won't. I'll admit that the "temptation" in the financial markets compared to many years ago are quite different. It's very easy to get into trouble, very quickly, in today's "mindset".

Sometimes "progress" is not necessarily good.

Oh BTW, my last mortgage/note on the home we built (our current home in retirement) had a "down payment" of over 50%. 30 year mortgage/note at 6.875%. We paid it off in 5.5 years (I know, that's another thread ). And yes, we are completly debt-free.

- Ron

 

[youbet]

"As through this world I've wandered, Ive seen lots of funny men,
Some will rob you with a gun, and some with a fountain pen."

Woody Guthrie

 

[HFWR]

A man with a briefcase can steal more money
Than any man with a gun...

Don Henley

 

[youbet]

But the man with the gun gets hung.....
The man with the briefcase gets "bailed out!"

 

[youbet]

"now, a very great man once said
That some people rob you with a fountrain pen.
It didn't take too long to find out
Just what he was talkin' about."

Bob Dylan

 

[mountaintosea]

Yes the picture is worth a thousand words... isn't it? She appears to have issues with self control. She eats too much, exercises too little or not at all. So why wouldn't her reluctance to take control of her health spill over into finances? And probably a lot of other areas of her life?

Now that I think about it, there's a few people I know when faced with either eating healthier and exercising...chose the pills the docs handout instead. Those same people are not good with their finances either.

 

[youbet]

Yes the picture is worth a thousand words... isn't it? She appears to have issues with self control. She eats too much, exercises too little or not at all. So why wouldn't her reluctance to take control of her health spill over into finances? And probably a lot of other areas of her life?

Now that I think about it, there's a few people I know when faced with either eating healthier and exercising...chose the pills the docs handout instead. Those same people are not good with their finances either.

So......healthy, thin folks with good nutrition and exercise habits should be FIRE'd? Or......they're healthy and thin but have their heads up their butts about finances? If you're overweight, like Big Macs, drink a six pack every night but are comfortably FIRE'd, does that mean you have to give the money back and go to work? This is all very confusing..... Are there rules written down someplace to clarify?

 

[Westernskies]

I'm getting too old ...

When I executed my first mortgage/note, I had to have 20% down (no exceptions). This was in the early '70's.

There was no such thing as PMI (I had to laugh when I first read about it).

Had no credit cards until the mid '70's, after being married, owning my own home, and being on my own. I'll admit that I ran into "trouble" early on. Did not understand that CC's actually represented money (duh) and had to be repaid.

While I can easily "condem" the women in the article, I won't. I'll admit that the "temptation" in the financial markets compared to many years ago are quite different. It's very easy to get into trouble, very quickly, in today's "mindset".

Sometimes "progress" is not necessarily good.

Oh BTW, my last mortgage/note on the home we built (our current home in retirement) had a "down payment" of over 50%. 30 year mortgage/note at 6.875%. We paid it off in 5.5 years (I know, that's another thread ). And yes, we are completly debt-free.

- Ron

This is how it is supposed to work:

1. Get a job
2. Get an apartment
3. Save money for downpayment
4. Work hard to get a better job
5. Save more money for downpayment.
6. Buy first house (starter home) 65K with 20% down, 20 year note
7. Furnish home with hand-me downs and garage sale finds.
8. Work hard at better job.
9. Save money for better house
10. Sell starter house for 100K
11. Buy newer house for 150K, equity from sale of first home as DP.
12. Work harder to earn even more money.
13. Repeat steps 6-12 until you have the $500,000 house of your dreams.
14. Credit cards used primarily for emergencies.
15. Focus on saving, not spending


How it worked in the mid-1990s until 2007:

1. Maybe you have a job, maybe you don't (who cares- no documentation required, anyway.)
2. Stiff landlord on apartment lease.
3. Get a bunch of credit cards and installment loans to “build credit”
4. Change jobs because they expect you to actually work.
5. Borrow down payment on credit cards at 18-36% interest rate
6. Buy the $500,000 house for $600,000 on an inflated contract with a kickback to the mortgage broker, lender, and buyer with no down payment, interest-only adjustable rate mortgage with a 5-year ballon.
7. Use the mortgage kickback and credit cards to buy new furniture, a boat, lots of electronic gizmos and toys, and lease a couple of new cars.
8. Lose job because of mortgage crisis
9. Lose inflated equity in mortgage crisis
10. Walk away from the mortgage because you are upside down on the house. (Bonus round: Strip wiring, plumbing, appliances, cabinets, etc. out of house first)
11. Move into the apartment from step 2…
12. Credit cards used for everyday living expenses.
13. Blame the government, Mortgage Lenders, credit card companies, QVC, Payday Loans, Banks, and predatory loan practices for your predicament.
14. Focus on survival. File for Bankruptcy?

It is a lack of financial discipline, a focus on buying the latest and greatest gadgets, gizmos and games, and the "I deserve it now" mentality that is kiling these folks. The financial instituitons shoulder some of the blame with their innovative marketing , but are mostly responding to consumer demand. If people didn't want these products, they wouldn't be able to sell them.

 

[clifp]

Ms. McLeod, who is 47, readily admits her money problems are largely of her own making.

I wouldn't argue with her.

Me to.

I think this woman was drowning the minute she got divorced. The illness were the lead weight that sealed her fate, but inevitably "her attitude that I'm not good with money" is self-destructive, and some event would have come along that ruined her.

I don't even think that the evil financial institutions are that much to blame.

If she was born several hundred years ago, she be rotting away in a debtors prison. If she lived in Philly in the 1900s, she have the crap kicked out of her by loan sharks.

Some people are born with addictive personalities, short of banning everything that people can become addicted to I don't see any solution.

 

[haha]

With respect, I must disagree here. I believe that is exactly the cause of the problem in the first place. The mind is just like a muscle in the body. It must be exercised to become stronger.

Well, I wonder about this. I think there are limits, of basic mental power and of time to learn all these things that one needs to know today.

How much exercise do you think it would take for you or me be able to do Princeton PhD quality theoretical physics? I know for me, it would be impossible.

Like Delfina said, half the people have IQs below 100, and since the SD is about 15 points, a good slug of these people are 85 and below. They look like you and I; but they really aren't.

No one is asking for any money out of anyone's pocket, or votes to make bankruptcy easier- just a little respect and kindness toward fellow humans. Like Aretha said,-R-E-S-P-E-C-T.

By the way, a very capitalistic and very successful hedge fund operator named David Einhorn doesn't even think that mortgages should ever have been packaged, let alone cut and re-packaged into CDOs.

One of the sharpest minds I have ever run across, Hyman Minsky, predicted in the mid 90s what bailout pickles we would eventually have from not doing some prior regulation.

Ha

 

[NW-Bound]

Like Delfina said, half the people have IQs below 100, and since the SD is about 15 points, a good slug of these people are 85 and below. They look like you and I; but they really aren't.
Ha

I wonder if it has to do more with EQ than IQ. Surely, I have read of MDs with $300K+ income running into bankrupcy by overspending, not due to some unfortunate circumstances.

Most forum members have shown financial self-restraint far better than the general population. We all have been able to "delay our gratification". I am not sure if IQ is that important in this matter.

 

[haha]

All these smart companies run by smart people and Nobel-Prize winners are in the hole for much more than the lady here.. who is the classic example of the "capra espiatoria".. the hapless goat that assumes and expiates the sins of its masters, in this case the true believers of the current financial religion.

I read a good comment about conservatism somewhere (in relation to such "traitors" to conservatism as Bush and McCain) to wit: "Conservatism cannot fail, it can only BE failed". And so we see here that the US financial system grounded on debt cannot fail, but can only BE failed, by its very victims! This is the "common wisdom".

Oh-oh, are you a Friggin' Froggy Structuralista?

Ha

 

[Frugality_of_Apathy]

This is how it is supposed to work:

6. Buy first house (starter home) 65K with 20% down, 20 year note

I don't think you can legally live in a fire damaged studio apartment after it's been a methlab.

My starter home was wasn't even legally inhabitable until I put 10K into repairs and it still cost 145K for a 2 bedroom 1 bath.

 

[clifp]

I wonder if it has to do more with EQ than IQ. Surely, I have read of MDs with $300K+ income running into bankrupcy by overspending, not due to some unfortunate circumstances.

I have sympathy for stupid people getting taking advantage of by financial sharks. This lady doesn't sound stupid, just foolish.

 

[bubba]

It's a bad thing when anyone makes poor choices. That doesn't change the fact that those choices were her own and she must dig out of that mess the best way she can. It's not the cc company's fault, nor is it QVC's fault that she couldn't stop shopping. I'm not making fun or sneering at her. Instead my point of view is that she'd better start dealing with reality quickly. It seems to me that the author of these articles want us to feel all sorry for the "victim". Not working here - like someone said earlier, even a child knows better. Self-control and addiction would be my guess and those can't be cured unless the person wants to change.

 

[UncleHoney]

Since most money management is done by nothing but rank amateurs it's amazing to me that we don't have more problems than we have.

Maybe we need a labeling system on different financial products warning that "Use of this product may be hazardous to your financial health".

One of my favorite stories of financial illiteracy centers around one of my nieces. She got a letter from a collection agency saying she was behind in some loan payments. I looked at the letter and it referenced a loan she had taken out with a health club she belonged to in another city months before. According to my niece she never had a loan with them. Since she wasn't going to the club because she moved she stopped sending in her monthly dues.

I read the paperwork she had from the health club and sure enough she had financed the yearly club dues into nice monthly payments. Right on top of the application form for monthly dues payments were the words "This application constitutes a promissory note payable to XYZ Health Club"

Time to pay up Kiddo.

 

[Gardnr]

Why should my dad, at 72, go back to work so she can eat all the fast food she wants, when he takes a PBJ for lunch (when he was working or volunteering)? Why should I tack on a few more years of work so I can support her bad habits (including health and spending), not be able to FIRE myself, or lose my own health in the process?

Exactly. Well said. That's a sort of microcosm for our society at large. I really fear that those who have been responsible, lived below their means, etc., will have to bail out those who have been eating at the trough with no regard for the future. And I know I'm not alone in that regard.

I've been shaking my head for years at the overconsumption fueled by debt that just had to come crashing down at some point.

 

[RetiredGypsy]

Jimmy Buffett may not be Warren Buffett's long lost son, but he knows a little bit about debt too:

As a child on the farm
I was warned of the wiles of the city
Of that demon disguise
As the dirt in the skies of the city

Well they say the proximity warps their minds
Until they're shooting one another just to pass the time
And we live it appears
Both in spite and in fear of the city

I was constantly told
How our lives were controlled by the city
How they keep us in debt
With the trends that they set it's a pity

Now the beautiful people in the magazines
Got the normal ones living beyond their means
And the things that they said
Made me go in my head to the city

When I finally came
There's some things still the same in the city
You still lie under the thumb
Of the rich and the young and the pretty

Well they weren't much different than we might act
If there was that many others that closely packed
It's an ancient idea
But it struck me so clear in the city

 

[Gardnr]

When I asked why, each said that since I had no job income, they needed some way to determine my income level.

Does not compute!

They've dumbed things down so much in the lending business that if you don't fit their little formula they don't know how to deal with you.

 

[citrine]

You know....I had a neighbor when I lived in the condo who was kind of like this woman. She would keep rolling her credit card debts into her home equity loan.....charge them back up again and then roll them all into another refinance. Her son then got sick with leukemia.....she had to start taking a lot of time off from work. She ended up selling the condo, buying a bigger house, her son was out of remission, and then her father got diagnosed with lung cancer.
I felt bad for her, but a couple of years of therapy would have cost her a LOT less than all of the debt she kept accumulating. She didn't have really expensive things....just wasted her money on junk.
She would keep telling me to refinance and to buy a bigger house.....when I would tell her that I couldn't afford it, she would look at me like I was crazy.

I understand that we should not judge the people portrayed in these articles, but I am definitely not cosigning their bullshit! I would love to see an article that came up with some solutions to the holes they have dug for themselves....but I have not seen one article where they actually deal with the issue and not treat them like little victims.

 

[ERD50]

You seem to be implying, that these people (homeowners) were not intelligent enough to know they were getting a bad deal, ...

So now you want to introduce legislation so that no one can enter a bad deal ever again? How would such a system work? What group of people could possibly decide what is a "fair deal" for everyone?

The answer is obvious. Congress can decide for us if something is a fair deal or not.

After all, I'm sure they mostly have IQ's >100, and surely they understand you just can't go on spending more than you take in. Right?



-ERD50

 

[armor99]

Like Delfina said, half the people have IQs below 100, and since the SD is about 15 points, a good slug of these people are 85 and below. They look like you and I; but they really aren't.

Hmmm... an interesting observation. Ok.... let me conceed the arguement to you then. Maybe you are right, maybe there is a much larger percentage of people out there than I thought possible, that are just sort of barely able to mentally get on with their lives. People that have reached adulthood, but are fairly low functioning, and have no family or friends to help them.
Maybe a better solution for home-loans, credit cards, etc, would be some sort of intelligence test that the lender of credit needs to give to the perspective lendee? Something tangible that would prove a working knowledge of interest rates, balloon payments, PMI, etc, depending on what sort of credit the person was going for? That might solve a few problems. The lendee gets their loan or credit upon passing a certain "financial literacy" test (much like a drivers licence exam), and the lender is now protected against later allegations of "predatory lending" and the like. Seems a fair and equitable trade to me. The banks and credit card companies of the world now have to prove that the people they do business with, are mentally up to the task of performing such transactions. And if not... no loan, credit card, etc. No way to financially hurt themselves any more. What do you think?

 

[Westernskies]

I don't think you can legally live in a fire damaged studio apartment after it's been a methlab.

My starter home was wasn't even legally inhabitable until I put 10K into repairs and it still cost 145K for a 2 bedroom 1 bath.

Sorry, I was projecting the starting date back a few years....since most responsible people would take about twenty years working hard, building equity and moving up to get to where a lot of these mortgage meltdown goofballs thought they could start out.

 

[Westernskies]

Hmmm... an interesting observation. Ok.... let me conceed the arguement to you then. Maybe you are right, maybe there is a much larger percentage of people out there than I thought possible, that are just sort of barely able to mentally get on with their lives. People that have reached adulthood, but are fairly low functioning, and have no family or friends to help them.
Maybe a better solution for home-loans, credit cards, etc, would be some sort of intelligence test that the lender of credit needs to give to the perspective lendee? Something tangible that would prove a working knowledge of interest rates, balloon payments, PMI, etc, depending on what sort of credit the person was going for? That might solve a few problems. The lendee gets their loan or credit upon passing a certain "financial literacy" test (much like a drivers licence exam), and the lender is now protected against later allegations of "predatory lending" and the like. Seems a fair and equitable trade to me. The banks and credit card companies of the world now have to prove that the people they do business with, are mentally up to the task of performing such transactions. And if not... no loan, credit card, etc. No way to financially hurt themselves any more. What do you think?

" No borrower left behind?" We could get the NEA to administer the program...