Another Article on American's Debt

[kevdude]

When we first started investing in rental properties (2002) our first property was a 4-plex in an area that would be considered low income. One of the tenants was section 8, and the others did not make much money. But they all smoked cigarettes (prior to our going no smoking) and played the lottery regularly. Most of them would pay their rent late and barely lived paycheck to paycheck. But they all smoked cigarettes and played the lottery.

They also had the latest HD TV and the most recent gaming console with the latest games. Most of the electronics were rented from the nearest “rent to own” place, but they would never end up owning them as the equipment would have to be upgraded as soon as the newest model came out. And they all had cable TV with the most expensive plan. There was no attempt to save $400 at all.

As we increased our rental portfolio this scenario played over and over again for the vast majority of our tenants, no matter what income level they were/are. Saving is just not a priority for most people.

 

[Cassius King]

We continue to live in a very narcissistic and consumer society. People can see your house, clothes, car, phone, etc. Their financial life is not so transparent. Nobody displays there savings, investment accounts, etc.
Had a coworker ask me last month the best way to cash in her husbands stock position that his father started for him so they could go forward with the building of their new house. They've moved and upgraded four times already.
The group on this forum really is a very small minority of the populace.

 

[ncbill]

We all know that is never going to happen. We are a society that lives for RIGHT NOW and low, monthly payments. The producers of products have gotten very smart to this...you can subscribe for a "low monthly price" for everything from razors to dog food to dinner to underwear to well...you get the idea. Shoot, people are now LEASING mobile phone?

So the odds of this happening is about the same as everyone stops eating at McD's and starts going to the farmer's market and slaughtering their own meat.

Yep, i read one financial blogger who grew up poor who said his family had a whole different mindset...any windfall was spent immediately on things they wanted right then, because who knew when they were going to have that kind of money again?

That last sentence illustrates another part of the mindset: things (good or bad) happen to you, instead of you making those things happen.

A very foreign way of thinking to those of us here or on sites like bogleheads.

 

[Jeffman52]

A short time? How short do you foresee? Not being snarky at all. I would have said "total destruction."

Short .. in the scheme of things short. But yeah...probably a decade.

 

[Rianne]

Marketing/advertising, living the good life and showing off your accomplishments. How subliminal does it get? My DB would feel like a failure without the newest BMW or best vacation tales. Flash the cash and show your peacock feathers. That's what marketing does to the psyche. It affects everyone, the poverty stricken and the wealthy.

Yes, it drives our economy and gives us frugal minded cheapos the chance to FIRE, but how to explain that pinching pennies is not something to be ashamed of? We're a material driven society and those that figured that out and moved in the opposite direction are the lucky ones.

I just keep climbing that damn soap box.

 

[gwraigty]

It's hard when people I know talk about their difficult financial situations, when it's obvious that a lot is due to stuff that they could control, but don't. Especially when the women complain about having to work, and wonder why I don't have to. I just try not to respond too much.

 

[razztazz]

It's hard when people I know talk about their difficult financial situations, when it's obvious that a lot is due to stuff that they could control, but don't. Especially when the women complain about having to work, and wonder why I don't have to. I just try not to respond too much.

Bingo! I have nothing but lectures for most people crying the blues. Let's face it, my experienced dealing with the world is, most problems are self-inflicted and most problems can be solved by money. But they either take the easy way out, as if nothing could ever happen, OR it's easy-come-easy-go and when they need it they ain't got it.

I'm sort of the opposite of most people's n economic view. Most will rail against safety nets and "socialism" but of you personalize the problem, show them a real person then they feel sorry and get in high dudgeon when there isn't a program to help them or they don't qualify.

My view is, certainly we need a safety net because every economic system fails somewhere and it's either fill the gap or "Let 'em die." But show me a individual and 9 out of 10 times he's some slack-ass good-time-charlie who got his ass caught in a crack and now finds himself unprepared. I find it hard to "care."

 

[CardsFan]

Another reason is that, unlike 50 years ago, many of these jobs now require special training programs and/or certification so there are barriers to entry. Even back in the glory days of the unions it could be very hard to get into some of these occupations.

Caveat: I am not a particular fan of a lot of unions, HOWEVER, in the case of the Building Trades, through personal experience managing construction projects, there is considerable value.

Regarding the bold above (by me): In the "Glory days" I agree it was more difficult. You basically needed to know someone (of course, we professionals prefer to call that "networking"), and even now, it does not hurt. The key is, if you can get on, a lot of the special training and/or certifications can be acquired through the union, or in partnership with the union and employer.

I guess my point here is there are a lot of options between flipping burgers and being a doctor, lawyer or engineer. They pay well, and for the most part cannot be "off shored".

 

[pb4uski]

Yep, i read one financial blogger who grew up poor who said his family had a whole different mindset...any windfall was spent immediately on things they wanted right then, because who knew when they were going to have that kind of money again? ....

I volunteer at a local food pantry and got to know the former Executive Director well. We once had a discussion about why our clients didn't save. She had attended a conference where a speaker posited that the poor don't save because if they have savings and a relative or friend asked to borrow money that culturally they would feel compelled to lend money to them and they know that they would never get paid back... so the easier path is to not have any money so when they are asked they can say that they don't have any money.

I dunno about that logic though. DS has a lot of friends who live paycheck to paycheck but he saves pretty well. But I was a bit surprised that he recently conceded that he had lended some money to a friend and wasn't sure if the friend would ever pay him back... so perhaps it is true.

 

[Music Lover]

My niece was in this cycle and I gifted the 3% down payment for $70k house which they could fix up and make a nice home.. their rent was almost $1000, so all of a sudden they are in a home where costs were fraction of that $1000 and they were right side up, have savings, was able to reduce hours so she could go back to school, now is working thru nursing degree and their future is finally secured.. but could never come up with the down payment so could have been stuck in that cycle of poverty forever. On top of it, they now grow a garden so reduce food costs, have a shop to fix their car in so save money on car repairs, their kids are in a safe environment, better school, etc. $2100 plus some closing costs is nothing for me but everything to them, and you have to wonder how many of the poor are in that same situation, where a few thousand dollars could completely right size their entire world.

Great story and it's very nice of you for helping your niece and it's also great that they used your help to make the best of it, but I think that the overwhelming majority of people in that situation with the same sort of help would still have failed for one reason or another.

You probably saw the potential in them that led you to help...had they been slackers blaming the world and sucking back a dozen Bud lights every night you may not have been as generous.

 

[Independent]

What percent of Americans have credit cards?
What percent of Americans carry balances on their credit cards? (don't pay off the entire amount)

I guessed 85% had at least one cc, and 2/3 of them didn't pay off their balances, so maybe 55% of all Americans have balances. I was too high with both guesses.

Credit cards are found in most Americans’ wallets. Multiple studies say about 7 in 10 Americans have at least one credit card. Boston Federal Reserve data released in August 2017, for example, found 75.7 percent of consumers had at least one credit card,

Card issuers divide the world into two groups: “transactors” who use their cards for purchases and pay off the balances each month; and “revolvers” who carry balances on their cards, paying interest charges month to month.

To pure transactors, the balances on their cards aren’t really debts at all, since any purchases will be paid off before interest charges are applied.

The percentage of U.S. households revolving credit card debt from month to month has been level at about 37 percent in 2019, from 38 percent in 2018, after steadily falling from 41 percent since 2010,

https://www.creditcards.com/credit-card-news/ownership-statistics.php
https://www.creditcards.com/credit-card-news/credit-card-debt-statistics-1276.php

There was a time when the only way to handle an emergency expense was the cash in the bureau drawer or under the floorboard. Even banks weren't safe. Rich people had a "line of credit", ordinary workers didn't. Then credit cards gave most workers a loc.

But, depression era people hated debt, so it took a while for attitudes to change. Now, you don't need $1,000 in the bank earning 0.15% interest to cover your emergency. If the transmission falls out of the car, you reach for plastic. (am I behind the times? do kids reach for their electronic device instead?)

 

[googily]

If the transmission falls out of the car, you reach for plastic. (am I behind the times? do kids reach for their electronic device instead?)

I'm not a kid, but I use my phone/Google Pay whenever I can. It's the greatest.

 

[Music Lover]

If the transmission falls out of the car, you reach for plastic.

I put everything on my credit card that I'm allowed to...even my phone payment. But I do it for the points.

 

[Dtail]

I put everything on my credit card that I'm allowed to...even my phone payment. But I do it for the points.

Big +1
Maximize 5 different CC for points.

 

[Spock]

Its obvious debt fuels our current economy.
The thing with debt is it accelerates or "pulls in" future consumption by allowing it to happen now vs. later.
While the economy is juiced by that accelerated consumption now, it leaves an air pocket in the future when that debt must be paid back (or defaults) or the debt has grown to the point that it no longer fuels as much "growth" as it used to.
Every system has its limits. Eventually it starts to shake and rattle. Accelerate further and the wheels come off.

 

[Rianne]

If those who used CC, used them wisely, it might be a simpler society. Sweden is doing it.
"In Sweden, however, especially in bigger cities, going cashless is becoming the norm. Purchases usually happen as digital transactions — by card, online or with Sweden's most popular mobile payment app, Swish."
"It's good for both the guests and for us," says Christopher Loob, general manager of Urban Deli, a restaurant and ecological food company in Stockholm that stopped accepting cash a year ago. "It's saved us a lot of time in that we don't have to count cash anymore. There's hardly been any reaction. Almost everybody has the alternative payment method — a credit card."


https://www.npr.org/2019/02/11/691334123/swedens-cashless-experiment-is-it-too-much-too-fast

 

[Independent]

If those who used CC, used them wisely, it might be a simpler society. Sweden is doing it.
"In Sweden, however, especially in bigger cities, going cashless is becoming the norm. Purchases usually happen as digital transactions — by card, online or with Sweden's most popular mobile payment app, Swish."
"It's good for both the guests and for us," says Christopher Loob, general manager of Urban Deli, a restaurant and ecological food company in Stockholm that stopped accepting cash a year ago. "It's saved us a lot of time in that we don't have to count cash anymore. There's hardly been any reaction. Almost everybody has the alternative payment method — a credit card."


https://www.npr.org/2019/02/11/691334123/swedens-cashless-experiment-is-it-too-much-too-fast

China is also working on a cashless economy.

China’s cities are ‘closest to cashless consumer economies’ as mobile payments surged to a record amount in the 10 months to October last year.
Mobile payment transactions in China reached a record 81 trillion yuan (US$12.8 trillion) from January to October last year, driven by the vast number of consumers across the country who have looked beyond credit cards to more convenient, cashless systems.
...
China’s latest tally dwarfed the estimated US$49.3 billion in total mobile payment transactions in the United States last year,

Notice that is trillions compared to billions.

I'm not sure about the common use of phones. Do people use them as debit cards (immediately withdrawing money from bank accounts), or like credit cards (borrowing until the next payment date) ?

I'm bothered by cashless because it means one more system that can fail due to human error, random hackers, or a cyber attack from an unfriendly gov't.

 

[LRDave]

I'm bothered by cashless because it means one more system that can fail due to human error, random hackers, or a cyber attack from an unfriendly gov't.

Plus, how am I going to buy eggs from my neighbor down the road?

 

[joeea]

Its obvious debt fuels our current economy.
The thing with debt is it accelerates or "pulls in" future consumption by allowing it to happen now vs. later.
While the economy is juiced by that accelerated consumption now, it leaves an air pocket in the future when that debt must be paid back (or defaults) or the debt has grown to the point that it no longer fuels as much "growth" as it used to.
Every system has its limits. Eventually it starts to shake and rattle. Accelerate further and the wheels come off.

"Eventually" is a long time.

I can't get into partisan politics here. But I think it's fair to say that many politicians care only about "now" and don't care much about "eventually", because they won't be around at that time.

Voters seem to agree. There's no political incentive to do anything about America's debt. And so nothing will be done. So it goes.

 

[travelover]

Plus, how am I going to buy eggs from my neighbor down the road?

Trade him for one of your goats.

 

[Teacher Terry]

I like to use cash for small purchases. It’s a pain to have to keep track of small purchases with a CC.

 

[Spock]

"Eventually" is a long time.

I can't get into partisan politics here. But I think it's fair to say that many politicians care only about "now" and don't care much about "eventually", because they won't be around at that time.

Voters seem to agree. There's no political incentive to do anything about America's debt. And so nothing will be done. So it goes.

I agree. Personally I think the fuse on "eventually" has been burning for awhile... and in general things seem to accelerate more than they seem to slow down.

I tend to ignore the US politicians on this particular issue as the only time side X complains about the debt is when side Y holds more chairs (with X and Y being interchangeable).
However, I believe that external forces/countries will have a bigger say in the US debt than US politicians. When (for example) BRICS et al are able to bypass the dollar as a reserve/trading currency things are going to change to favor somebody else for awhile.

 

[joeea]

the only time side X complains about the debt is when side Y holds more chairs (with X and Y being interchangeable).

I don't agree, but that's a topic for a different forum.

However, I believe that external forces/countries will have a bigger say in the US debt than US politicians. When (for example) BRICS et al are able to bypass the dollar as a reserve/trading currency things are going to change to favor somebody else for awhile.

We'll see. I'm not holding my breath waiting for that to happen any time in the foreseeable future.

 

[Music Lover]

I'm bothered by cashless because it means one more system that can fail due to human error, random hackers, or a cyber attack from an unfriendly gov't.

Or you can be shut out by an unfriendly tech or credit card company for simply having the wrong stance on a hot button topic. That's already happening.

 

[googily]

China is also working on a cashless economy. Notice that is trillions compared to billions.



I'm not sure about the common use of phones. Do people use them as debit cards (immediately withdrawing money from bank accounts), or like credit cards (borrowing until the next payment date) ?



I'm bothered by cashless because it means one more system that can fail due to human error, random hackers, or a cyber attack from an unfriendly gov't.

Google Pay works in concert with your credit card companies to set up your cards to be used. It transmits virtual numbers, and requires you to log into your phone (I use my fingerprint), so I consider it safer than the physical card, though chip cards have helped that a bit.

In my big city, I can go weeks without handling cash, and I'm also now able to use my phone even more. The lunch place in my office building now takes Google Pay, the vending machines take it, CVS has finally given in and is taking it, etc. And even some phone apps let you choose Google Pay as your payment type, keeping your account information walled off.

My phone is soldered to my hand at all times, and anywhere I can use it rather than digging in my purse for a credit card works for me.