The financial news just gets worse and worse. I read the paper and find myself just shaking my head and wondering how it will ever get sorted out. One side of me just wants all the irresponsible people and companies to pay the price for their idiocy and greediness and the other side of me knows that if they all go bankrupt or out of business the mess will be just as bad if not worse.
Yesterday I read an article in the New York Times on a town in California where 90 percent of the homeowners are underwater on their mortgages - they owe more than their homes are worth. People bought homes for nothing down and are paying interest only. Where is the logic in that? What ever happened to having a down payment and paying principal and interest?
Today I have been reading about the bailout that the US auto manufacturers want. I just can’t believe how stupid US automakers have been over the years. Devoting most of their energy to SUV’s. Of course automakers around the world have been making innovation and energy efficiency their goals for many years. Why not in the US? I think we know the answer to that one. Here’s Thomas Friedman’s opinion on the auto bailout, if you’d like to read it.
All of this is in addition to the $700 billion already promised to shore up the financial industry. The plan for this money keeps shifting and it really does seem they don’t know what to do with it. I just hope that it isn’t wasted and that it actually helps the situation.
I am ashamed with how greedy and wasteful so many people have become…one man in the NY Times article linked above said he would have to cut back from buying 50 DVDs per month. Per month! What is it with people?
I can remember being young and broke and having to eat our way through fifty pounds of potatoes. We bought tiny eggs inexpensively due to their small size. I made my own bread and sewed my own clothes. I canned fruit and vegetables and had a garden. A splurge was fresh mushrooms or a roll of paper towels. The kids wore cloth diapers and I washed them myself. We used the library. When I got my first credit card I used it when those kid expenses like new soccer shoes cropped up in between paydays. But credit was something you used, not just accumulated.
Real estate is another thing…you buy it if it pencils out. For an investment property, this means it pays for itself after expenses, and for a home, it means you can afford to make the payments, and if you had to sell, you know what you could get for it. Realistically, that is. I remember buying a duplex back in the 80’s where the only way we could put the deal together (and it was a good deal) was to assume the seller’s loan and then the seller’s father loaned us a second mortgage for the balance so his kids could get some cash out of the deal! Interest rates? 10% and 13.5%! Remember those rates?
I have a lot of optimism in Obama. I believe many good minds are working on these problems. And, I hope that answers come in time. The main thing I am wondering right now is whether people in the US have any idea how to live on less. Can they do the math? Can they get out of the drive-through and cook? Can they do without designer jeans and the latest gadget? Could they give up their cell phone if they had to? Or their DVD habit?
I’m glad I know how to live frugally. I think hard times are coming for a lot of Americans, in a way that many have never experienced before. Will they find the strength within themselves to adjust or will they complain and try to place blame? Time will tell.
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