But, my question is, “What have we learned as individuals?”  Basically, the way I see it, we’ve got two problems going on, what the government has done to us economically, and what we’ve done to ourselves.

In this last year, many of our own budgets have been cut, due to tanking investments, job loss or benefit reduction. Permanent personal recovery will take time and effort for a lot of folks. It will also take a change in behavior on the parts of consumers.

I happen to agree with David Walker’s take on the world. In case you were sleeping in a cave these last few years, Mr. Walker was one of the original harbingers of economic doom clear back in the Bush years. I call him a prophet. As former Head of the U.S. Government Accountability Office (GAO), he predicted the very situation we’ve been facing in 2009, including the health care crisis, over spending, the near demise of the value of our dollar, etc.

When I’ve listened to David Walker, I see many correlations in the federal crisis and in our own financial situations. Nearly every issue the country has faced or is facing fiscally is similar to our personal cash crunch.

That’s why I reiterate the question, “What have we personally discovered from the economic crisis?” The adage, “Those who do not learn from history are destined to repeat it,” comes to mind.

Here’s what I think we should have learned by 2009’s brush with fiscal death:

Our personal spending habits need to change. Let me give you an example: I’ve got a friend whose husband currently nets a salary of over 65K as a professional. She’s working as a nurse full time and as a QMA part time. With a combined income of over 100K annually, they’re considering filing bankruptcy. My friend’s had no major medical issues, or giant fiscal shift, except for a freeze on commission bonuses for the last year at her husband’s work. Maybe I’m crazy, but if you can’t live on a 100K a year, in my book, you don’t deserve that kind of money. Or you need to go to a financial boot camp to be re-educated. In spite of my friends’ economic issues, they have a skiing trip planned and are forever remodeling. They’re still spending furiously,(but now on credit, without paying it off in full). Every purchase is “the last big one” and every month it continues. It’s hard watching a friend do this to herself. I’m fighting the urge to have an intervention on her behalf. This case is not isolated, by the way. According to prophet, David Walker, “Americans are living beyond their means.” It’s true. If all we learned from this last two years was to put our purchases on credit cards and take out extra loans, then we’ve learned nothing.

Americans need to proportion their spending in line with their budget. In spite of how tempting “Cash for Clunkers” or how attractive the current mortgage rates are, we still need to hang onto our money or make best use of it. Buy a used car in cash, the old fashioned way. Take advantage of the mortgage rates, but buy down from what you think you can afford, to what you know you can easily afford (including renovations, insurance, taxes and utility bills for said home). Like the government, endlessly spending (albeit even for some very altruistic programs)- if you can’t afford it, you don’t do it.

Credit and lenders are not the devil. Our own impulses are. It’s not the banks that got us in trouble. And it’s not the credit cards. It’s our misuse of them. Had we turned down banking offers to re-finance or dampened our spending, much of the fiscal damage that occurred in these 2 years would have been a tremor to the economy instead of a giant earthquake. I know many people who don’t abuse credit cards and actually make money using them, via rewards and cash back programs. My own paternal grandpa was a banker and a farmer. He’s in his late 80’s, and has a very modest home. I’m guessing at one time he could have made a shift to an upscale place, but he didn’t. I think his furniture is dated, circa 1970. Grandpa’s made good choices, curbed fiscal impulses and along the way, even had opportunity to help others.

 Place less value in stocks and more value in savings. I’m going to get dragged outside the city gates and stoned for this one. But, none-the-less, I believe it to be true. The thing is, we want our money to grow. We all desire a retirement nest egg, right? So stocks seemed like the easy way to keep spending, while still acquiring that nest egg.However, if you’ve got cash, you’ve got cash. Ain’t no one gonna take it away. Let the economy fall to its knees, and you’ll go on. The reality is, interest rates in savings accounts are barely existent.  Even the online banks, who offer “great rates” aren’t too impressive. So to save for retirement, in a traditional means, is to truly cut spending today. Your money won’t quadruple in four years, like some stocks have in the past. You’ll have to save more. But money in the bank also won’t collapse, costing your home and leaving you penniless for retirement, either. (At least there’s a federal guarantee if the bank goes belly up). I’m not saying stocks and money market funds are a totally bad idea.  I’m just commenting that we need to curtail how much value we place in a risky business, compared to good old fashioned savings. If the money fairy ever blesses me with extra cash, I’d be open to a few stocks. But I’d be sure to have savings built up first. Stock investing would be money I’d be open to lose if it came to it. (I think I’d rather invest in a good pair of Italian shoes, actually. At least those won’t lose their rich Corinthian Leather smell).  

Say “NO,” wait on purchases, be frugal as a permanent way of living. Some folks have learned this year. Their fiscally penitent at the moment, taking the pledge to never overspend again. But I wonder how this will look in four or five years? Are these same individuals going to go nuts with spending again? Let coupon shopping, buying bargains, and being frugal with fuel, utilities and expenses be a way of life, not a temporary fix. It also means saying, “No” to purchases. Or waiting on them. You’re offered a “free” upgrade on a cell phone, which actually costs you another hundred bucks? Say “no” unless your phone breaks and you’re S.O.L without it. Don’t just buy because it’s on sale, buy because you need it. And when you do have to purchase, shop for a great bargain. 

 Make your kids wait on stuff too. It’s ok that “all their friends” have something they don’t. If you’ll be strapped to purchase it, make kids wait. Trust me. I’ve got five kids who’ve waited all their lives for some luxuries. My very youngest a couple of years ago, (age 12) desperately wanted a Nintendo DS. As a parent, I’d loved to have bought one. She’s a good kid. But I couldn’t afford it. I already pay for struggling college kids’ car insurance and had just put braces on another child. My daughter took her Christmas money, from aunts and cousins, to Wal-Mart and bought a Nintendo on sale after the holidays. She’s treasured it since. She didn’t die because she waited almost two years after her friends had one. Your kids won’t die either.  

 Food for thought, while in the pre-recovery mode. I’ll leave you with David Walker’s words. In my opinion, greed, lack of fiscal accountablity, poor budgeting and spending beyond our means, are common demonimators we’ve shared with the government.  I know at one point, I’ve been guilty of all of them. But I’m trying to recover and relearn my own spending.  Let’s recover in the grassroots as well as federally.

 

 

 

 

I admit it, I am a CSI junkie.

Actually, our whole home is a veritable crime scene waiting to happen, given the laundry piles stained with various “trace” items and mountains of suspicious toxin laden dishes that stack up. There probably is a fugitive or two hiding here amidst the hair balls and clutter. I am addicted to the show, not housework, sad to say.  

So it should come as no surprise I find life lessons in these epic life events, such as 12 hour marathons of CSI.  Recently, I discovered there were credit tips to be gleaned from CSI.  (If I were doing housework, I would have missed this life altering data).

1. The Evidence Doesn’t Lie. Your credit score, alas, is evidence that no matter your alibi, will either “convict you” to a poor interest rate, inability to obtain loans, or exonerate you to fiscal freedom.  It’s a scary thought, (like being interrogated under a stark light bulb). But take time to know your credit score, and keep regular tabs on it.
2.  Clean Up Trace Evidence.  Even a small fiber of bad fiscal decision left behind should be cleaned up. In other words, after running a credit report, have old evidence of bad credit removed. If you filed for bankruptcy, it’s likely there are several items that need to be cleaned up.  In my case, I still have residual items that pop up on various credit bureaus from a 2005 bankruptcy!  Four years of debt DNA still visible at times. Ugh! Write letters and make calls to remove evidence.
3. Solutions Take a Team- Overwhelmed by debt and credit issues?  Get help if you need it in the way of credit counseling, debt relief or debt settlements if you are feeling it’s too big a crime scene.  I have used, in the past, an attorney’s advice, budgeting tips from Consumer Credit Counseling, and thrown myself on the mercy of creditors to work plans out. It often takes a team approach to solve a debt crime against your credit.  Call in the experts.
4. Use Science to Solve the Homicide- This is my theory, finance is a science. Like all science it can be predicted rather measurably, and recreated in similar conditions. My own credit issues were very complex, but not unusual.  I did stupid things and committed desperate acts. Now I have to be vigilant so I don’t recreate the same ugly credit murder again. I am convicted of massive debt crimes, but am trying to rehabilitate myself.  I killed a 720 credit rating in cold blood, I admit it. Clothing purchases once upon a time racked into the thousands, offing my credit score when I couldn’t pay the card’s interest. But like all science that is predictable and measurable, getting good credit is also a science. I now try to pattern myself after those who have good credit and amend my crimes. Study those who got their butts in credit Sing Sing, and learn what they did to get parole.
5. The Good Guys Win- I have those days where debt appears to be eluding me like a slippery villain.  It seems to take forever, working the cold case of my dead credit. But in the end, I believe in truth, liberty and the American way- and I trust I can win, if I do the right thing. If you are suffering under weight of poor credit, keep working the case, my friends.

Eight p.m.- time for more knowledge via Horatio.  Maybe CSI can teach me tips on raising teenagers tonight and that would be true enlightenment.

By the way, if you take the time to watch the endless sea of “one liners” above, you will notice a choice bit of Horatio Cain, stated, “You don’t spend a thousand dollars on clothes you are never going to wear.”

Ummm,  make that, ” I don’t spend a thousand dollars on clothes I am never going to wear, again, in this lifetime.” 

I’m reformed.