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.

 

 

 

 

Getting a mortgage, post bankruptcy has proven the Holy Grail of my current credit pilgrimage. In former bleaker fiscal times, I had neither credit nor income to even ponder the possibility. I rented a nice home, or rather a series of them.  Like many with poor credit, I was at the mercy of landlords. I was gouged financially with deposits, or paid out the nose in rent.

Renting and trying to save is a vicious cycle. I am weary of being on the wheel, endlessly running but never winning the race. I seek permanency. I need walls that aren’t “renter” egg shell white.

I swear I will kiss the ground every time I arrive at my very own home (and possibly run around the house naked screaming like a chicken).

I turned 44 a few weeks ago with a determination to obtain that home. Other than an act of God, it’s going to take hard work. I have to cut expenses to save real money. There is only one way to do that, shy of selling the children. I began to question, “What am I willing to sacrifice to reach that goal?”

As my current lease is expiring in four weeks, I discovered another option. It may kill me in the end, but it’s one I am committed to. I found a place to rent at half of what I am currently paying. Not only will I save in rent, it’s far smaller- which means utility savings, too. It can’t cost much to heat a shoe box.

I soon will have a lovely view of a pit bull pen. Soothing sounds of trains on the nearby track will lull me to sleep. The inside is new and clean, but no frills. I can save a ton. (By my best estimate, almost a thousand dollars a month). In two years, if I am frugal, I can have enough to not only pay some residual bills, but also produce a sizeable down payment.

I can do this. I hope.

I told the kids today. This went over like Hiroshima. “What? We have to move? Again?”

From the oldest, still-at-home child, age 18, came the sound of a door slamming. Its force, I am sure, registered a seismic shock large enough to spawn tsunamis in Fiji.

The middle daughter was only concerned by how many receptacles were in the bathroom, for her multiple hair appliances.

And the youngest merely cried herself to sleep.

It was a grand day.

I am still certain, in spite of the kids’ response; I am doing the right thing. A goal is not a goal if you don’t work toward it. Always before I have taken the path of providing the short term, “fix”. We currently have a lovely home on the lake. But it’s not ours, and we pay a small fortune for it. Spending money foolishly has become a pet peeve of mine since my bankruptcy. I am tired of doing so anymore.

The coming weeks, months and possibly- years- will be no doubt a bit painful. We will make the best of it, though. Some of us will transition easier.

But the goal, in the end, will be worth the effort spent. Which brings me to ask- “What are you willing to sacrifice to achieve a credit goal?” I’d be curious to hear. (If the children don’t murder me in my sleep, that is).

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