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Thread: How fast should losing income become a crisis for the middle-class?

  1. #1
    Prehistoric Bitchslapper Sarahfeena's avatar
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    Default How fast should losing income become a crisis for the middle-class?

    I'm not sure if I titled this thread quite the right way, but my question refers to this story that ran in the Chicago Tribune today. The basic outline is this: Dad makes $110,000 a year, loses his job. The mom makes $20,000, all of which goes to the kid's Catholic school tuition. Within a week, they are on food stamps and at risk of losing their house because they have zero savings, no emergency fund at all. Unemployment covers only their mortgage. "From middle class to poor," the dad is quoted in the article.

    So my question is...does anyone find the tone of this article to be somewhat outrageous? I think it's supposed to be a cautionary tale, but it reads an awful lot like these folks were hapless victims of the economy, when it seems to be in large part their own bad judgement that caused this problem. I don't mean to sound unsympathetic, but the problem is that my sympathy mostly lies with people who are truly struggling in life, and not people who make 130,000 grand a year and can't manage to stash some money away for a rainy day. And I don't begrudge them their food stamps or anything...if they need it, they need it...it's not about that. It's more an annoyance with the media for putting this face on the economic crisis.

    Anyone else with me, or am I all wet?

  2. #2
    For whom nothing is written. Oliveloaf's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    I was JUST discussion this article with coworkers.

    What the hell?

    In the article dad's coming out of what it obviously a walk-in closet, with his private-school-uniform-clad kid.

    They chose to live like this, and, suddenly, they're ruined?

    What the hell?

    The dude in the piece was making $110k as a buyer. So, what, he just started making that? Last year he was making $25k?
    I'm guessing there were years of good salary along the way, and years that money should have (and clearly wasn't) salted
    away for just such an eventuality.

    Second question:

    Why do you subject yourself to newspaper coverage of your disgrace? Maybe, as Sarahfeena noted, they're just victims.

    It's Obama's. Bush's, the economy's, Clinton's, the Japanese's fault.

    I am with you!
    "I won't kill for money, and I won't marry for it. Other than that, I'm open to just about anything."

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    Prehistoric Bitchslapper Sarahfeena's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    Dang. Now I feel bad about the joke I made in your "Things you hate" thread.

  4. #4
    For whom nothing is written. Oliveloaf's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    Quote Originally posted by Sarahfeena
    Dang. Now I feel bad about the joke I made in your "Things you hate" thread.
    Way too late.

    You can't unsalt a wound.
    "I won't kill for money, and I won't marry for it. Other than that, I'm open to just about anything."

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  5. #5
    Elen síla lumenn' omentielvo What Exit?'s avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    They are feckless morons that had no clue how to spend their money. Seriously, they did some really awful financial planning and budgeting if they were in this kind of shape that quickly.

    With their income they should have built up some good reserves. I think 3 months is a minimum and I am paranoid, we have much more of a reserve.

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    Prehistoric Bitchslapper Sarahfeena's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    Oh, a couple other relevant points:

    Parents are in their early 40s, AND the dad's dad had worked at the same company for years, so this guy had probably been climbing the ladder there for a while. Therefore, as Oliveloaf points out, they probably had a steady increase in salary, vs. a huge sudden jump.

    I don't know, this all strikes me as everything that's wrong with America, and I don't mean a little blip in the economy, either. (A little blip I've suffered from, as well, as my husband was just "reorganized" out of job...though we are hopeful that he has a new one lined up.)

  7. #7
    For whom nothing is written. Oliveloaf's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    My wife insists that we keep a (relatively) enormous amount of money as cash. And we do.

    We built it up over time, time when it would have been cool to buy a new car or camera or scuba some more, but we sleep well.
    "I won't kill for money, and I won't marry for it. Other than that, I'm open to just about anything."

    -Jim Rockford

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    Oliphaunt featherlou's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    That article left me confused and somewhat irritated - what is the time-frame they're talking about? Did all of that happen in a week? He got a job in six days, and their world fell apart completely in that time? Hunh?

    The irritation - have these people gone from upper middle-class upbringing to upper middle-class life, and that's why they don't know anything about anything except spending every cent they earn? Not to blow my own horn too loudly, but I was raised somewhat poor (we always ate, but it was quite often baloney), and job losses are par for the course, not world-ending. How did these people make it to their forties without learning any life skills?

  9. #9
    For whom nothing is written. Oliveloaf's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    Quote Originally posted by Sarahfeena
    Oh, a couple other relevant points:

    Parents are in their early 40s, AND the dad's dad had worked at the same company for years, so this guy had probably been climbing the ladder there for a while. Therefore, as Oliveloaf points out, they probably had a steady increase in salary, vs. a huge sudden jump.

    I don't know, this all strikes me as everything that's wrong with America, and I don't mean a little blip in the economy, either. (A little blip I've suffered from, as well, as my husband was just "reorganized" out of job...though we are hopeful that he has a new one lined up.)
    Sorry about Mr. Sarahfeena, I didn't know.

    I can also see why this would really hit home for you.
    Because I know you guys (well your husband, at least) are money careful.
    Hope the new gig is "lined up".
    "I won't kill for money, and I won't marry for it. Other than that, I'm open to just about anything."

    -Jim Rockford

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    Prehistoric Bitchslapper Sarahfeena's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    Quote Originally posted by Oliveloaf
    Sorry about Mr. Sarahfeena, I didn't know.

    I can also see why this would really hit home for you.
    Because I know you guys (well your husband, at least) are money careful.
    Hope the new gig is "lined up".
    I'm sorry, I forgot that I hadn't mentioned it to you, Oliveloaf. I just haven't wanted to make a big deal about it exactly because we have always been careful, and I have nothing to complain about compared to what some people go through. I just mentioned it because, as you say, it's relevant here.

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    Oliphaunt
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    Default Re: How fast should losing income become a crisis for the middle-class?

    Quote Originally posted by featherlou
    That article left me confused and somewhat irritated - what is the time-frame they're talking about? Did all of that happen in a week? He got a job in six days, and their world fell apart completely in that time? Hunh?
    Six weeks, not days, which the article acknowledges is still lightning fast.

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    Prehistoric Bitchslapper Sarahfeena's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    Well, of course, to be fair, you never know how long it will take to find a job. But, on food stamps in a week? That is scary to put yourself at that much mercy of an employer when you don't have to. I mean, what were these people thinking?

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    Oliphaunt featherlou's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    Quote Originally posted by Laughing Lagomorph
    Quote Originally posted by featherlou
    That article left me confused and somewhat irritated - what is the time-frame they're talking about? Did all of that happen in a week? He got a job in six days, and their world fell apart completely in that time? Hunh?
    Six weeks, not days, which the article acknowledges is still lightning fast.
    Oops - I read that wrong. Still, six weeks from employed at $100,000 plus per year to taking handouts and on medicaid? The mind boggles.

    On the one hand, I guess this is an interesting article because it tells the story of a whole lot of people who are not insignificantly responsible for the worldwide economic problem - people who live well beyond their means and have no sense of financial reality.

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    Prehistoric Bitchslapper Sarahfeena's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    The $1500 that her friend gave her? That probably came out of HER savings. I mean, get a clue, you know?

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    Oliphaunt featherlou's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    You have to be some kind of rich person to not miss $1500 - yeah, I agree, it probably came out of the friend's savings. I don't think I like anybody well enough to just hand them $1500. Of course, someone who hands a friend $1500 might not be very financially responsible themselves.

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    Stegodon
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    Default Re: How fast should losing income become a crisis for the middle-class?

    It's not an excuse, but people do tend to spend roughly what they earn, (ignoring unnecessary, non-mortgage credit). Otherwise, what's the point in earning it? Job goes away, so does the lifestyle.

    We all face that risk and the consequences are a difficult thing to adjust to, but let's not be so immediately judgmental here. I'm sure that there are people out there who really are the nasty tennis-club stereotypes, but I bet that most families aren't.

    My partner's dad lost his business in the last economic crash. They went from a Ł1.5M home to a social housing almost overnight. The family was strong and adaptable and they made it back, slowly, but please don't immediately judge someone by their reaction while they're in shock and coming to terms with their lot. America is the land of opportunity, but few remember that it's an opportunity to fail - sometimes through no real fault of your own - as well as an opportunity to succeed against the odds. If you sneer at someone's failure, you're no better than a smug have-not jeering from the sidelines in my opinion.
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  17. #17
    For whom nothing is written. Oliveloaf's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    This is all strange to me.

    I grew up strange, though. I've had the same friends since grade school, and we all grew up, if not poor, on the cheap.

    One buddy was the youngest of 10, another's dad was trying to launch a business.

    I am the son of immigrants who had squat in 1955, and never, ever, forgot what it was like to have squat.

    My dad paid cash for every car. My buddies' dads were like that, too. My parents didn't air-condition their house
    until I moved out (bastards).

    What's funny is that my parents think I am careless with cash. This concerns me a little, because I don't want my daughter
    to stray still further from their frugal ways.

    I hate to make sweeping generalizations, but some just seem to work. A lot of Americans seem to think that they deserve
    everything.

    By everything I mean:

    A house
    New cars
    Cool vacations
    A big screen
    Blu Ray
    200+ channels
    50+ visits to Olive Garden annually
    Lunches out
    A Wii in each kid's room

    I rant, but this stuff pisses me off. My sister managed to bury herself in credit-card debt and my folks bailed her out. If she didn't
    have a fall back she'd have been screwed if she lost her job.

    I know a lot of people who are jobless now, and it's interesting to see who's sweating, and who's "kicking back 'till things get better".

    I feel for folks working hard to make ends meet. And God-bless unemployment for folks who need it. But if you're sucking in $100k+ a year,
    and you have nothing stored up, you suck*.


    *You don't suck if you have serious medical issues or are being tapped by aging parents or leach-like loser relatives. The folks
    in the story above did not seem to have these excuses. My excuse would be eBay.
    "I won't kill for money, and I won't marry for it. Other than that, I'm open to just about anything."

    -Jim Rockford

  18. #18
    Elen síla lumenn' omentielvo What Exit?'s avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    Quote Originally posted by Guizmeaux
    It's not an excuse, but people do tend to spend roughly what they earn, (ignoring unnecessary, non-mortgage credit). Otherwise, what's the point in earning it? Job goes away, so does the lifestyle.
    Not true of many people. There are too many people that really are just scraping by and then there are people that make a good living like the group on the article that have the ability to build a cushion but are foolish in their spending and purchases.

    I know too many smart people that earn good money that can live on unemployment for a year or more combined with savings and still not be desperate. 6 weeks is nothing. They should have had at least a 3 months reserve and with that income more like 6 months minimum. Poor planning.

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    Prehistoric Bitchslapper Sarahfeena's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    I'd also add that it's different it you are an independent business owner, vs. someone with a steady job. Business owners often have to take the risk of pouring everything into it (which is why I think they're entitled to reaping the rewards when they come, but that's a topic for another thread). I just see no reason why these folks couldn't have socked away 50 bucks a week for the last 10 years. They even admit there was no reason. And while I said that I don't begrudge them their food stamps, I think it should embarrass them to need that kind of help when there are TRULY needy people in the world. I have a friend whose 40-year old husband is incapacitated from illness. He can't work and they have huge, huge medical expenses that insurance hasn't covered. THAT is a disaster. Being out of work for 6 weeks is nothing.

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    Stegodon
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    Default Re: How fast should losing income become a crisis for the middle-class?

    I do take your posts on board, What Exit? and Sarahfeena. I'm not saying for a minute that any given person's lifestyle is correct or otherwise. What I was saying is that a collapse can catch you very quickly and that even if you have money under your belt, there is a possibility that you might have taken reasonable risks which go south faster than you can manage.

    Mrs. G's Dad was no fool, but the collapse in the early 90's took out most of his debtors over the course of 4 months. Three months after that the auditors told him that the government and other creditors had taken everything that was left of those companies and that he would get more-or-less nothing as there were no assets left. Even stuff that he'd sold them.

    "Oh and by the way sir, we know you're Ł3m down on products that you've sold to those people and invoiced in the last 90 days, but we will need the VAT (sales tax) paid. Since they haven't acknowledged or satisfied their invoices, the VAT is on your company from when you purchased them. So please pay up because we'd hate to put you before a judge."

    Do you see? With a cash flow that crashed so suddenly, what would you do with an unexpected and unreasonable Ł600,000 tax bill? (that's about $900,000 in today's money, demanded immmediately).
    Anything is possible if you use enough lubricant.

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    Default Re: How fast should losing income become a crisis for the middle-class?

    Damn, can someone pick up my eyeballs? They just rolled out of my head.
    Boldly going nowhere.

  22. #22
    Stegodon
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    Default Re: How fast should losing income become a crisis for the middle

    How can you not save money on 100,000 a year? I'm a graduate student who makes almost nothing (I paid 12 English pounds in taxes last year!) and I still have 600 dollars in an emergency savings account -- I don't touch it for any reason, and every year I put a small amount in. In high school they taught us one thing in useless 'Advisory' class -- sock away 10% of every paycheck in savings. I just don't get it.

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    Stegodon
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    Default Re: How fast should losing income become a crisis for the middle

    Quote Originally posted by DaphneBlack
    I just don't get it.
    Really? Let's give you a real-world example from someone who lived through the last economic depression;

    Say it's 1992 and you're earning Ł14,500 a year. You have a Ł30,000 apartment on which you have a 30-year Ł20,000 mortgage with a 3.5% interest rate that you're happily paying off each month. Just for fun, the property market collapses, leaving your apartment worth Ł19,000. Then the economy follows downward and the BoE base rate rises to 11% because the government wants to halt private spending. This pushes your mortgage rate to 14%. You've got repayments four times higher than they were and no equity to refinance.

    What happens to your lifestyle? How long does your $600 last?

    Add a zero or 17 years to all the numbers above as applicable. Can you still honestly say that the homeowner is to blame?
    Anything is possible if you use enough lubricant.

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    Stegodon Papaw's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    Having grown up just above poor, and not being a very good money manager myself, I can see how this could happen to that family. They really had no idea how to cope. They lived the lifestyle with little to no regard for such an occurrence, much to their dismay.
    All that said, I don't think the story is much more than a newspaper making a big story out of something that happens to some degree to many less able people. Imagine not having much already and losing a job with little prospect of a new one soon. This guy got a good job in a very short time and the family will overcome. I hope they have learned a lesson.
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    Default Re: How fast should losing income become a crisis for the middle

    Quote Originally posted by Guizmeaux
    Then the economy follows downward and the BoE base rate rises to 11% because the government wants to halt private spending. This pushes your mortgage rate to 14%. You've got repayments four times higher than they were and no equity to refinance.
    Probably worth pointing out that my understanding is that U.S.-style 30 year fixed rate mortgages don't appear to be an option anywhere but in the United States ( and maybe Denmark? ). Before someone comes in and scolds the above hypothetical person for getting a variable rate ( considered these days a bit of a financial sin in the U.S. ) .

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    Stegodon
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    Default Re: How fast should losing income become a crisis for the middle

    Quote Originally posted by Tamerlane
    Probably worth pointing out that my understanding is that U.S.-style 30 year fixed rate mortgages don't appear to be an option anywhere but in the United States ( and maybe Denmark? ). Before someone comes in and scolds the above hypothetical person for getting a variable rate ( considered these days a bit of a financial sin in the U.S. ) .
    I'm afraid that my experience is limited in this to the UK, but I can say that here, fixed-rate mortgages are generally limited to 1, 2 and 5-year terms.

    The longer the term of the fixed rate, the larger the fees payable for arrangement. The fees on a 5-year fixed are (nearly) an order of magnitude larger than those on a 1-year.

    Also, it used to be common that you had 2-year fixed terms that tied you in for 3 years. So for 2 years you'd get a favourable rate and in the 3rd year the spiked glove would go on - the rate would be 3 or 4 percent above BoE base rate. You were contractually tied into the 3rd year unless you paid a couple thousand pounds to get out of it. Depending on base rate, it was usually cheaper to stay put, but that was the risk you took. Of course, with a .25% base rate, you don't get them these days!
    Anything is possible if you use enough lubricant.

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    Oliphaunt featherlou's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    You're not wrong in anything you're saying, Guizmeaux, but your examples really aren't the same as this family. A man who has a steady job and income for 22 years, with a good portion of those years being at a high rate of pay should not have got himself into the position he found himself; it was all on him for his bad decisions. (Plus the wife's $20,000 per year as well, which is a hell of a lot more than a lot of women with two kids live on.)

    I guess what is irritating me the most about this story is that it seems I am expected to feel sympathy for this family, when their problems are basically all of their own making. Yes, he lost his job unexpectedly, but the rest of it was all them, living the grasshopper life as though things will never change.

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    Prehistoric Bitchslapper Sarahfeena's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    That's exactly right, featherlou. In fact, I think it's kind of a slap in the face to people who have real problems for people like this to whine about their situation.

    One other thing I think is interesting...the company he worked for, Mark Shale, is a small and VERY high-end men's clothing retailer. If he couldn't see the writing on the wall when the economy started going south, I don't know WHAT he was thinking. He should have realized this could happen at any time.

  29. #29
    The Queen Zuul's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    I think that people who find themselves in these sort of crises would have been well-served by actually having to struggle for money for a while at some point in their lives before getting to that point. I've managed to scrape by making under $15k a year before. Yes, it sucked. But I cut out things I couldn't afford and still managed to save a few thousand dollars by the end of the year, and that was with taking a vacation, too. Now, I probably couldn't have done it without the child support for my niece, but I also would have been living even cheaper if she hadn't been along for the ride.

    The fact that a couple who make nearly ten times that together would find themselves suddenly destitute is complete BS. They were living an unsustainable lifestyle.
    So now they are just dirt-covered English people in fur pelts with credit cards.

  30. #30
    Stegodon
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    Default Re: How fast should losing income become a crisis for the middle-class?

    They're just two different life strategies... live for today, or budget for tomorrow. Each has its merits... if your income stream is stable and guaranteed (whose is), then you get the maximum value for your money. If it isn't, you lose out. We're huge savers in our household; our savings rate is somewhere in the 40-50% range. If we die tomorrow then we'll have lost out on a lot of potential enjoyment. But we sleep well, very well, in this economic climate.

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    Prehistoric Bitchslapper Sarahfeena's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    That's our philosophy, too, Alien Crouton. We save a lot, and we maybe don't have as much fun as we might have otherwise. But we try to find fun even when we're just at home hanging out or whatever. And we didn't have to panic when my husband got that pink slip. That's worth all the vacations in the world, in my opinion.

    (Good news, BTW...another directorship has opened up at his company, and everyone seems to be liking the idea of moving him into it. So, it looks like everything is going to work out. )

  32. #32
    The Queen Zuul's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    Quote Originally posted by Sarahfeena
    (Good news, BTW...another directorship has opened up at his company, and everyone seems to be liking the idea of moving him into it. So, it looks like everything is going to work out. )
    My fingers are crossed for you guys. Hope it all goes smoothly!
    So now they are just dirt-covered English people in fur pelts with credit cards.

  33. #33
    Prehistoric Bitchslapper Sarahfeena's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    Thanks!

  34. #34
    Stegodon
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    Default Re: How fast should losing income become a crisis for the middle-class?

    Hi all. Although I don't really have much to add to what I already said, (and I realise that my examples weren't necesarily germane to the family in discussion), I just wanted to say that I understand the justifiable frustration of e.g. featherlou, that someone who should have secured their position, did not do so.

    I don't for a minute condone the life-on-credit approach, whether you take the view that irresponsible lenders and "keeping up with the Joneses" are to blame or not.
    Anything is possible if you use enough lubricant.

  35. #35
    Stegodon
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    Default Re: How fast should losing income become a crisis for the middle-class?

    I am crap with money. I mean, I understand the big concepts better than most of the people around me, but it's the little day to day stuff that I constantly fail at. I realize, on a logical level, that if I have a mocha every weekday, that's $15 a week, and $780 a year, and there's no reason at all not to just give them up, put the money in my piggy bank and at the end of the year, buy a pony. Or something. And yet, every weekday morning, my little reptile brain says "Yeah, but we haven't had a mocha today," and I end up giving in to that stupid impulse.

    So, I sympathize with the family. It sucks to be broke. It sucks to look up from a disaster like losing your job and realizing that it's about to get a whole lot worse, and it's all your own fault. It's just that . . . when it has gotten that bad for me, that's been the time all hands are on deck, all belts are tightened, all excuses are forfeit. You don't make things better by throwing a pity party for yourself and inviting the media. You make things better by determining where you went wrong and fixing it.

    I wonder how much our society is going to change because of this. Will we be willing to cut a little slack to those who've made really bad, major financial decisions? Or will we cut them off because they don't deserve help and because we don't want anyone else thinking it's okay to do this?
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  36. #36
    Oliphaunt featherlou's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    There's saving, and then there's living. You'll never get this time back again, so you do have to live your life somewhat in the moment, but that basically happens after the living expenses (including rainy day savings) are paid for. It's a bit of a balance that each family needs to find, but zero savings on high salaries is not it.

    I wonder too, Phouka, how this economic crisis will affect people longterm. I live in a boom-and-bust oil and gas city, so this is sort of business as usual for us, but it sounds like there are a lot of people who are seriously stubbing their toes on financial reality right now. I hope they learn good lessons, and not just blame everyone and everything else for their problems.

  37. #37
    Elephant
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    Default Re: How fast should losing income become a crisis for the middle-class?

    I think the financial crisis will lead to some behavioral changes, although whether they'll be short- or long-term remains to be seen. Many of the people I know aren't reaching for the credit card quite as much; if they don't have the cash to do it, they don't do it until they do. I also think that credit card companies will be encouraged to scale back their rewards programs; getting airline miles or gadgets for charging purchases just encouraged people to add debt they shouldn't have. In fact, some standard financial advice was to charge everything you could to get the reward points, then pay the bill off in full at the end of the month. Which is fine until you lose your job and have no cash cushion to pay the credit card off in full, and you don't have the cushion of the credit card, either. Among other problems.

    Finally, I think the financial gurus will be scrutinized a little harder; their bad advice was part of what caused the whole mess in the first place. Before now, they have been excluded from any sort of scrutiny from any of the regulatory agencies because they were journalists and not offering individual financial advice. I'm waiting for the first lawsuit against one of them to make it to trial, just to see if there really is justification for regulatory oversight.
    There is more than one way to burn a book. And the world is full of people running about with lit matches. -- Ray Bradbury's "Coda"

  38. #38
    Stegodon
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    Default Re: How fast should losing income become a crisis for the middle-class?

    Quote Originally posted by MsRobyn
    Finally, I think the financial gurus will be scrutinized a little harder; their bad advice was part of what caused the whole mess in the first place. Before now, they have been excluded from any sort of scrutiny from any of the regulatory agencies because they were journalists and not offering individual financial advice. I'm waiting for the first lawsuit against one of them to make it to trial, just to see if there really is justification for regulatory oversight.
    Please tell me you're kidding.

    The hedge funds are already back to naked short-selling after they lobbied government to allow them to do so. The bulk lenders are gobbling up government subsidies to protect themselves while still issuing 33.5% credit cards and approving 95.5-98% mortgages while still ignoring demands to refund charges that have been found in law to be unfair. All the while, they're clapping each other on the back and awarding bonuses again for getting more people into unpayable debt.

    Is anyone really so naive that they believe the banks will ever be punished? Does anyone really believe that they'll stop preying on the greed of idiots?

    I'm sorry, but the naivety displayed by people who think it's getting better makes me furious. It's part of the problem, FFS.

    ETA: Financial guru == shill. Noone can possibly claim that these people who encouraged unrestricted borrowing are in no way linked to the financial institutions.
    Anything is possible if you use enough lubricant.

  39. #39
    Oliphaunt featherlou's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    You're making me weep for humanity again, Guizmeaux. I recall going into some threads about the financial crisis when it was just starting and posting some very cynical things about how things will never change because the foxes are in charge of all the henhouses - you seem to be telling me that I wasn't cynical enough.

  40. #40
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    Default Re: How fast should losing income become a crisis for the middle-class?

    Dammit. Third time's the charm.

    Guizmeaux, we're not talking about the same people. The people I'm talking about are the Suze Ormans and Jim Cramers, who make an excellent living going on television and writing books advising thee and me what to do with our money. On the one hand, they trade on their years of financial experience, but on the other, they're not held to any standards, and they're not expected to comply with the same laws and regulations their non-media-mogul colleagues have to because they're journalists and not financial advisors. In fact, if you watch Cramer's show and watch the stock ticker at the bottom of the screen, you'll see the prices of the stocks he designates as "buy" spike and the prices of the stocks he designates as "sell" tank. IIRC, it's been proven that if you do everything Cramer tells you to do, you cannot make money; you're most likely going to be too late to get a good price on stock you buy, and too early to get a good price on the stock you sell.

    I think the climate is probably right for a judge to allow a lawsuit where an ordinary investor sues one of the media gurus for rendering bad advice. It may not count for much, but I think one of the lessons we're learning is that we can't rely on so-called "experts" anymore, and that they need to be regulated just like their non-celebrity brethren.
    There is more than one way to burn a book. And the world is full of people running about with lit matches. -- Ray Bradbury's "Coda"

  41. #41
    Oliphaunt featherlou's avatar
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    Default Re: How fast should losing income become a crisis for the middle-class?

    I would not like to see any suits brought against financial journalists - that's like suing a relationship writer for the costs of your divorce when their advice doesn't work. I think caveat emptor applies here as anywhere - if you take your financial advice from a book or tv and it doesn't pan out, the lesson you should take from that is to get a better source of advice.

  42. #42
    Stegodon
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    Default Re: How fast should losing income become a crisis for the middle-class?

    MsRobyn, I'm afraid that I don't know the people to whom you refer, though your 3rd time was indeed a charm - I know what you mean now and am sorry for misreading you.

    It seems to me that they are the worst sort of idiots possible - ones who look so trustworthy and provide advice, while knowing that the success of their guidance is immaterial. Let me guess - they have premium-rate phone lines to tell you what to do, right?

    I love the idea that they might be punished, but;

    1) Your 1st amendment prohibits prosecution for saying stupid stuff.
    2) I bet their disclaimers are bullet-proof.

    Instead of punishing them, why not counter the situation by pointing the finger at people who didn't apply sufficient critical thought? After all, such comment is protected by the same laws that allow those "advisers" to exist in the first place.
    Anything is possible if you use enough lubricant.

  43. #43
    Elephant
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    Default Re: How fast should losing income become a crisis for the middle-class?

    First of all, regulatory oversight for people appearing on legitimate media is non-existent -- the Financial Industry Regulatory Authority (FINRA), which is the organization that oversees the securities industry in the United States, explicitly does not regulate such people. To the best of my knowledge, no one has ever tried to see if this is even legal, or if FINRA can step in and pull the plug on an irresponsible "expert" or even require them to hold valid licenses before they can hold themselves out as "experts". So, my position, after some thought, is that they can say whatever they'd like, but they need to be held accountable for what they say.

    Second, also to the best of my knowledge, their disclaimers haven't been tested, either. I honestly couldn't tell you if they would withstand legal scrutiny. No disclaimer is bulletproof until it's been tested in the courts. For all I know, a judge could rule them invalid.

    I agree with featherlou that caveat emptor applies. People need to think critically about what they're doing before they do it. But for someone to claim expertise in an area and then deny responsibility for the advice they give is not very ethical.
    There is more than one way to burn a book. And the world is full of people running about with lit matches. -- Ray Bradbury's "Coda"

  44. #44
    Stegodon
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    Default Re: How fast should losing income become a crisis for the middle-class?

    Didn't John Stewart comprehensively spank and humiliate a financial adviser for his approach to mortgages, credit card debt, and stock purchases?

    At any rate, I've always found Suze Orman's financial advise to be conservative and well-founded. Keep a liquid account with enough funds to live off of for eight months, invest in your IRA every month and never touch it, if you can't pay cash for something, don't buy it. But then, I only read her books. I don't watch her on tv.

    Are we going to lose the idea that every American will be able to afford to buy a house? Currently, the only way I'll be able to afford one is if I get a job as a teacher and can qualify for the FHA's Teacher In The Neighborhood program. These days, even on a teacher's salary, renting a one bedroom apartment in the San Diego area is too steep for comfort.

    I do hope the upcoming credit card bill will make it through. While I no longer carry a credit card and doubt I ever will again, I am very tired of seeing them rape and pillage my neighbors.
    The panther is like the leopard, except it hasn't been peppered.
    If you see a panther crouch, prepare to say "ouch!".
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  45. #45
    Elephant
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    Default Re: How fast should losing income become a crisis for the middle-class?

    Quote Originally posted by phouka
    Didn't John Stewart comprehensively spank and humiliate a financial adviser for his approach to mortgages, credit card debt, and stock purchases?
    Yeah, he interviewed Jim Cramer, who promptly apologized for not doing more reporting on the financial crisis. (Wiki article here.

    At any rate, I've always found Suze Orman's financial advise to be conservative and well-founded. Keep a liquid account with enough funds to live off of for eight months, invest in your IRA every month and never touch it, if you can't pay cash for something, don't buy it. But then, I only read her books. I don't watch her on tv.
    She's interviewed enough as an expert that she's made some blanket statements about such products like variable annuities that some people won't touch them even if they're entirely appropriate for their needs. It's the influence, not the whole message. I do like her point that women need to be more empowered with their money. But too many people rely on her and others like her when they should be working with a financial advisor who is familiar with them and their specific circumstances.

    Are we going to lose the idea that every American will be able to afford to buy a house? Currently, the only way I'll be able to afford one is if I get a job as a teacher and can qualify for the FHA's Teacher In The Neighborhood program. These days, even on a teacher's salary, renting a one bedroom apartment in the San Diego area is too steep for comfort.
    Not everyone should be a homeowner. For years, and especially during the housing boom, the interest deduction was touted as being something that was too good to pass up, and hey, wouldn't you like to build equity instead of rent? Except that you don't really earn equity if you're constantly borrowing against it to pay for things like vacations. I read an article online that said that military families who were encouraged to buy are now royally screwed because they're so upside-down on their mortgages that walking away is a good thing, except that financial problems hurt the servicemember's military career. So they're stuck choosing between the lesser of two evils -- foreclosure or career. (I wish I could remember where I saw that article.) Sideline; I once had a conversation at a family dinner some years back where I said that if I won the lottery, I'd buy a house for cash and live in it for the taxes. My father-in-law said that I shouldn't do that because of the interest deduction. I replied that if I were that rich, the mortgage deduction wouldn't make a bit of difference since that deduction is intended to help the middle class, not the rich.

    I do hope the upcoming credit card bill will make it through. While I no longer carry a credit card and doubt I ever will again, I am very tired of seeing them rape and pillage my neighbors.
    You and me both. I don't have a credit card and don't really want one, largely because of the attitude of the credit card companies. I understand that there are deadbeats, and that everyone else has to pay for deadbeats, but for the companies to consistently have the upper hand here is unfair.

    One thing I hope to see from this is more thought put into the middle term view. We've got "right now" and "at retirement or death" but not enough in the middle. What I'd like to see is an incentive for people to open midterm CDs (for say 5 to 10 years, with the money not available until maturity), or develop something similar, perhaps an annuity-like product. This way, people can save for midlife without touching retirement or their kids' college savings.
    There is more than one way to burn a book. And the world is full of people running about with lit matches. -- Ray Bradbury's "Coda"

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