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Bob's Boomer Blog Now that I've turned 60 I get to write whatever I want and you have to read it. ;)

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Old 07-21-2008, 01:34 PM
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Exclamation Given a Shovel........

Speaking with Genevieve Sophia on Saturday she said she had been listening to the Dolan's on the radio and the statement was made that our current recession might turn into a full depression. Since GS was a child of the Depression this shook her up quite a bit as I imagine anyone who lived through that period would also be very alarmed. On Sunday reading the NY Times online I found an interesting series about the growing debt of Americans. I forwarded that information to GS and also blind copied all the rest of the family since three (3) men in the family are now unemployed due to this recession.

Here is my email with some minor editing of personal information:

Quote:
Hi Mom,
Over the years we have all remarked to you, "the Depression is Over" and I'm sure at one time or another each of us has had serious financial problems. While I'm not all doom and gloom, fearful of another Great Depression, the economy is worsening each day and there are NO signs of improvement in any sector of the economy.

The next President might have to tackle something worse than inflation, Deflation of the US economy. In spite of what we may read or hear about Wall Street, the fact remains that real individual earnings across the entire country have declined in the last 10 years.

All that is beyond our control, but ........ There is an extremely interesting and eye opening article on www.nytimes.com, "Given a Shovel, Americans Dig Deeper Into Debt."

The subject of the article is the enormous fees, penalties and interest rates being charged by banks, credit card companies and mortgage companies which are overwhelming consumers with massive debt. The example in the article is bad, it's a divorced woman in PA who has gotten herself into a total debt of around $285,000. Reading the entire article it is apparent that she has some real emotional problems, is not too smart and certainly is not representative of the average American. Nevertheless her story is proof of how easy it is to get in over your head, and proof that one life changing event can destroy a lifetime of hard work. I suggest you read the whole thing and then read the Comments section for the opinions of other readers, they are not compassionate.

Just as important as that single article is the series, The Debt Trap, that the NY Times is running. Much of it is graphic and interactive, allowing you to compare your financial situation against others in your age range and income group.

The address is:
http://www.nytimes.com/2008/07/20/business/20debt.html?

The NY Times requires registration, it is free.

The attached chart is from the NY Times, it is an interactive chart however I've used my graphic software to capture it and display the changes over the years. For comparison purposes: In 1933, the worst year of the Great Depression, when the economy had deflated, the
average household debt was $9,771. That equals $164,465 in 2008 inflation adjusted dollars. That means we are "better off" but back in 1933 a loaf of bread didn't cost $3.19, it was 7 cents! More information at this very interesting web site: http://www.peoplehistory.com
The second graphic comparing timelines on past US recessions is telling. I certainly recall the recessions of the past 30 years. I do find it interesting that the NY Times has designated the Carter era recession as beginning in 1980 and a new recession beginning in 1981 under Reagan. Call me dumb but that takes a real leap of gullibility to buy into, the Jimmy Carter presidency was 4 years of weak leadership, rhetoric and misery for America. We had not hit bottom yet but at least the country elected a real leader with executive experience and a brain.

Question: Is anyone buying a new 52 inch flat screen HDTV television?

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Old 07-21-2008, 03:18 PM
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Default Re: Given a Shovel........

Didn't have time to go thru the articles yet, but It seems like these days alot of folks just walk away. You know - your going to have a kid, see you later. I can't pay for the new pile of stuff I just charged on the credit card. Oh well, see you later. My folks also grew up with the depression and the only thing they used credit for was their mortgage.
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Old 07-21-2008, 03:23 PM
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Default Re: Given a Shovel........

Well, it's nice to know I'm above average at something.

Call me crazy but I'm actually looking into selling my house and buying another one right now. And a nice new TV to go with it. Our main TV is a 16 year old 27" Hitachi.

My house is nice but with the growing family has become too small. Taxes, $7000.00/ year, the public schools are not up to my standards so for my two kids in private school the overall tab is roughly $12,000.00/ year.

We have taken no equity out of our house. It is starting to make sense to spend a little more in taxes to be able to send the kids to public schools.
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Old 07-21-2008, 05:49 PM
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Default Re: Given a Shovel........

Everyone's circumstances and needs are different, if you are on an upswing, it makes sense to pay more in property taxes to send your kids to a very good public school system. My only recommendations are:

1: Agree right now with your wife that you cannot afford the house of your dreams unless you take on more debt than is realistic. Being "house poor" in a declining housing market is really stupid.

2: Swallow your pride and go sit down with your BANKER and review your finances. Forget mortgage lenders and "financial planners" just talk with a traditional banker and then go forward with a conservative strategy.

3: Spend a LOT of time researching school districts. Princeton Boro and Township (Mercer County) as well as Montgomery Township (Somerset County) have superior school systems but housing costs and taxes may be prohibitive. Also consider the trade off in additional commuting time versus "home time."

4: It's better to sell your current house at a fair price and go out of your way to avoid points and weird deals with buyers who may not really be capable of getting a normal mortgage. Make sure your realtor shares the pain, negotiate his or her commission rate, up front.

5: Make sure you budget for college savings programs.

6: Don't spend more than $750 on a flat screen HDTV!
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Old 07-21-2008, 07:55 PM
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Default Re: Given a Shovel........

People don't respect debt, they will get burned. Having debt isnt bad, if used correctly.

I remember my brother in law looking at me wierd when I said I didnt have a Home Eq payment or CC debt...but then again I could use siding on my house for it to "look" better but let's not be stupid...

I couldn't believe people were buying houses three years ago at crazy prices.

Btw, expect fuel to go down in a few weeks. Guy at the station I've been going to for years told me, he's making 40 cents a gallon since last Wed, he was losing 7 cents a gal in May and June...he said everyone is holding to recoup their losses. He said I stayed under 4 to keep my customers. We shall see...

Benny, If you have that extra cash going to private school...there are plenty of towns not that far from you with great schools. Summit, New Providence come to mind.
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Old 07-21-2008, 07:59 PM
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Default Re: Given a Shovel........

I sold my house, and am renting now. Glad I did also. Payed off all my debts, and have a cushion in the bank. No credit cards. I did splurge on a few things, new grill, patio set, a little fishing stuff... I resisted the lure of a new TV (about the only time my 18 year old one is on is the watch the Weather Channel before work), didn't buy a boat that was screaming to be bought with where I'm living now.... I dont have the worries about schools and such that BennyB has. My job is secure (yeah, I'm one of those bloodsucking public servants) and planned on retiring from there when I hit the 55 yr age thing. I probably will do so, but will have to see how the economy is. More than likely find something to do that interests me. My pension wont be great, but will allow some breathing room.
I think I'm ready to weather the storm...
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Old 07-21-2008, 08:05 PM
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Default Re: Given a Shovel........

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Originally Posted by ragman View Post
My job is secure (yeah, I'm one of those bloodsucking public servants) and planned on retiring from there when I hit the 55 yr age thing. I probably will do so, but will have to see how the economy is. More than likely find something to do that interests me. My pension wont be great, but will allow some breathing room.
I think I'm ready to weather the storm...
Rags look hard at that pension, do the math and figure out what an additional 5 years does for your monthly payment, anyone on the NJ state plan does well the more years they put in....put in another 5 and you could spend your mornings giving Tom off from Grumps...the customer wouldn't know the difference!!
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Old 07-21-2008, 10:17 PM
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Default Re: Given a Shovel........

Well, let's see, my wife is our realtor, she's been doing that on the side for a couple years now.

We are looking in Union County right now, basically Roselle Park, Cranford and maybe Scotch Plains, the public schools in these towns are acceptable. Have not really looked at Summit or New Providence. We both work in Union County so we are trying to stay local.

We only owe 128K and should get 300K for our current house. We are sitting down with a banker my wife knows through the real estate business and I want to see what our current lender Wells Fargo can offer us. I really like Wells Fargo, they have been very fair with me and I have 8 years payment history with them which is flawless.

My wifes banker buddy told us we could get a fixed rate of 6 and a quarter. I'm paying 5 and 7/8ths now. That's another reason to act now if we are really going to have to. The interest rates will eventually go up and they wont be this low for a long time. Plus the kids are just starting school now so it makes the most sense.

In 20 years, maybe I'll move to a 55 and over community in Toms River and retire.
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Old 07-21-2008, 10:47 PM
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Default Re: Given a Shovel........

Quote:
Originally Posted by Frank N View Post
Rags look hard at that pension, do the math and figure out what an additional 5 years does for your monthly payment, anyone on the NJ state plan does well the more years they put in....put in another 5 and you could spend your mornings giving Tom off from Grumps...the customer wouldn't know the difference!!
Frank,
I have done the math. When I am 55, I will have 30 years in. Thats about the max for additional money at retirement (I think if I stay for another 5 years past that I get 2% more, and it's just not worth the stress I put up with at work).
And I could be as Grumpy as Tom. Just dont have the beard, but I could grow one....
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Old 07-22-2008, 01:59 AM
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Default Re: Given a Shovel........

Quote:
Originally Posted by Frank N View Post
People don't respect debt, they will get burned. Having debt isnt bad, if used correctly.
Que? Any debt is bad, even a mortgage, it means you owe people money and extra money, aka interest. Of course there are times when having debt is good since it eliminates some tax but any credit card debt is always bad. According to the Times graphic above the average American family has 13 credit cards What the hell do you need with 13 cards? We have zero debt, I carry two credit cards and three ATM/debit cards. I use the ATM/Debit cards 50% of the time, the other 50% I pay cash and save the receipt.

A credit card is only used for paying for a big ticket item where I want the protection of being able to dispute the charge if the item or service is bad. i.e. We bought one of those Sleep Number beds, I paid with a credit card just in case there was something wrong so I could get the charge frozen until the problem was resolved. You don't get the same protection using a ATM/Debit card.

All credit card charges are paid promptly, usually online, before the statement is mailed.

There is not a week that goes by that we don't receive solicitations for new credit cards, business lines of credit and my favorite, "blank checks" from Capital One. Every damn week we get blank checks from them, I called and asked them to stop those mailings since I simply tear them into small pieces and toss them in the garbage. That did not work.

The real irony is, and this is a FACT, credit card companies like Capital One send out those mailings at negotiated, discounted postal rates AND the USPS loses money on each piece they handle! THAT IS A 100% TRUE FACT, we subsidize the SOB's by paying higher rates for our regular mail.

True story, week before last, Genevieve Sophia's TV died. OMG catastrophe! I did research online and found a 26" TV on sale at CircuitCity.com. I took her to the Circuit City store in Union, told her not to even look at the flat panel TV's and showed her the TV and I verified the warranty information. She agreed that it was fine. Then I told the salesman that the set was $50 cheaper on their web site. He said that any online discount was not applicable in their stores, I turned to GS and said "Let's Go." We were half way to the front door when he came running up to us and said his manager approved the discount. What bullshit!

Then I hauled the TV back to her house, lugged the old one out and installed the new one. The next day I was eating Advil's like they were M&M's
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Old 07-22-2008, 04:47 AM
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Default Re: Given a Shovel........

First things first, WHAT ARE YOU DOING CARRYING A TV?

As for the debt statement, think about this, I couldn't buy my house for cash 12 years ago, my mortgage and tax payment for the last 12 years are LESS than I've built in equity in 12 years not to mention the tax implications. Proper use of debt? I think so.

I just bought the Explorer, an 06, trust me I beat them down, timing is everything. Now do you pay in full or use Ford's 2.9 used car financing and let your money sit at 4.0 in a CD? Sure I'll get hit with taxes that will wipe the gain but the cash stays in my hands....at no cost.

As for credit cards, you are right floating debt on them is a killer, but you can use your credit to make money. I rarely pay cash, everything is funneled through an Amex cash back card, food, fuel, department stores and my work travel expenses (imagine what they total), paid at the end of every month...my cash back credit at the end of the year could pay for a couple of Van Stahls...but I buy old z's, frugal yes, foolish, no. Everytime I use that card it's like getting an additional 3% off my purchase. BTW, don't pay it off on line before the due date, you are using an interest bearing checking account, right?
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Old 07-22-2008, 04:56 AM
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Default Re: Given a Shovel........

30 years, the magic number, congrats Rags, almost there! pull the plug and go enjoy doing something for work....just make it a day job!
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Old 07-22-2008, 08:50 AM
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Default Re: Given a Shovel........

Quote:
Originally Posted by Bob D'Amico View Post
Que? Any debt is bad, even a mortgage, it means you owe people money and extra money, aka interest. Of course there are times when having debt is good since it eliminates some tax but any credit card debt is always bad. According to the Times graphic above the average American family has 13 credit cards What the hell do you need with 13 cards? We have zero debt, I carry two credit cards and three ATM/debit cards. I use the ATM/Debit cards 50% of the time, the other 50% I pay cash and save the receipt.

A credit card is only used for paying for a big ticket item where I want the protection of being able to dispute the charge if the item or service is bad. i.e. We bought one of those Sleep Number beds, I paid with a credit card just in case there was something wrong so I could get the charge frozen until the problem was resolved. You don't get the same protection using a ATM/Debit card.

All credit card charges are paid promptly, usually online, before the statement is mailed.

There is not a week that goes by that we don't receive solicitations for new credit cards, business lines of credit and my favorite, "blank checks" from Capital One. Every damn week we get blank checks from them, I called and asked them to stop those mailings since I simply tear them into small pieces and toss them in the garbage. That did not work.

The real irony is, and this is a FACT, credit card companies like Capital One send out those mailings at negotiated, discounted postal rates AND the USPS loses money on each piece they handle! THAT IS A 100% TRUE FACT, we subsidize the SOB's by paying higher rates for our regular mail.

True story, week before last, Genevieve Sophia's TV died. OMG catastrophe! I did research online and found a 26" TV on sale at CircuitCity.com. I took her to the Circuit City store in Union, told her not to even look at the flat panel TV's and showed her the TV and I verified the warranty information. She agreed that it was fine. Then I told the salesman that the set was $50 cheaper on their web site. He said that any online discount was not applicable in their stores, I turned to GS and said "Let's Go." We were half way to the front door when he came running up to us and said his manager approved the discount. What bullshit!

Then I hauled the TV back to her house, lugged the old one out and installed the new one. The next day I was eating Advil's like they were M&M's
Excellent advice. Stay debt free if you can and don’t try keeping up with the Jones’s.
I thought about retiring this year but with the direction are economy is headed and having a good job I decided to hang around for a little while longer. Plus my pension keeps going up.
fficeffice" />
My wife thinks I’m over the edge when I tell her that were headed for a depression but I see it coming and so does my 88 year old father who has some very interesting stories about the last one.

We needed a TV for our back porch and I wanted a big screen one but didn’t want to spend the money for a new one. So after a month of checking Craig’s list I got a friend to help me pick up 35” XXXXXXX with a stand that plays excellent this past weekend for $125. (Advil doesn’t work for me it has to be aspirin or stronger)




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Old 07-22-2008, 11:51 AM
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Default Re: Given a Shovel........

Quote:
Originally Posted by Frank N View Post
First things first, WHAT ARE YOU DOING CARRYING A TV?

As for the debt statement, think about this, I couldn't buy my house for cash 12 years ago, my mortgage and tax payment for the last 12 years are LESS than I've built in equity in 12 years not to mention the tax implications. Proper use of debt? I think so.

I just bought the Explorer, an 06, trust me I beat them down, timing is everything. Now do you pay in full or use Ford's 2.9 used car financing and let your money sit at 4.0 in a CD? Sure I'll get hit with taxes that will wipe the gain but the cash stays in my hands....at no cost.

As for credit cards, you are right floating debt on them is a killer, but you can use your credit to make money. I rarely pay cash, everything is funneled through an Amex cash back card, food, fuel, department stores and my work travel expenses (imagine what they total), paid at the end of every month...my cash back credit at the end of the year could pay for a couple of Van Stahls...but I buy old z's, frugal yes, foolish, no. Everytime I use that card it's like getting an additional 3% off my purchase. BTW, don't pay it off on line before the due date, you are using an interest bearing checking account, right?
That's what Carole asked but not as nicely, there was some profanity....

Admit it Frank, you are somewhat unique, you have your head on straight and actually use the brains God gave you. Must be why you are a Libertarian.

Mike let's just hope, you, your Dad and Genevieve Sophia are wrong. The current financial situation in the country is confusing, even for us more "mature and seasoned" guys. I am against bailing out "banks," and individuals but we're in uncharted waters right now. If the Feds bail out any company or individual there must be strings attached, including re-payment, fees and interest. No more Bear Stearns and no pity for people who ran up their personal debt by multiple re-mortgages, sub prime mortgages and buying a ton of shit on QVC!

It was pitiful that McCain dumped Gramm for his honest comment, we are a nation of whiners!
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Old 07-22-2008, 06:02 PM
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Default Re: Given a Shovel........

We only use the AMEX and debit cards. I use my amex for most stuff as I get the rewards like Frank. I think we have a discover because when they tried to get me with an annual fee, I threatened to cancel and it went away, but we never use it.

I also have a sears card that I use to do thier 0% interest on big stuff. Me and mag usually get one big appliance every year and a half. After the fridge we got a dyson, thats paid off and now she wants a new washer. What the heck, I keep it in my account and pay it the day before it is due.

We have modest investments and a nice nest egg that we have accumulated. 401k, Roths, and some cd laddering round us out. I am out of the market otherwise, i am too scared and I got time.

Debt is crazy and I cant believe we allow ourselves get trapped in cages with bars of gold. The media and popular culture make it impossible to know you are being a spendy dumbarse. You think you are doing the right thing.

People ask how I afford good equipment... be cynical, be cautious, be educated and DONT PAY INTEREST ON REVOLVING CREDIT!!!!
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