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Economy Fitful, Americans Start to Pay as They Go
NYT ^ | 2/5/08 | PETER S. GOODMAN

Posted on 02/05/2008 5:48:11 AM PST by xtinct

For more than half a century, Americans have proved staggeringly resourceful at finding new ways to spend money.

In the 1950s and ’60s, as credit cards grew in popularity, many began dining out when the mood struck or buying new television sets on the installment plan rather than waiting for payday. By the 1980s, millions of Americans were entrusting their savings to the booming stock market, using the winnings to spend in excess of their income. Millions more exuberantly borrowed against the value of their homes.

But now the freewheeling days of credit and risk may have run their course — at least for a while and perhaps much longer — as a period of involuntary thrift unfolds in many households. With the number of jobs shrinking, housing prices falling and debt levels swelling, the same nation that pioneered the no-money-down mortgage suddenly confronts an unfamiliar imperative: more Americans must live within their means.

“We don’t use our credit cards anymore,” said Lisa Merhaut, a professional at a telecommunications company who lives in Leesburg, Va., and whose family last year ran up credit card debt it could not handle.

Today, Ms. Merhaut, 44, manages her money the way her father did. Despite a household income reaching six figures, she uses cash for every purchase. “What we have is what we have,” Ms. Merhaut said. “We have to rely on the money that we’re bringing in.”

The shift under way feels to some analysts like a cultural inflection point, one with huge implications for an economy driven overwhelmingly by consumer spending.

(Excerpt) Read more at nytimes.com ...


TOPICS: Business/Economy; Front Page News; News/Current Events
KEYWORDS: credit; debt; economy
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To: misterrob

“I make one departure from that for my car which I lease.”

I financed my current car. At 2.8% (plus I got all the cash incentives) it makes more sense, as my cash has been working for me making more than that in the meantime. My credit card gets paid off in full each month.


61 posted on 02/05/2008 8:18:09 AM PST by -YYZ- (Strong like bull, smart like ox.)
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To: aristotleman

Does anyone think that the Dave Ramsey workshops, on living
Debt Free, that go on all over the country are causing this pay as you go story? I see signs for Workshops by Dave about every 6 weeks in the Dallas area.


62 posted on 02/05/2008 8:23:25 AM PST by q_an_a
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To: CDHart
Sorry, my lashing at debt holders shouldn’t include people in your situation.
I was talking about people who spend out of greed and selfishness

AM

63 posted on 02/05/2008 8:25:19 AM PST by aristotleman
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To: Intimidator

Additionally, my CC, and many others, double the warranty on purchases. It adds a year to five-year warranties. So there are advantages to using one on major purchases. Put it on the CC, then go home and immediately pay it off.


64 posted on 02/05/2008 8:27:23 AM PST by hoppity
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To: RSmithOpt
Thank you.

Carolyn

65 posted on 02/05/2008 8:32:51 AM PST by CDHart ("It's too late to work within the system and too early to shoot the b@#$%^&s."--Claire Wolfe)
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To: aristotleman
That's OK - there are often more than two sides to any story! :^)

Carolyn

66 posted on 02/05/2008 8:34:24 AM PST by CDHart ("It's too late to work within the system and too early to shoot the b@#$%^&s."--Claire Wolfe)
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To: q_an_a

Could be the effect of Dave Ramsey. I think it is more likely that it is simple demographics. The peak year of the Baby Boom was 1957-58. Those people are all 50 now, and that seems to be an age where people really stop and take stock of where they are. Most 50-year-olds know they are not likely to get a higher paying job and most have kids about to go to college. They realize they are only 15 years away from retirement and a lot of them haven’t put enough away. They are in the house they intend to stay in until they retire and they have already bought all the stuff they need to put in it. People who are 50 realize that nobody cares what they look like anymore so they stop spending so much money on clothes, shoes, handbags, cosmetics, even hair coloring. It is most important to them now to start seriously saving for college and retirement, and there isn’t much stuff they really need or want to buy.


67 posted on 02/05/2008 8:39:57 AM PST by Dems_R_Losers (Waiting for 2012 to vote for an actual Republican)
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To: xtinct
My credit union recently had a promotion for a Visa platinum card. Since my wife and I are separating, I thought I should get my own card. I have fairly good credit, so my card has a $20,000 limit. Yesterday, I got a Visa bill and panicked...what was going on. Opened the bill. Amount due = 0, balance = 0. That’s the way it will remain. Card will only be used for emergencies.
68 posted on 02/05/2008 9:13:29 AM PST by JimmyMc
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To: Tanniker Smith

“In fact, I’m MORE LIKELY to spend recklessly when I’m just pumping money out of an ATM.”

This is why I said, don’t have an ATM and do it the old-fashioned way.

I don’t think anyone was accusing you of being anything in particular.

What we ARE saying is that our theories would be the norm, and not the exception. The fact this story is printed about credit, et al, is proof that the majority of people don’t get the benefits of credit (or ATM) as you do. They *don’t* see what they’re really spending using credit and just use it up the wazoo.

IOW, it would seem you are the exception and not the rule.


69 posted on 02/05/2008 11:08:42 AM PST by the OlLine Rebel (Common sense is an uncommon virtue.)
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To: RSmithOpt

Thank you RS for your very kind post...I appreciate it :)PaMom


70 posted on 02/05/2008 11:33:28 AM PST by PennsylvaniaMom (I do not want people to be agreeable, as it saves me the trouble of liking them. Jane Austen.)
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To: Tanniker Smith

I also pay for everything on one credit card (which I pay off at the end of the month), more so I can get a better idea of where all the money goes. It’s nice that most online banks allow you to download your transactions to your PC accounting package


71 posted on 02/05/2008 11:56:37 AM PST by PapaBear3625
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To: xtinct
Credit cards are valuable in emergencies and for frequent flyer miles. As long as you pay them off at the end of every monthly billing cycle, they are OK.

Using them for regular purposes and carrying a balance over time, however, is not wise.

72 posted on 02/05/2008 12:09:10 PM PST by Clemenza (Ronald Reagan was a "Free Traitor", Like Me ;-))
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To: Intimidator

You know why divorces are so expensive, do you not?


73 posted on 02/05/2008 12:10:37 PM PST by Clemenza (Ronald Reagan was a "Free Traitor", Like Me ;-))
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To: Notary Sojac

“The generation that lived through the Depression as adults has not been around to provide counsel for the last 10-15 years”

I lived in the depression and i’ve never paid interest on anyrhing but one home mortgage and it’s been paod off for 20 years.

If you haven’t got the money you don’t need it.

I’ve never in my life had less than 6 months earnings in reserve for emergancies and that’s the minimun.


74 posted on 02/05/2008 12:23:09 PM PST by dalereed (both)
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To: Clemenza
You know why divorces are so expensive, do you not?

Because they're worth it.

75 posted on 02/05/2008 12:24:44 PM PST by Intimidator (It's not unilateral - just try saying you're a Progressive Democrat in your typical Evangelical chur)
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To: Intimidator

DING DING DING! Never gets old, because its so true.


76 posted on 02/05/2008 12:25:20 PM PST by Clemenza (Ronald Reagan was a "Free Traitor", Like Me ;-))
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To: xtinct
The shift under way feels to some analysts like a cultural inflection point, one with huge implications for an economy driven overwhelmingly by consumer spending.

Here's the thing about an economy that depends entirely on service and customer spending: it inevitably puts itself into a Catch-22 that can't be circumvented. The jobs depend on the spending, and the spending depends on the jobs.

77 posted on 02/05/2008 12:29:43 PM PST by jpl (Dear Al Gore: it's 3:00 A.M., do you know where your drug addicted son is?)
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To: untrained skeptic

Did you know if you buy gas with a debit card theyput a hold on a certain amount of money in your account and don’t release it for 24-48 hours ?

If you are doing errands one day, you may find yourself over your balance and your bank will charge you fees.


78 posted on 02/05/2008 12:44:12 PM PST by cinives (On some planets what I do is considered normal.)
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To: the OlLine Rebel
IOW, it would seem you are the exception and not the rule.

Thank you. Pretty much what I said back in post #2 before someone else told me that what I'm doing is not what I'm doing. I know for a fact that since I started using the card more often and having everything lumped on one bill, my spending is more constrained and I know where the money is going without being nickel and dimed all over the place.

Moreover, since I'm not breaking the bills in my pocket, I have less spare change to throw away on the silly things, the impulse buys (a buck or less kind of stuff) that will add up over time.

79 posted on 02/05/2008 12:52:41 PM PST by Tanniker Smith (Who knows what evil lurks in the hearts of Dems . . .)
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To: Clemenza
DING DING DING! Never gets old, because its so true.

Does that make us jaded or old and wise?

80 posted on 02/05/2008 12:58:46 PM PST by Intimidator (It's not unilateral - just try saying you're a Progressive Democrat in your typical Evangelical chur)
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