This is so absolutely spot on. In a span of 3 years, I had to (unexpectedly) pay for the burial of both of my wife's parents, and my wife suffered a severe medical crisis and was unable to work for over a year. This was shortly after purchasing our new home, new furniture, and new home odds and ends. Out of necessity, we had to rely on credit and savings to make ends meet during her convalescence. Despite good health insurance, you would be surprised how much 10 days in ICU will cost. From a very frugal budget, trying to recover from these $$$ hits has been a struggle. Families with lesser incomes, and no credit or savings, would have been decimated and I would understand the need for bankruptcy.
I am very sorry to hear about your struggles. On topic, once upon a time I felt like others on this board feel...that the bankrupt somehow did it to themselves. After spending everyday for almost 6 years talking to people about their situations, it has become clear to me what reality is.
Man, you are far from being on my favorite list, but I wouldn't wish these things on the worst person I met.
I never said this was the one sole reason. However it's a contributing factor, no doubt. As far as going without 30% of your income, typical advice is to have at least a 6 month rainy day fund in a savings account, or at least 50% of your income. We were living beyond our means, it's no wonder more people are going bankrupt.
You are clueless about this topic. Most people are trying to survive day to day. Feel free to take a poll on how many people have 6 months of their income in savings. The number will shock you. It is also a lot easier for people who have no children. When your kid needs new shoes, you buy them. When your kid breaks their arm, you pay the med bill. As for more people going bankrupt, I can tell you that the numbers in the Southern District of Texas are nowhere near what they were prior to BAPCPA of 2005. You would do very well to see these situations daily as I have. Most of these people were doing just fine...then something bad happened. They would struggle along for a few months and then they ran out of resources. Add that to the fact that then, on top of it all, their ARM note adjusted. BAM!!! Instant Chapter 13...just add water. Pretty easy to judge from your Ivory Tower.
I'd rep you if I could, but apparently I've repped you too much. You are going to feel so much better when you realize you're a Democrat. Email me through the board when it happens. Drinks on me.
I have often characterized myself as a right leaning centrist. The GOP of today is a bastardization of the conservatism I have embraced. As for the bankruptcy issue, I have seen so much during my career that I believe I have a perspective that you can only get through being in the trenches and counseling people on one of the toughest situations of their life. Oh...and thanks for the rep, buddy.
Exactly. Right leaning centrists are Democrats now. Didn't you get the memo? Only Palinesque freakjobs are still Republicans. If you don't like something about your party (The Democrats), work to change it from within. We're all in this together.
It's a fact that savings have gone down since 1980. Sorry this fact upsets you. It's still a fact though. I am not shocked. I'm the one who pointed out that the savings rate went negative. So why would I be shocked? I never said bankruptcies and tragedies don't happen, but if this emotional rant makes you feel better, then good for you. ARM note...hmm those are always a financially smart move.
Yes, savings have gone down since 1980. There's a reason (hint: the reason is not "because people were more responsible then"). hint #2: the reason is interest rates.
You're putting the proverbial cart before the horse. Interest rates are down because consumer spending is up. The #1 reason is because of irresponsible spending. 30 years ago, people didn't have cable/satellite in every house, cell phone bills, internet, gadgetry galore, new cars every couple years, ect ... Arguably , the close second is inflation to living wages. If you cut out cellphone, tv and internet, one could easily save up 6 months worth of savings in a couple years. This doesn't include the huge credit boom with many people carrying several hundred dollar min. payments to CC companies.
If you want to talk specifically about 1980 vs. recently (which is what I was addressing), saving has fallen relative to that point in time because we no longer have interest rates nearing 20%. Lower interest rates => less incentive to save. That should be clear enough not to have to be addressed further. Also, the statement, "Interest rates are down because consumer spending is up" doesn't make sense because increased consumption (and, thus, decreased savings) acts to raise interest rates. Think about it this way: if people are saving less, there's less money available to be borrowed, and would-be borrowers will have to pay more in interest in order to take out a loan. Thus, less saving =>higher interest rates. Of course, all of this is assuming you have a working financial system, but I don't think anyone here has been basing their arguments on the current financial crisis.
In theory, I might have to agree to you in some extent, but ... My first question to you: Who controls the interest rates? This same group told Ron Paul (who is trying to pass his "Audit the Fed - HR1207) that if he continues to push this bill, they will be forced to raise interest rates. Interest rates are not controlled by the market, they are controlled by a few people who base their opinion on "whats best for the economy".
Thanks. I wasn't seeking solace or sympathy, I just wanted to drive home Refman's point that it is not always a matter of "living beyond your means" but a matter of life happens sometimes creating a downhill snowball effect. All is well now, and we're both out of in-laws to worry about from here on. Funerals are not cheap.
Well whatever the reason is, it's not good. The savings rate going that low was always disturbing to me. And it's not true that people are just living day-to-day and can't save. Notice how the savings rate is going UP in the worst recession since the Great Depression.
How does this fit with this: Do a few people control interest rates, or does the level of consumer spending control it?
The market determines interest rates. Consumer decisions, inflation expectations, risk, taxes, etc. influence that. The FED tries to influence these rates through changes in the fed funds rate. So I guess it's kinda both.
