Credit, debit, or nothing?

Both the New York Times and the Wall Street Journal are regular reading at our house. The Times has some of the most fantastical stories that I just can’t pick one on which to ruminate. (Lucky you.) However, as with my post “Stock up on Popcorn,” the Journal has once again extracted a “harumph” noise from me. (I produce another sound for the Times but have not as yet named it.) Despite its being owned by the illustrious Mr. Murdoch, I still find news of note in the WSJ.  Sometimes, though, it seems as if I’m reading fiction, or even fantasy.

Economic recovery

The October 22-23 weekend edition featured a front-page article titled, “Penitent Debtors Hobble Recovery in U.S.” I could definitely wax long and rhapsodic on the title alone, but for once, I won’t. Here’s the skinny.

The article immediately introduces us to a 36-yr. old Atlanta speech therapist who reflects on her former borrowing habits in the manner of a recovering drug addict. She states “her life is so much better not having that haunting debt.” She’s not talking about Halloween, despite her former economic fantasy life not being much different than playing dress up and asking for society candy. If you think this through, you’ll figure out who comprises “society”.

This young lady is proud that she used savings to pay for her recent wedding. She’s also feeling good about paying off the balance of two dozen credit cards and not buying boutique-label goods. She’s diligently chipping away at $50,000 in student loans and $215,000 remaining on her mortgage. The article states our therapist is “among a generation of Americans who were taught the value of saving as children but had to learn the hard way to spend wisely.”

Really?

I don’t think so. She must have been absent when the savings lesson was taught. Maybe she was already shopping. Two dozen — 24 — credit cards? Who has — who needs— 24 credit cards? It’s amazing she had any savings to pay for her

Get ’em by the dozens.

wedding. She still has at least $265,000 in debt. I hope she maintains her ability to continue those payments. Does she have any remaining savings in the event she finds herself without income?

We also meet a Maryland gentleman of about the same age whose home is worth $50,000 less than what he can sell it for, who has placed himself on a strict budget. No longer does he “toss his credit card bills in the drawer” so he can “figure out how to deal with them later” as he did during his spending heyday. That’s so commendable of him.

But here’s the consequence of these, and thousands of other, reformed free credit wheeling ways — the nation’s economic recovery is hampered by folks like this deciding to pay off their current debt, borrow no more, and operate on a cash basis. We find ourselves in a “paradox of thrift.” Nobody’s buying; they’re just trying to pay for the mega-houses, closets full of designer clothes, the latest phones, 3D televisions, e-readers, computerized appliances, and cars that virtually drive themselves, all purchased with the assumption that the pile of bling came with an extended warranty of happiness. Like drunks who’ve had more than one too many, this generation that is supposedly only now learning they have to pay for all that stuff has blithely contributed to a national shopping spree hangover that we can’t find a pill to cure. The almost laughable paradox of thrift is that we’re now saving too much and not spending enough on consumer goods, said spending being key to  a humming economy.

wha CrDtt CARd bil??

I hardly think one generation is responsible for our economic malaise. But there is a significant number of people who didn’t buy those oversize houses or status-symbol cars or $$$ Coach handbags, who never had 24 credit cards, who never intentionally threw a credit card bill in a drawer and casually slammed it shut without another thought about paying it, who are currently almost being made to look as if they’re guilty for not sympathizing with the crowd that went down the “buy now, don’t pay later” road; people who are now being sneered at because they don’t think mortgages should be wiped from the ledgers wholesale or school loans forgiven or debts erased without repercussion. These are the people who always lived within their means. They don’t all have “PhD” behind their names.  They’re not all Wall Street bankers. They’re not “the 1%”. They’re everyday people doing a little forecasting, a little financial planning, a little saving. There will never be a way to completely remove risk and unforseen circumstances, but before signing away 30 years on a jumbo mortgage or thousands on the latest entertainment medium, they’re going to look at their whole economic picture and make an informed, responsible decision. And they expect everyone else to look at their own pictures and make their own thoughtful decisions. 

So, maybe we could give those folks who excercised restraint from the get go a little pat on the back in the media, too. Let’s give some credit where it’s due for a change. Seriously, no pun intended.

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One response to “Credit, debit, or nothing?

  1. Very thought provoking!

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