Friday, May 21, 2010

More On Debt



I was halfway through writing a blog about Time’s cover story and got sidetracked. Elizabeth Warren coauthored a book entitled: The Two-Income Trap: Why Middle-Class Parents are Going Broke.

I’m still reading an interview about it in Salon but I’m already hooked. You should read it.

So, we're not living that much larger than we were in the 1970s? The plague of American hyperconsumerism in recent generations is just a myth?

The overconsumption myth is just that -- a myth. It's a story that we tell ourselves. And it's a story that every credit card company that wants to press Congress to give it even more beneficial laws raises: the story of consumers who are wildly spending, and who need to be reined in. The credit card companies need protection from these wild overspenders.

When, in fact, those are the people that the credit card companies make all their money on?

When, in fact, that's exactly where they make all their profits.

I think that the reason that the story has been so tenacious is that we want to believe that it's true. If the only people who get into real financial trouble are the overspenders, then those of us who buy in bulk at Costco, and wouldn't dream of spending $200 on sneakers, surely we're safe. “


There is so much more but here’s the part to start you thinking. If you have a one-income family (Dad) and he loses his job (illness or laid off), Mom can go to work. If you have a two-income family (Mom and Dad) and he loses his job, you can’t cut your expenses fast enough because you paid too much for the house in the “nice” neighborhood with the “good” schools. The overpriced lifestyle is all conveniently financed, of course. And in case it hasn’t hit you, with two people working, you double your chances of a layoff. Or an income-reducing illness. In other words, you’re twice as likely to face bankruptcy.

Interesting thoughts. Have a read.

Don Brown
May 21, 2010

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