Will our living standards never be the same again?

[mommy111]

So all this talk about how our living standards and the American way of life will never be the same again is scaring me lots. Call me unfashionable, but I LOVE the American way of life (at least the American the way we live...I realize this may be very different from the way other people in this country live).
Now, I know some (a few) people live very excessively. My excesses are mostly limited to clothes and toys for the kids, we buy them good brands (Hanna, Gymboree etc) but never at full price. I would buy a house in the price range of three times our annual income and never above that and we save about 20% of our household income (at least we did before we moved to China and took a huge paycut). I *think* our standard of living should not change too much, but I am terrified of the inflation that will hit us.
So what about you guys? Do you think your standard of living is about to change forever?

[ChunkyNicksChunkyMom]

I will say that, yes, I think our standard has changed. We have always lived way within our means but have lost 40% of our worth in stocks. It is sickening. Always drive cars til they drop, house paid off, never credit card debt and saved, saved, saved. Now we are about to be hit by a tax increase. It does not seem fair or right that having always lived well within our means should have left us in a pinch. Literally makes me sick to my stomach. And our neighbor, whose restaurant failed is waiting on bailout money, having not made a house payment in many, many months.

[maestramommy]

We've always lived well within our means also. Since Dh took a paycut to change jobs we are working to make sure we are doing it enough to save and keep building up our reserve. And with the unemployment scene the way it is, we are really trying to build that reserve so now we do almost nothing in the way of discretionary spending. BUT I will say that our life is still very comfortable. I mean, we have a comfy house, cars that are paid for, decent clothes on our backs and good food on the table. None of us have any health issues to speak of, and we can afford to send Dora to school. We're really lucky compared to many others, and we have a ways to go before I personally would feel like life is a hardship.

It's funny that someone brought up Kjip's siggie because that's the way we've always operated, and now it's become a huge game. I mean, if we really have to scrimp we might as well have fun doing it.

[wellyes]

This crisis really feels like all the people who did what they were supposed to got slapped down for it, doesn't it?

At the same time, I think it's wise to keep things in perspective. Day-to-day, not much has changed for me, I still live an extremely privileged (by world standard) life. My stocks are worth less but I still eat well, do some "for fun" shopping, pay my mortgage, have health insurance, etc. Unless you are unemployed, you're likely still doing pretty well.

[ChunkyNicksChunkyMom]

Unless you are unemployed, you're likely still doing pretty well.[/QUOTE]


I think that depends on what stage in life you are in. When DH is 54 and not that long away from retirement it is a real slap in the face. If this had happened when I was in my twenties or thirties I would not be nearly so concerned.

[jse107]

Yes-- I think things will change, though for many it will be temporary. Like many here, we already live pretty much within our means--save at least 10% of our gross pay, no credit card debt, one credit card paid off monthly, no house projects we can't afford, spending within our means, etc. That said, DH and I both work and daycare & preschool are HUGELY expensive. In fact, after having Elizabeth, we had to use are HELOC to pay for part of preschool. That is our only debt (besides the house and car), and hardly one that is frivolous.

Unfortunately, I still worry (A LOT--though that's what I'm good at). DH is a structural engineer and work has come to a total stand still. We live outside of DC, one of the better areas of the country right now in terms of unemployment, but no one is hiring if DH were let go. It hasn't happened yet, but I worry that it could any day.

Ultimately, it's that kind of dynamic that is changing the way we live. We're not out jumpstarting the economy with spending b/c we're worried about having enough in savings. Yes, we still have health care and enough to cover the basics, but not enough to help float the rest of the economy with spending!

I think it will take 5 years to really feel like the economy is recovered. Beyond that, yes I think our way of living will change in terms of making changes due to climate issues and the like. We will probably need to sacrifice in terms of the types of cars we drive, the type of travel we do, or where we get some of the food and goods we buy.

[elektra]

I think things will continue to change and people will really rethink how they spend. I have been comparing how I live now to what I could still live on and be comfortable and it's really a big difference. I have a gardener, cleaning people that come every two weeks, TV's, stereo's, video cameras, DirecTV, strollers, etc.
I feel like tons of Americans live like this, at least with the consumer electronics stuff and it is really so excessive if you add it all up. But I would miss it too!
I tell DH how freaked out I am. I feel so scared that I will lose our house that we just bought last year after waiting until we thought the time was right, prices were down etc.
I knew prices could very well drop further, but things are really scary now, especially in California. Home prices are way worse than anywhere else in the country (besides FL), our taxes are increasing, teachers and social workers are getting laid off.

[ThreeofUs]

For me, as a policy wonk and a pretty cynical on-looker, the "American" way of life has seemed unsustainable for a while. Sure, conspicuous consumption has been around for a while, but since when - for example - does a starter home have to be over 3000 sf? I can cite lots of examples like this, but with a savings rate that was negative (that is, most people in debt), you probably already know what I'd say.

We don't live like most of our age group - our entertainment budget is minuscule, we save like mad, we buy everything as inexpensively as possible. The stock market has killed our retirement funds, and I find myself thankful I still have an annuity and a government bond or two lying around. I think/am afraid things are going to get worse, and that it's going to be hard for all of us.

[sste]

DH and I are unusually lucky, I have lifetime "tenure" at my job and it pays very well. DH would literally never be jobless - - he is just finishing his training for a medical specialty that is an extreme shortage. His worst case scenario if he got laid off would be that he did "medical temping" and flew out a week or two a month - - he would still make multiples of his training salary.

HOWEVER, lest things sound too good, our lifestyle has completely dropped. Why you ask? No one we know wants to go on vacation with us, go shopping, or get a nice dinner!! And we are so worried about our family and friends that we have downscaled more or less in solidarity - - and due to some worry that there may be future need for "bailing out" a family member.

[mommy111]

OK, you guys are confirming my worst fears. I worry that inflation will be so out of control that we won't really be able to buy the little luxuries of life that we loved (wooden toys, organic food, I'm not talking sports cars). Most of all I worry that we won't be able to save enough to send our kids to college and they will have to take loans to get through college....that was always one thing that I wanted to do, to make enough to put the kids through college without crippling debt.
And I totally hear you, Susan, about it being a lot worse for people who are older...already, in my 30s, I have college coming in another 10-15 years and as soon as we get over that, retirement.

[gatorsmom]

Honestly, I think our way of life has been changing ever since we started sending our jobs overseas. Who here will willingly pay full price for an item that they can get at half the price? Nothing is free, there is always an effect. The effect is that in our search for more and cheaper, we've chosen to buy cheaper goods from overseas, eliminating the jobs of our neighbors. I say nothing is free because when we pay less for overseas-made goods, that takes away jobs from Americans- who many times then rely on welfare and other social- aids. So, we pay anyway! The difference is that one way provides people with jobs that support their families and give them dignity and the other way gives them money in a less respectable way (I'm not saying there is anything wrong with receiving any kind of social aid.).

A result of this is that there is less pride in quality work. Many in our society do not value quality work. They value cheaper prices. Small businesses are suffering because Americans can buy cheaper at Walmart, who is only too glad to move into small towns and undersell the small businessman. The sad thing is, I'm honestly not sure that the average American understands that if they shop at Walmart, then they aren't patronizing local businesses which takes business away from them.

And look at the increase in wealth of the Chinese! I'm not begrudging them their new-found wealth, because they've earned it. And they are probalby being underpaid for their work. But if their lifestyle is going up, doesn't that mean ours is probably going down? If our money is going overseas then is just simply isnt' being invested here at home.

I have no background in economy or finance or anything monetary. The above ramblings are just what I see from my limited perspective. But I found a shirt in my closet a few weeks ago that I had bought back when I was in high school. If i ever fit in it again, it's a really cute top. And it doesn't look any different than when I bought it back in 1989. The cloth is not threadbare despite being worn a lot in highschool and college, the threads are not tearing anywhere. It's made inthe USA. I have a lot of my clothes from that era (because i'm a clothing packrat) and the quality is very different from what I see now.

Yes, I think our quality of life will go down even if the economy eventually turns around. We will never again see the quality of goods and services that Americans naturally expected 15-20 years ago. And ti don't think we'll ever place the samevalue on work that we did in past ages. So, really, I think we've done this to ourselves.

[kijip]

Ok, we have weathered a lot of recessions since the Great Depression and while what we are looking at now is not great and is hurting a lot of people, it is not (at this time) anywhere comparable to the Great Depression. Namely, a high unemployment rate in most places is 7-12% Considering that 5% used to be considered "full employment", that is just not the same thing as high unemployment during the Depression.

Don't get me wrong, I don't think this is nothing or that we will bounce right back in a year but I don't think it is the economic equivalent of Armageddon either. Not to get all FDR, but we are hurting ourselves more with our fear IMO.

[gatorsmom]

Ok, we have weathered a lot of recessions since the Great Depression and while what we are looking at now is not great and is hurting a lot of people, it is not (at this time) anywhere comparable to the Great Depression. Namely, a high unemployment rate in most places is 7-12% Considering that 5% used to be considered "full employment", that is just not the same thing as high unemployment during the Depression.

Don't get me wrong, I don't think this is nothing or that we will bounce right back in a year but I don't think it is the economic equivalent of Armageddon either. Not to get all FDR, but we are hurting ourselves more with our fear IMO.

I could kiss you, katie. I respect your opinion so I'm glad to hear your optimism. I haven't had the time to come up for air lately and really understand what is going on with our economy (I guess I could spend the time I'm on the boards doing more reading.). And I totally agree that the fear and media are not doing us any favors. I think our country could use a little speech from FDR right now!

[Happy 2B mommy]

My parents grew up during the Great Depression, and this is nothing compared to that. I agree the media is making things sound worse than they are, but that is partly because so many Americans were living beyond their means and are having such a rude awaking. My mother told stories of how she dug out nails from the wood of a demolished house and pounded them straight so my grandfather could reuse them (she was about 5 or 6). Her 3 dresses (one for Holidays and special occasions only) were made from flour sacks and the ribbon/lace on the nice dress was reused for her next nice dress. They ate what they grew and made, and sometimes it wasn't quite enough, but enough that they were seldom truly hungry.

I think/feel I live pretty extravagantly compared to my parents and my own upbringing. We have a smaller (under 1500 sq feet), but newer, comfortable home. The house is furnished with antiques/2-hand/garage and estate sale furniture. We own our cars, have no debt other than the house mortage and are well on our way of paying that off. I am able to be a SAHM. Our retirement funds weren't great, but decent and like everyone else, those have been hit hard and we are trying to figure out if dh will ever be able to retire or if I'll need to return to work sooner than I would like.

I think things are going to be hard for the next 10-15 years, not so much because of the recession, but more due to the onslaught of Baby Boomers retiring/needed assistance in the next 10 years. But we will adjust our thinking and expectations to something it probably should have been anyway and hopefully find new solutions to the problem.

[mommy111]

Ok, we have weathered a lot of recessions since the Great Depression and while what we are looking at now is not great and is hurting a lot of people, it is not (at this time) anywhere comparable to the Great Depression. Namely, a high unemployment rate in most places is 7-12% Considering that 5% used to be considered "full employment", that is just not the same thing as high unemployment during the Depression.

Don't get me wrong, I don't think this is nothing or that we will bounce right back in a year but I don't think it is the economic equivalent of Armageddon either. Not to get all FDR, but we are hurting ourselves more with our fear IMO.

You've made me feel so much better with that, Katie. I truly am terrified. My sense is that this is not horrible and that things will get better, but everything I hear from the media says not. In many ways, this is a huge depression in that we are depressed about the state the economy is in....
While not from a disadvantaged background by any means, I have had my share of living with not 'enough' money, having to live in horrible, tiny apartments, in filthy neighbourhoods, next door to lunatics, having to buy mattresses off craigslist and sleeping on the floor because I really didn't have the $300 to buy a bed etc etc. And I have vowed to try to never subject my kids to that, because I know the sense of mental deprivation that comes with that. Very different from not being able to buy a new toy or gourmet cheese or organic food, which are all luxuries, but not being able to afford the things that allow you to live a decent life and the psychological wear that that subjects you to. I hope we never have to go there again but some part of me lives in that constant fear.

[maestramommy]

Unless you are unemployed, you're likely still doing pretty well.



I think that depends on what stage in life you are in. When DH is 54 and not that long away from retirement it is a real slap in the face. If this had happened when I was in my twenties or thirties I would not be nearly so concerned.


This is true. We're just 40 or so, so don't think about it much. But I agree, if your retirement was coming that would be really scary. I think a year or so post 911 when the market plunged, one of my coworkers was so stressed out because her Dh had been planning to retire soon, and now he couldn't. I'm sorry Susan :hug: I keep tending to think as if we're all younger because of our kids.

[Beckylove]

I'm an optimist too. Media reports say things like "biggest GDP decrease since the '91 recession," or "highest unemployment since 1982." I hear these scary stats and think-- it has happened before and then what happened? We recovered. Sometimes it takes longer than other times, but we recovered.

I ache for those facing joblessness and uncertainty. There is some hope there too. My brother-in-law had just purchased a new house when he lost his job in commercial construction. It was very scary. He was out of work for 9 months in the hardest hit industry in a hard hit city. He collected unemployment and got a roommate. He didn't fall behind on the mortgage. He just got a new job- in construction, that paid more than his old one. Now we are delighted for him.

Naturally, in tough times, it is wise to take stock of your situation and consider how you'd get through if the worst happened. I feel my house is in order, it is the best I can do. Other than that, I am making the decision not to be ruled by fear. My hubby took me to the same fancy birthday dinner we get every year. I am still going out today to by a friend's baby present at Gymbo. The world seems scary and uncertain today, but I choose to do what I can do, and I choose to believe that it will get better.

[jse107]

I agree with everyone--although I worry, I remind myself that "this too shall pass." We have always been relatively conservative with our money and that hasn't changed. We're trying to plan on what we will do if DH does lose his job, but that's about all we can do for now.

We're not living on rice, beans and spahetti...yet!

[Piglet]

Well judging by the steady traffic into Circuit City yesterday and steady flow of people leaving with HUGE TVs, I don't think things are so bleak. I mean, really, do you NEED a 60" TV just because it is 30% off? I think people are still living it up in many parts of the country and in the harder hit areas, people are still making ends meet. This is hardly the same as the Great Depression. Our standard of living is VERY high compared to virtually every other country in the world as a whole. We are living in good sized homes, driving good cars (2 per family usually), vacationing, buying creature comforts, etc. The media is the problem, not the economy as far as I can tell. The economy has down-turned, no doubt about it, but we had bad recessions in the past but not the same level of media doom and gloom. Of course I feel for the peopl that genuinely got hurt with he collapse of the stock market and I genuinely feel for people that are losing their jobs. I just ca't fear that we are on the verge of the next Great Depression when I see people buying big screen TVs.

[kijip]

Well judging by the steady traffic into Circuit City yesterday and steady flow of people leaving with HUGE TVs, I don't think things are so bleak. I mean, really, do you NEED a 60" TV just because it is 30% off?

My brother and his partner have been grumbling about the economy a fair bit (thankfully his partner, their main breadwinner still has a good job and decent prospects) but over the holidays they bought a second LARGE flatscreen for their living room and moved the first into the bedroom. On credit, they don't have that kind of cash. They have a family of 4 in 2 bedrooms, like us and their bedroom and living room are mere feet from each other. Whatever floats their boat, we never said a word about it. Then his partner wondered aloud why, "with the economy the way it is" we spent cash on something like a piano and a new to us dining table (both things we have saved up for for a loooooonnnngggg time, even though we technically have had the cash for a long time). The dining table and piano have both been like new craigslist finds and together cost about the same as the TV. I told them different stokes for different folks, dudes. I am not panicking about the economy, we have cash and have been planning on both purchases so we did it.

The nice people we bought the table and chairs from (a $2500 or so dollar purchase new, we bought them for $400) were only getting rid of it because their interior designer decided it did not fit her vision. They were buying all new furniture for their living and dining room in a smaller ranch home in a nearby suburb. People are still spending money if they have jobs and most people do still have jobs.

[AnnieW625]

Both my husband and I are California state government employees in California. I have 8 years of full time service (plus 18 mos. of student time, which I am in the process of buying back), and DH will have 5 this November. We both get a great salary. I felt like we lived a little beyond our means the first two years we had our home, but we always pay off our credit cards, and mortgages monthly so we don't have huge savings accounts. However I hate paying interest so in a way I am still saving money. If we didn't have stable state jobs (I work for a fully self funded insurance company governed by the state, and DH works for a partially self funded agency) we probably would've never bought a home. We've never once had a late mortgage payment. We do have a 5/1 ARM loan that is fixed until next March, which is a tad scary, but I do hope that this mortgage plan does take effect because we've probably lost close to $70K on our home in the past year. Sometimes I regret buying our home but we had no clue that the mortgage mess was coming. I plan on taking full advantage of this plan that the President is trying to push through congress. We could lose our home if the interest rate goes too high in March, 2010.

We don't go on extravagent vacations (our first week long vacation to not visit family since our honeymoon was to Boston last October and we cut costs by renting a small apartment through VRBO; would definitely do that again!). We'd love to do a Disney cruise or go back to Maui for our 10th anniversary (DD will be almost 7, and #2 will be almost 4), but right now we are happy living where we live (less than 8 miles from the ocean, 20 minutes to Disneyland, 2 hrs. to San Diego, and less than 2 hours to the mountains, where my grandparent's live) so there is no really need to feel like we need to go somewhere exotic for vacation.

College does scare me a bit, but if it all possible I plan on putting away the difference that we will be paying in our childrens' Catholic school education (appx. $5K per year for elementary school; not sure about high school) and between what we are now paying in daycare costs ($12K per year) into a 529 or regular savings acount once they are no longer in daycare. So appx. $300 each per month per child. If we do opt for public schools then we'll be able to save appx. $700 per month per each child.

We've lost a lot of money in our retirement accounts, but I don't let that bother me because I don't plan on touching that money ever until we are able to retire.

Best wishes and I know you'll make it work if you decide to move back to the US full time.

ETA: I forgot to add that right before my DH and I married my DH got laid off from a private sector job; he is an engineer and because of the dot.com bubble bursting he was unable to find a good engineering related job for two years; he did a three month full salaried pension, had a construction job (under the table), plus unemployment for the first year, and then a job with a beer distributer the second year, but that job really taught us that we could still live a good lifestyle without going overboard. We still live like that now and it's probably part of the reason I tend not to freak out entirely about the economy going down the tubes; we at least both have our jobs.

[MontrealMum]

Honestly, I think that the media is causing much of the problem here. We are experiencing very similar problems here in Canada, even though the banks here love to say how much more stable they are - and our news is nowhere near as fearmongering as what you seem to be getting in the US. Yes, some of the news is grim, but it's not stirring the population into a panic in the way it seems to be down there.

Sure, things are not great, and we should all be watching our spending, making calculated decisions, but things have been worse - my maternal grandparents had lots of stories about cardboard in shoes and dropping out of highschool to help support the family during the Depression. They managed to own their own homes and cars, eventually a retirement home in FL, and all three of their children hold college degrees - mind, you, two went on the GI bill.

DH cringes everytime we get a statement for our investments. We are lucky that we are nowhere near retirement age and should be able to recover from the huge hit we've taken. A good point was made that those that are older, many are in a tough situation and it is scary. But, also, many are just fine. My parents and in-laws have always been conservative financially are are all retired and living off pensions and investments. The only change in any of their habits has been that my dad is spending one month less in Florida this year. It's a balance - we also know families that are in extremely hot water right now, whether due to poor planning, or just bad luck. It's sad, it really is.

But those having troubles due to poor planning? I am in no way saying they deserve it, not at all so please do not jump on me, but we really need to learn to live within our means, and to readjust our priorities and separate "need" from "want". Not the people that frequent these boards necessarily, but North American society as a whole. The concept of a 3000 sq. foot starter home, the sense of entitlement...these have been problematic in my mind for a long time, long before this particular crisis hit.

I guess I'm rambling, but my point is, for many of us, if we continue to watch our finances and be conservative in our spending, it will eventually get better for most of us. A PP said that we, as a people we are depressed, not in the economic sense, but as in...demoralized. I think that this is very true. Certainly we need to have some awareness and compassion for those in truly tough times, but we also need to pull ourselves out of this hole of despair that we're in.

[HIU8]

I guess I should not cringe so much at the new LCD TV that DH bought. We have been saving for it and have never had a new TV. All of our TV's are hand me downs from DH's parents, My parents and my brother. It pains me to know how much DH paid though (anything over $400 makes my head spin--and I know they are far more expensive). We need a new kitchen table which we probably won't be getting until our current one literally falls apart (it's almost there) while we are eating. Our dining room set was my grandmothers. It is nothing fancy or expensive and the wood is splitting on the legs. It costs far more to repair it than to purchase something else, but we won't spend the cash on that right now either. I insist instead that DH put a specified amount of $$ in our savings each month b/c our 401K's are down so much. If I didn't force him to do that, he would not save a dime and we would be screwed.

[daniele_ut]

Ok, we have weathered a lot of recessions since the Great Depression and while what we are looking at now is not great and is hurting a lot of people, it is not (at this time) anywhere comparable to the Great Depression. Namely, a high unemployment rate in most places is 7-12% Considering that 5% used to be considered "full employment", that is just not the same thing as high unemployment during the Depression.

Don't get me wrong, I don't think this is nothing or that we will bounce right back in a year but I don't think it is the economic equivalent of Armageddon either. Not to get all FDR, but we are hurting ourselves more with our fear IMO.

I completely agree with this. None of us are old enough to have experienced the Great Depression, but my mom and her siblings are and they assure me it was far, far worse than anything we are experiencing now

I think right now, I have a healthy "fear" that is causing dh and I to continue to live within our means, save and plan for the future.

[niccig]

My brother and his partner have been grumbling about the economy a fair bit (thankfully his partner, their main breadwinner still has a good job and decent prospects) but over the holidays they bought a second LARGE flatscreen for their living room and moved the first into the bedroom. On credit, they don't have that kind of cash. They have a family of 4 in 2 bedrooms, like us and their bedroom and living room are mere feet from each other. Whatever floats their boat, we never said a word about it. Then his partner wondered aloud why, "with the economy the way it is" we spent cash on something like a piano and a new to us dining table (both things we have saved up for for a loooooonnnngggg time, even though we technically have had the cash for a long time). The dining table and piano have both been like new craigslist finds and together cost about the same as the TV. I told them different stokes for different folks, dudes. I am not panicking about the economy, we have cash and have been planning on both purchases so we did it.

The nice people we bought the table and chairs from (a $2500 or so dollar purchase new, we bought them for $400) were only getting rid of it because their interior designer decided it did not fit her vision. They were buying all new furniture for their living and dining room in a smaller ranch home in a nearby suburb. People are still spending money if they have jobs and most people do still have jobs.

Nothing against your brother or the people you bought the furniture from, as my DH would easily do the same, but I don't get this kind of spending. My DH wants to replace our TV with flat screen for years. Our TV is 8 years old, big, but just not flat. It's not high-def, but it works fine. I can appreciate the quality of the image of the new TVs, but it's not first on my priority list. And when I told DH about setting a budget and saving for it, he nearly choked. Because we do have the money as the TV he wants isn't high-end expensive. But we also want to do other things like having the lead paint stripped off the windows, and that has priority over the TV.

I hope that this recession helps people realise that they have to save money for an emergency fund, to buy things, and for their retirement. I think the days of easy credit either credit card or home equity line of credit, or the days of making $500,000 on your house, as friends of ours did, well those days are gone. We nearly have our emergency fund together, and DH only agreed to do so as it makes me worry less if we have that safety cushion. He still thinks that we could either get equity line of credit (nope, checked about refi. and we've lost too much equity), or put it on credit card - the interest rate on 2 cards has increased despite us not carrying a balance and never late on payments. He's still used to the easy credit he's had since college and the lifestyle pre-kids and pre-house where he had all this extra cash to do what he wanted with. So, personally I hope this economic crisis does change some people's lifestyles and help prioritize things. I'm hoping for less arguments in this house over money.

[ChunkyNicksChunkyMom]

But those having troubles due to poor planning? I am in no way saying they deserve it, not at all so please do not jump on me, but we really need to learn to live within our means, and to readjust our priorities and separate "need" from "want". Not the people that frequent these boards necessarily, but North American society as a whole. The concept of a 3000 sq. foot starter home, the sense of entitlement...these have been problematic in my mind for a long time, long before this particular crisis hit.

Could not agree more!

[AnnieW625]

Chunky, ITA with you! I was watching an episode of House Hunters last night from 2007 and the guy in the ep. was a 20 year old real estate agent who bought a 3000 or so sq. ft. home in Austin, TX for $260K! He was a single guy and they made no mention that he was going to rent out the remaining three bedrooms to help with the mortgage. It did look like his parents made a good deal of money because his dad drove a Dodge Viper, and the mom an Audi, I think, and the kid a Hummer truck. However just the thought digusted me that a 20 year old even with a decent career would be looking for more than a 2 bedroom condo. . Even though I know DH, and I could afford a 3000 sq. foot home in other parts of country if we kept our same salaries, but truthfully I'd rather buy a smaller home on one income, and be able to work part time or not at all until my children are older.

My 1950 post war tract home is 1122 sq. feet, and that was a starter home in my area up until about 5 years ago, now it's the norm for anyone who wants anything less than $500K for a home (we paid $513K in 2005).

Niccig, the people that sold us our home made over $200K on it in just over two years. I was beyond sick when I learned that reading our title report, but at the time we just wanted a home. I am soo thankful though we bought when we did because even one of our neighbors paid $30K more than we did for the same house, plus an additional half bath in 2007, so I know they've lost a bundle too.

[brittone2]

I think we'll see a temporary shift toward people becoming more frugal and then eventually a swing back toward extravagance and debt being the norm.

I heard someone on NPR recently discussing how in the current climate it is "out" to be seen buying big name labels, spending lavishly, etc. even if one can afford it (terms like "out" are IMO silly but this was his drift ;) He even mentioned some more upscale stores were now offering "plain" shopping bags sans logo for customers who don't want to be perceived as being too flashy in these times). He then said in the past periods like this are almost always followed by an eventual swing back toward conspicuous consumption, the return of big labels, etc.

I feel conflicted about the current situation, as so many people I know, even our well–educated friends, truly do not understand finance, savings, compounding interest, etc. When I was in college, our dept head was near retirement. One day she bought in her financial planner to go over things like 401Ks, compounding interest, etc. It was fascinating to me that in my class/major, mostly filled with people who were valedictorians or salutarians in their high school class, really didn't get the concept of compounding interest, etc. They had taken calculus in high school and or college, they were bright people, but they didn't *get* it. My father, a very blue collar worker (who only completed one year of college, and my mother none...neither ever took an advanced mathemetics course, etc.) spent a lot of time talking to me about those topics. I was fortunate. In any case, it amazed me that I was surrounded by very bright people who knew almost nothing about the real world of finance, kwim? Many went to public school, but many others went to excellent parochial or private schools. But almost none of them understood finance at all. Our dept head was not the kindest or most liked professor by any stretch, but I think it was awesome that she took the time out of regular class to discuss such a topic (we were physical therapy majors, so it had nothing to do with our profession other than understanding 401Ks etc. for intervivew purposes and for our own future planning). It left me wondering why we had spent little to no time at all in high school, etc. talking about *anything* along those lines, other than the occasional "stock market game" type of situation. But credit card terms? Understanding a mortgage? 401Ks? IRAs? Credit scores? Debt to income? We did a little bit of work with compounding interest but it wasn't really a "real life" scenario.

On the other side of personal responsibility, I have a sibling who has always spent far beyond his means. He and his ex got in way over their heads. She was a mortgage broker and they refinanced a few times into all sorts of exotic and weird mortgages. They filled their house, garage and yard with toys (big TVs, a full gym, expensive cars, a 20K tractor for snowplowing their lane, all new furniture, etc.).

I've lived in two different homes now, both around 1800 sq feet. Neither has been my dream house, but both have left me able to sleep at night, kwim? In both homes, my brother would walk in and say...oh, how lovely for a starter home. But now his enormous home is in foreclosure (I assume...he hasn't made a payment in a loooong time and is actually no longer living in the same state). He's now living in a trailer. I'm not kidding. It is so sad. It also came w/ great emotional turmoil for him and shattered mental health :( His marriage is over, he lost his job, his home, etc. It is so sad, but at the same time...at some point t hey had to know they couldn't afford it :( In fact, I know they knew at some point it would catch up with them. I think my brother often regrets not going to college, etc. and spends in an effort to make himself feel like he has achieved...but I'm not a psychologist. He declared bankrupcy once a few years back and he's about to again.

When DH finishes his PhD, we're stuck with deciding where to live, and if we remain in this area, whether to keep this home (1800 sq feet). While it isn't perfect, it is so affordable, and we have great neighbors and a great lot. We love our little small town. But at the same time, w/ the market depressed, it would be a great time to size up if we're going to want to do that within the next 5 years, kwim? It is such a tough call! We're quite tempted to stay where we are in many ways, even though we have a smallish home. (and it all depends on where we end up once he's job hunting anyway).

I've read some books on consumerism, etc. in the past and it is all quite fascinating...when I feel pinched for space and then realize how people used to raise families of 6 in 1000-1200 sq feet without a second thought, it makes me rethink how much "space" we really need. In one of the books (I forget which now...) I recall them also discussing how the "middle class" home is portrayed on TV. People have adjusted their thinking so that 2800-3000sq feet is now what they feel is average and sort of the default for the average "middle class" home, even though many people can't afford that amount of space.

I think marketing and consumerism will still be powerful forces even after this storm passes. Hopefully credit won't be so loose and people will readjust their priorities, but I'm not so sure how long that mindset will last. I'd love to see people reconsider needs vs. wants, realize that it is important to save and be able to sleep at night, that big degrees and advanced education does not automatically make one wealthy enough to spend, spend, spend, etc.

I think this will pass, but I'm not sure the lessons will be remembered for as long as they should be. I hope, but I'm not confident that they will be.

[mommylamb]

Nothing against your brother or the people you bought the furniture from, as my DH would easily do the same, but I don't get this kind of spending. My DH wants to replace our TV with flat screen for years. Our TV is 8 years old, big, but just not flat. It's not high-def, but it works fine. I can appreciate the quality of the image of the new TVs, but it's not first on my priority list. And when I told DH about setting a budget and saving for it, he nearly choked. Because we do have the money as the TV he wants isn't high-end expensive. But we also want to do other things like having the lead paint stripped off the windows, and that has priority over the TV.


Another negative to those flat screen TVs is that they use A LOT more electricity than your regular TVs, so there's a long term cost to them.

Looking on the bright side... we can all buy stocks/mutual funds etc at a really cheap price now.

[elektra]

I hope that this recession helps people realise that they have to save money for an emergency fund, to buy things, and for their retirement. I think the days of easy credit either credit card or home equity line of credit, or the days of making $500,000 on your house, as friends of ours did, well those days are gone. We nearly have our emergency fund together, and DH only agreed to do so as it makes me worry less if we have that safety cushion. He still thinks that we could either get equity line of credit (nope, checked about refi. and we've lost too much equity), or put it on credit card - the interest rate on 2 cards has increased despite us not carrying a balance and never late on payments. He's still used to the easy credit he's had since college and the lifestyle pre-kids and pre-house where he had all this extra cash to do what he wanted with. So, personally I hope this economic crisis does change some people's lifestyles and help prioritize things. I'm hoping for less arguments in this house over money.

I think many/most people on this board are great savers, but many other people out there have some major changes to make. I myself (and when I say I, I really am talking more about DH, but me too) really need to make some changes and since I have not been super frugal as many are here, it would be a bigger change for me to live more within my means.

And Nicci! I've said this a bunch before but our DH's are cut from the same cloth when it comes to money! DH just said to me last week that he really wants to get a flat screen for our office (what is it with freaking flat screen TV's?). I was like are you kidding me!?
We rarely use the TV that's in there now, and hello, we might want to buy a crib for our baby first. Oh yah, and pay off some of that credit card debt!
He just does not GET IT.

[niccig]

I've read some books on consumerism, etc. in the past and it is all quite fascinating...when I feel pinched for space and then realize how people used to raise families of 6 in 1000-1200 sq feet without a second thought, it makes me rethink how much "space" we really need. In one of the books (I forget which now...) I recall them also discussing how the "middle class" home is portrayed on TV. People have adjusted their thinking so that 2800-3000sq feet is now what they feel is average and sort of the default for the average "middle class" home, even though many people can't afford that amount of space.


I agree with this. I know some people who expect to have a certain lifestyle, house, wife stays at home etc as that is the life they had as children. Which is all good and well if you can afford it. But they can't. The DH doesn't earn enough for that kind of life. They're barely getting by and the DH has a 50-50 chance of getting laid off in April. Hopefully, he'll be in the lucky 50, if not then they'll be in REAL trouble as they're in debt and have no safety cushion. I can't help but think that if they scaled back expectations and looked at the reality of their financial situation, life wouldn't be so scary at the moment.

[MamaKath]

I for one hope things don't go back completely! I think it is incredibly sad that we (our culture/nation) is selling our kids and their futures as well as our futures short by living on credit. It is a personal problem in many households, but it is also a problem that the example is set by our government. I don't foresee bailouts helping many folks who have gotten there by bad decisions, most are not changing their habits/choices when they get the money!

At some point in the last year, I decided to take my head out of the sand in my own life, and have started taking a class called "Financial Peace University" by Dave Ramsey (13 week long class, I am about 4 weeks in). His motto is that we should "live like no one else, so we can live like no one else." It is certainly changing how I am perceiving finances, as well as needs and wants. It also has us looking at our priorities. And we have never lived too high on the hog to begin with (luckily dh has kept me reigned in over the years, lol). I can honestly say, I don't want to go back to being clueless. I want to help my kids get an education, I want to have a decent retirement (dh gets forced out early in his profession) and be able to enjoy it, and I want to help others who are truly in need.

So to a point I hope it doesn't go back to the way it was. On the other hand, I think it will be rough for everyone as the inflation hits following the stimulus packages. That does have me nervous!

[niccig]

And Nicci! I've said this a bunch before but our DH's are cut from the same cloth when it comes to money! DH just said to me last week that he really wants to get a flat screen for our office (what is it with freaking flat screen TV's?). I was like are you kidding me!?
We rarely use the TV that's in there now, and hello, we might want to buy a crib for our baby first. Oh yah, and pay off some of that credit card debt!
He just does not GET IT.

I bet the two of them could get together and have a good old B$tch session about their wives and not getting a flat screen TV. DH works in the entertainment industry and apparently even people much junior than him at the company have flat screens. I'm like "so what? Are you embarrassed? Did you sit around and compare who has what gadget?" We will get one eventually. Our TV is 8 years old, so I can see it needing to be replaced at some point. He's slowly getting better and we're talking a lot more about and trying to get on the same page. We're going to have a budget meeting this weekend as he said something about saving, so I'm going to jump on that we'll he's thinking about money and where it goes.

[kijip]

Nothing against your brother or the people you bought the furniture from, as my DH would easily do the same, but I don't get this kind of spending. My DH wants to replace our TV with flat screen for years. Our TV is 8 years old, big, but just not flat. It's not high-def, but it works fine.

ITA. I totally don't get that kind of spending. Well, in the case of the couple with the furniture, I don't have enough information to have a clue as to if what they are doing is financially sound (for all I know they have $$ coming out of their ears, for whatever reason we got a steal of a deal on the set we bought from them). Our TV is a 19 inch TV/DVD combo with a broken DVD player so we have it hooked up to a cheap DVD player. I mentioned about 18 months ago that "our next TV" would be a smallish flat screen. I have considered it now and then but never seriously. Nearly every time I see my brother and his partner, they quote me a "good deal" they saw on a flat screen TV like we were going to rush out and buy it then. Um, no. Our "next tv" will most likely be purchased when this one no longer works. It's just not a priority. We knew we wanted a dining set so we saved for a long time, and checked CL often. As soon as we saw what we wanted, we were ready. They assumed that since we weren't moving on the TV, we were low on cash. No, we just have other things to do (or not do) with what we have.

[mommy111]

I bet even in the great depression, there were people making millions and for people like them, throwing out designer furniture may not be a great deal. I had these friends' friends who hired a young just out of school designer and gave her 10million to decorate their home. They figured if they didn't like what the young designer did, they could trash everything and have a more experienced one come over and do their home, so I guess to people who have that much, selling their items at a bargain on craigslist may be a frugality in itself.
BTW, the young designer did a great job...although I'm not quite unbiased since she was my best friend's younger sister :) She took us on a tour of the mansion and we marvelled (this was while we were living in a studio apartment with DD and considered ourselves lucky because it was in a nice location)