Thursday, October 18, 2012

Inflation, Financial Suicide & Being Henny Penny


Some of you may want to go 'fortify' yourselves with some adult beverages before reading this.
It's a rambling missive in which I reflect on economic things and I do a fairly good impersonation of Henny Penny.   I will try to be perkier on Friday.  *

As we go into a brand new world after this election cycle I foresee things changing in this country.....but only changing for the worse for the average citizen no matter which "party" takes control.
 
I see lots of people struggling.....struggling everyday just to hang onto the life they have now.  More people swiping Access Cards(food stamp cards)at the grocery store or putting things back after they run out of cash at the register......people not filling their gas tanks fully at the gas station......store parking lots seem a bit emptier.....the number of cars in the parking lot at the food bank when it's open is noticeably higher, et cetera.
With the growing rate of inflation, and the hyperinflation that's sure to come eventually if the course in this country isn't changed, it will be getting harder and harder to just maintain our lifestyle as it is.  Doing better financially is just not something that most of us can even hope for anymore!

As prices rise, more and more families are slipping off the cliff and falling into not being able to sustain themselves.  The wise ones are downsizing from their unaffordable ways, buying less and buying cheaper(though buying cheaper isn't always wise in the long run).  The ones who saw it coming put their heads down and braced themselves for austerity.  Hard times had forced many into trying on the frugal lifestyle.
While the rise of frugality in 2008 was an anomaly of the time that marked the beginning of the Great Recession of the 21st Century, the level of frugality we have now 4 years later indicates that it is NOT just a passing fade and that it has become the "New Normal" in this country.


Families are falling off the financial cliff due to several factors, but these people boil down to 2 financially fragile groups in this country......those who are not being able to change their lifestyles even if they want to and those who are unwilling to change their lifestyles even when it's clear that financial change is needed.

Now I can understand the group of people who want to change their lifestyle but are unable.....I mean those who, due to a lack of education or resources can't do anything beyond the same stuff to improve their standing in the economic world.  Then there are the people who can't work due to age or disability or mental illness mostly.  Granted this is a very small group.  Even some who are disabled or old or mentally unstable can find ways to bring in money if they put their minds to it.  I've seen it.  These folks are going to have a hard time getting some national chain business to hire them for a 40 hr. a week gig, but there are ways to bring in money.  You just have to be open to different ideas of what employment means and what an acceptable lifestyle is and embrace an opportunity when it comes along.

Notice that I didn't include the economically oppressed in this first group of the financially fragile.  While most of the poor have few economic options they do have their mental and their physical faculties going for them.  How else does one explain the success of many of our ancestors, who came here as poor immigrants, with nothing but a sack of belongings and some not even being able to speak the language of the land?  If someone with all that going against them could survive and thrive in a mostly hostile environment, don't tell me that an able bodied young economically challenged person can't find a way to support themselves now. 
But I digress.....

What I don't get are the people who refuse to change their lifestyles even when the reasons are staring them in the face!
If you were holding an anchor in your hands and standing on a ship that is taking on water......why are you not throwing that anchor overboard and using your hands to frantically bail the boat out?

That's what I see that the families who are unwilling to change their lifestyles are doing.  Continuing to hold onto the ways and lifestyle they use to have, even though their brain tells them that is NOT what they should be doing. 

An example of this is people who can't afford the car or the house that they own.  At some point in the past, they bought a house or a car and could afford the payments/mortgage but due to economic factors(income loss, price of gas, property taxes, insurance, etc.), paying for that car or house means they live above their income each month.  The house or car is unsustainable in their life.  No matter what they juggle financially, they just can't afford to pay all the bills and pay for that car or home too.

They may try to cut something else down or out, like food.  This may only be a short term solution because if their life is suffering in some other category because they are using  their economic resources to support a house or car payment that is unrealistic for their income level, eventually their solution will fail and they'll still have to face that crisis again.
We had a family member recently who went through this exact scenario.  They had a car repossessed and needed $2K+ to get it back, which they didn't have.  Come to find out they couldn't afford the payments on this car due to their income and other lifestyle choices.  But they were insistent on getting this car back.  It was pointed out to them that maybe getting the car back was NOT something they should do, since because of the lack of resources, they would not be able to make the payments yet again down the road,  and would lose said car again....thus having to find another $2K+ to get it back, which they wouldn't have in their budget obviously to do so.
Why was this person holding onto this car so desperately?.....a car that was unsustainable in their life?
This person was so emotionally attached to a C-A-R, they couldn't see how financially toxic is was to their life!
I am happy to report that the family member ultimately decided to let the bank take the car back and used some unexpected cash funds to buy a used car that they CAN afford.

When folks realize they need to cut an item out of their life, why do people not do it?

--Is it because of the lust for the item?  They have talked themselves into believing that in order to be happy they NEED that item no matter the cost to their financial well being?

--Is it the "what will everyone else think of me?" syndrome, where our image in the world is so important that we'll put our financial well being at risk?  "If I lose my car or house, my peers will think something negative about me?"  How they appear to the world is more important than being solvent?

--Is is denial that a problem exists?  They are so deluded about reality that they don't even see there is a problem here?

--Is is fear of the unknown?  They know they have to get rid of the car or home but they are so petrified of what will happen when they do so?

--Or is is combination of any or all of these reasons that people make insensible choices in their lives with money?

* Tell me what YOU think!  Are you downsizing your life?  Do you need to downsize your life?  Do you see more financial mayhem coming toward us after this election cycle?

* Tell me I'm wrong and why.  Got another opinion?....Tell me!

* Do we need to lower our economic expectations in this country?

* Tell me how you stay financially sustainable....give me examples.  Maybe you'll inspire someone!

* Tell me your personal story about being financially fragile and what you have done/are doing to get yourself out of that state.

Sluggy

22 comments:

  1. sluggy its no secret that my debt started with my first husbands mental illness and continued after his suicide till I put an end to it. I woke up later than a I wanted but I woke up

    The biggest debt DH and I have is the care which we were making triple payments on but I realized last night that that was stupid since it's no interest so I am goin back to one payment for now while we pay off the rest of the remaining debt. Its not alot compared to some but alot for us.

    We also own our home free and clear. I have never touched the equity since I bought this house way back in 1989 If this stays our forever house thats fine because eventually we will be able to do thing because we will always have a home.

    I truly believe that people are more worried about what there families might think then they are about what is going to happen and until the mind set of you just cant afford it is accepted this is never going to change. People may laught at the way I shop or the way I cook but we waste nothing and my family is never hungry. And if I reached a point where I could not afford my car our city has a great transportation system.

    As my grandmom used to tell us "sometimes you gotta be humble about life and humble about what you have". I think some people don't want to downsize and they certainly don't want to be humble

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    1. I agree it makes more sense to eliminate the debt you are paying interest on rather than the car at no interest. Logically that is the best for you financially, tho many use the Dave Ramsey type snowball approach, which uses an emotional approach to money.

      I also have a theory(uh oh!lol)that once we humans get to a "certain age"(especially women), we just cease to care about what other people think about what we do and who we are. I have been at the point for a few years now and it's GREAT!lol I no longer care about what ANYONE thinks about me.

      Your grandma was a smart smart woman. ;-)

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  2. You hit so many nails on the head here Sluggy! Society and advertising "tells" us what we want. People don't understand why we don't have Smartphones or why we don't do Facebook. But these are things we don't care about -- they suck time from your life. They are designed to get you to spend money. The money I don't spend shopping now goes into savings. The time I don't waste on Facebook goes into exercising, keeping my house clean, etc.

    People make dumb choices based on how they want to appear and interact with society. It is dumb!

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    1. I get that a lot too Alex...."Oh, you are on the computer so why don't you upgrade your phone and why don't you text?", etc.
      They try to make me feel bad about making the choices I make and tell me I am being "left behind". Well if THAT is where our world is going, I am GLAD to be left behind!lol

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  3. I feel the exact same way. You know how we cut corners. I talk about going to the casino once in a while but it is our date night. I can say that the little bit that we do spend has greatly helped our marriage. Well that and the kids getting older. I never look to make money. I see it as no different than going to the movies. It is a small amount of money to pay for entertainment. It's kind of hard for people to understand that. we don't waste in any other aspects of our lives.
    My real question is, how are we going to make it when this hits if you are a saver? We have cut almost everything out. The gas prices are going to go through the roof. They are holding them down a bit. No one wants that gripe to be brought up during the debates. When this next wave hits us, it will be unlike anything that we have seen.
    Should we start hoarding food and gas? ;p

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    1. Well you are already being hit as a saver! The Fed keeps printing money because the govt. can't/won't stop spending, so every time they print more, the dollars in your pocket and the dollars in your savings are shrinking in purchasing power every day. You'll need a wheelbarrow of dollars to buy a loaf of bread if we keep going.....this was what happened in 1920's Germany so don't anyone tell me it can't happen here!
      And the savings in your bank accounts or credit unions? Do you SEE any interest in those accounts?
      So salaries aren't increasing, savings aren't growing and prices continue to rise.

      So not only are we not standing in place in regard to money, we are going backwards. Nobody wants to hear this but it IS what is happening! I don't know why everyone isn't screaming about this?

      As for hoarding food/gas/etc. I don't see what good it will do. Unless you have enough cash reserves to hoard enough food(let's just use food for this example)that will get you to your deathbed, I don't see how this would help you. Say you went and bought a 2 years supply of food.....unless this amount gets you enough to eat until you eventually die or get you through to the day that inflation goes down or goes to 0, when the food is gone you will still have to go buy more food. And tho you bought flour at $3 a bag, and saved yourself buying flour when it went up to $4, $5, $6 a bag(during those 2 years you had enough flour from your $3 bag purchase), flour is now $8 a bag and you are out of flour so you are now paying that cost with the same dollars that are now only worth the amount they where worth when flour was $3 a bag. Does this make sense?

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    2. This is where learning to grow your own food comes into play. Actually, potatoes grown in a barrel give you more nutrients than white flour. (I know people won't agree with me.)Anyone can grow food, even if they live in an apartment with no patio.

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  4. I've frequently observed the same thing. One of my pet peeves is co-workers who complain about money woes but still go out to lunch everyday and drive brand new cars. I'm one of 3 people who answer the phone at our office, so I know who is getting the collection calls, and those people are usually the ones least likely to brown bag it.

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    1. The whiners who refuse to change ANYTHING are the worst Dy! While I don't wish bad things on people as a general rule, I will have little compassion for those who could have helped themselves but didn't before it was too late. If it comes down to me and my loved ones or them?....I know who I am choosing to help.

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  5. I'll tell you this, Divorce will make you financially fragile, so DON'T GET A DIVORCE. But that was over 14 years ago now and I recovered. AND my ex has now retired and thus a nice monthly pension check for me :)

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    1. You have that right....divorce and kids out of wedlock are the leading cause why a majority of kids and women are in poverty in this country.
      You are among the lucky ones who navigated those waters successfully!

      While you can't always avoid a divorce situation, there are ways to avoid having children having babies in this world. And it has to start long before that pregnant teen shows up at the dr., the child support court or the welfare office.

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    2. In my situation divorce has made me finacially stable. Before I was always struggling to pay the bills and forever behind on them. Now I have enough money to not only pay what I owe, but to actually get ahead somewhat. So if you're considering divorcing an alcholic or addict, I say go for it.

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    3. Dy-Right! Though, looking back with 20/20 hindsight, it would have prolly been best NOT to marry that person to begin with, if you are in that sort of relationship, getting out helps your emotional well-being and tho it can initially hurt your economic well-being, there can be recovery. Thanks for speaking up!

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  6. Sluggy remember the Carter years?

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    1. Kim, I started driving right before the Carter years started. I remember my mother bitching about what it cost at the grocery store and I remember waiting in gas lines on the even numbered days.
      I worried every week that our $20 we had to eat on while living off-campus for the last 2 years of college would still buy enough food at the A&P.

      The late 1970's should have been our wake up call....but then when things improved under Reagan, we stopped heeding the call to change how we live and went right back to living beyond our means on credit.

      How many chances are we going to get at doing it right?

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  7. As a finance adviser, I saw this downslide coming in 2001 after the dot com disaster. I lost most everything in the first stock market crash in 1987 so when the market took another dump in 2001, I said that was the LAST straw for me. Hubby and I downsized everything. We moved to a lower cost of living area within our state, built a 4 room home vs the 9 we had previously without a mortgage, got rid of all debt and car loans. We went from living expenses @$5600 a month ('01 dollars) to $1200 a month, also in '01 dollars. We got a lot of slack from our friends and family for making such a drastic cut to our style of living. But when the stock market crashed in 2008, we felt nothing and we lost nothing because all our cash was invested in FDIC ROTH IRA's at 4%. That interest level is good till 2015.
    But here is the bad part......through no fault of our own, despite continuing to live frugally, our living expenses rose to $2500 and now hover at $3500 a month and rising! Why? Because of energy costs, fuel costs, food costs, real estate taxes and higher repair and maintenance bills etc. etc. I haven't walked into retail store in 3 years. I buy anything we need at Goodwill, yard sales, thrift shops. I buy our food at Aldi or open farm stands. We eat beef once per month. Thanks to Obamacare, our health care insurance dropped our 100% coverage and now will only provide us with the HDHP (high deductible health plan). We still pay $600 a month to cover us BUT now have a $2400 annual deductible and a $9600 co-pay! This is insanity. Didn't Obama promise us our health care would not change? Now, if one of us becomes ill (I'm 61) it will cost me $6300 a year before my insurance will kick in. Three years ago I had 100% of coverage for $3600 a year! I'm afraid to get sick now AND I'm older!
    I know, I know, I know, no one wants to talk politics. I find it so upsetting that many of us have lost hope. Please forgive me for saying this but Mitt Romney said we deserve better and he has promised us better and you know what? I believe him with my whole heart. Now, shoot me, OK? I am NOT ready to give up the last shred of hope I have left in my body. I'm collecting Social Security next year and I am going to be forced onto Medicare when I turn 65. My long time doctor has already posted he will no longer accept new Medicare patients starting January 1st. WTF am I to do?
    I am sure we have all heard about the Fiscal Cliff we are all going to go over come January 1st. Yes, if we keep following in the same path, it is going to be difficult for all of us.
    Personally, I don't know what else I can cut out of my budget. Some days I am in tears because I'd love something new in my life. My birthday is coming up. I'm going to be 62. I just hope one of my kids treats me to something special.
    Well, that's my 2 cents. I do hope I have not offended anyone. If I have, I am sorry. I know sometimes my words are strong.
    Thanks for listening.
    Cindi from 'My Life In Focus' Blog
    www.mylifeinfocusblog.wordpress.com

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  8. A lot of people in my life fall for two of those descriptions: Denial of how bad the problem is (or ignoring it even exists!) and the keeping up with the Joneses and caring WAY too much about what other people think, it being right or wrong. I could downsize even more, but I already own only 3-5 boxes worth of stuff total, so that wouldn't seem necessary... I don't think we need to lower our expectations. We need to RAISE them. People have gotten too compliant with the way things are. Debt is NOT a way of life, but people think it's ok. Same with that "16 and Pregnant" tv show (ugh!!). It is NOT ok for those young ladies to be experiencing that, or for the babies, yet we're making that situation into an ok thing- even more, making it to a celebrity status.

    I guess you're very familiar with me. The way I keep myself afloat is by cutting every bit of fat from my budget, straight to the bone. I am making a lot more sacrifices than anyone in my situation should, but the way I see it is, in 3-4 years, I want to be able to enjoy life BIG time. So while I get there, I'll work my rear off and keep cutting, keep it small, and keep it simple. Stop wanting what you dont have and appreciate what you do have. Leave the Joneses to their own!

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  9. Slug
    I also navigated the divorce waters, yet luckily, came out OK, long story short. I find myself now in a rental home, free of a mortgage, a 0% interest car loan (yay!) for which I still owe approx. $4000 on. No other debt. $$ in the bank, which I am desperately adding to so as to put a MAJOR downpayment on my next home, which I anticipate to be my forever home. Where I live is one of the most expensive areas in the country. Throwing a significant down payment on it, will keep the mortgage "reasonable" and I'd like to do a 15 year one, paying it off as soon as possible.I am thinking a 3 br 2 bath ranch with a fireplace (supplement heat with wood), a basement, an acre for chickens and a garden. My needs/wants are simple.

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  10. The people who came here with little to their name lived in a different world. They lived in ghettos (people from same country who spoke same language)and had support from people from their own country. Many did not make it due to disease from unsanitary conditions provided by Americans. They often came from the countryside in their own land to the foreign cities of America. They accepted their lot and did the best they could. Most of them were poor.

    Americans today live with a different set of expectations. Plus, most have never had hardship like they are experiencing now. All their friends have "stuff." All their friends may be drowing in debt, but no one admits it like immigrants did.

    My house is paid for. I had to declare ch 13 bankruptcy after an injury. I was able to put my car and house into the repayment plan, paying both off two years later than scheduled.

    Still, I am not making it. Social Security and Disability= $720. Food stamps= $45

    I need surgeries--last vertebra is sitting on bone, two herniated discs, L5 is out of line, torn meniscus on L knee, torn rotator cuff on L shoulder. NOW, I find out I have cataracts!

    There is no way I can afford the help I need after back and shoulder surgery. I am limited severely in what I can do. No longer can I go to free festivals, craft shows, or any thing that breaks monotony of just being home. I am not going to play chicken foot with seniors even though I am 66.

    I admit I have a simple cell phone, basic tv, and the internet. I dickered for all. I cannot be cut off from the world and just sit here. So, I am in touch and entertained. Maybe some thing I should give up some of these, but it would be the death of me.

    This year, I pay no property tax. However, I am losing the house to decay. soooo....no more of this talk.

    I use coupons, shop sales, have two hens for eggs and entertainment...lol. This summer, I found three pair of black pants, the only three on a $1 rack. So, they are mine. Two years ago, I found sweatshirts for $1. I bought 8. I use them for indoors, outdoors with hens, and to sleep in. It is cold in my house.

    I try to eat well. But, I get chicken breasts on sale or get hen or chicken thigh/leg from food bank. I pay for fresh greens and tomatoes for salads, sweet potatos in a 40 lb box for $10/box. That is 25 cents/lb.

    I found $3.98/lb whole wheat pasta reduced to $1.79 and wheeled and dealed with manager to get all 17 boxes for $1 each. It's all in glass jars after being put in the freezer. Fruit jars are great storage containers to keep pasta bug free.

    In the past, I have dumpster dived. I may start again. I get from various sources fruits and vegetables to feed my hens. I buy no food for them. So, eggs are free and good for me--free range all day.

    In the past, I made all my clothing except socks and shoes. I bought only leather shoes and still have some of those. PayLess shoes kill my feet.
    (continued)

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  11. (second part)
    I buy nothing disposable. Washcloths are used in place of tp. I buy no paper towels. Until lately, I bought no paper plates. But, due to pain and lack of ability to stand long enough to unload or load the dishwasher, I gave in to paper plates and plastic cups/tumblers. That will end. This is partly an economic measure on my part--no paper products. But, even more so, it is my belief that we have no right to deforest the earth to wipe poo or pee. Plus, we flush potable water down the commode when most of the world struggles to get water.

    I do flush, bathe, use washer, and run too much water in the sink when peeling things. Yet, I use less than the minimum amount of water to get a base charge.

    I repurpose, reuse, and am happy with my little consumption. I may spend $10 needlessly!

    In the winter I sit and freeze. This year, I am going to try to reduce the exorbitant electric charges.

    For birthdays or gift-giving occassions, I give used things, but gently used or bought and never used.

    There are days that I deliberately do not even get in the car at all.

    When I got my MA and teacher's certificate, I immediately injured myself and then developed fibromyalgia so horrid I could do little. Still, I managed to support myself. Now, not so much.

    My goals--stay out of debt, get my PhD, come through surgery and rehabilitation and be able to walk. Oh, and to lose weight I gained through inactivity.

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    1. I'm totally confused. You are not "making it" on social security yet you are trying to get a PhD???? How can you afford that???? Better yet what is the point?

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  12. Well this is your most popular post ever!
    Did you see on yahoo about how the taxes are going up? Most people aren't paying attention to the 2% reduction in Social security taxes. The thing is and I know I have griped about this before, in IL(the land of Lincoln and thieves) they "took" the 2% in the form of a tax hike and they back dated the damned thing! So we will lose the 2% social security cut and still have to PAY THE STATE OF IL! Pisses me off!
    And I'm now interesting in growing potatoes in a bin, thank you Practical Parsimony.

    http://news.yahoo.com/psst-taxes-2013-163-million-workers-134512956--election.html

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