Tuesday, March 18, 2008
From Reuters comes this story (hat tip MM) about a crazy new idea that's now sweeping across the country - living with your means.
The next thing you know, people will actually begin to save money.
After years of living large, U.S. households are finally learning what financial experts thought they never would: to live within their means.It's the end of life as we've known it, here in the U.S.
Economists have long warned that the U.S. consumer was on an unsustainable spending frenzy and that savings rates were dangerously low. Now, families are being forced into financial responsibility by the housing downturn and a weakening economy.
Theresa Parks is a case in point. Parks, 36, paints lines on roads and highways for the city of Atlanta for a living. She bought a home in 2006 for herself and her three daughters in the suburb of Riverdale, but fell behind with her $669 monthly payment.
Her lender agreed last September to a repayment plan that required an additional $188 a month through to June 2008.
"We had to cut eating out at restaurants and we had to stop shopping," Parks said. "That was the hardest part for my teenage daughters because they love to shop. But I sat them down and we agreed we'd do anything to keep our home."
As the U.S. housing crisis deepens, many more Americans will be forced to budget to avoid foreclosure, with serious implications for an economy teetering on the brink of recession.
"This is going to take a bite out of consumer spending and is an ominous sign for the economy," said University of Maryland business professor Peter Morici. "We are in a recession that was manufactured on Wall Street by the major banks."