Frugal times?
The Economy, Real Estate December 1st, 2008
I hope that Americans are finally realizing that we can’t continue living beyond our means. Maybe, this financial crisis will bring some positive change to our country. This article in the New York Times shows you how Americans have been spending money they don’t have and how some of them are changing their ways.
Meet the Joneses, two Silicon Valley engineers who, in many ways, seem to have it all — a home they bought for $850,000, two children and a combined income of about $250,000 a year. But despite their apparent wealth, Kirsten and Mike Jones financed much of their lifestyle with borrowed money.
Now, like many overspent Americans, the Joneses are deeply in debt. They owe $100,000 on their credit cards, and the tax assessor says their home is worth $100,000 less than they paid for it. To turn their finances around, they’re embracing an idea so quaint it might be cool again: living within their means.
“Every time we ended up overextended, we used to refinance our house,” Ms. Jones, a software engineer in Scotts Valley, Calif., acknowledged. “The house would creep up in value, and every five years or so we’d take out another $50,000, and pay off whatever we needed to.”
She and her husband never felt that they were getting into debt, Ms. Jones said, because a kind of magical thinking prevailed: “You owed more, but then your house was worth more,” she said. “So you didn’t really have debt because you could always sell your house — and poof! — all previous sins would be erased.”
MS. JONES said that to get back to living on their actual incomes, she and her husband had to stop thinking in terms of credit. They set up one bank account to cover the household bills and pay back debt. To rein in unnecessary expenditures, she and her husband each get a cash allowance of $600 a month.
