Thoughts On My Personal Credit Crisis

May 15th, 2009

No, not mine, but thoughts on this recent, must read article on how one American family found themselves over their head in debt and are now facing foreclosure and bankruptcy. The added sauce: the author is an economics reporter for the New York Times. So, to put it bluntly, he should have known better.

A few things I found interesting about his story:

• It all started when him and his newlywed wife got into too much house they couldn’t afford. They weren’t making much money as a couple but were approved for $500K based on great credit. After that it was essentially a downward slide as they were putting out more money than they were bringing in every month and the debt started ballooning to a ridiculous $50K on credit cards. At that point you’re behind even before you lift a finger to try and get ahead. So they ransack their retirement accounts and borrow from family all accomplishing nothing.
• He doesn’t place blame on other people, with a pretty juicy quote from the mortgage broker: “Who am I to tell you that you shouldn’t do what you want to do? I am here to sell money and to help you do what you want to do. At the end of the day, it’s your signature on the mortgage — not mine.”
• My eyes rolled at the point he realizes they’re underwater but continues spending: “The charges included almost $350 for groceries, $700 in clothes from J. Crew, $179 at GapKids and $700 for airplane tickets for two of Patty’s children to visit their father in Los Angeles. Our balance climbed from $14,118 to $17,135, and in January 2006 we maxed out at our $19,000 credit limit.” All that crap has to be cut out — slash spending 101. Screw vacations and new clothes, seriously.
• Both he and his wife have very different opinions about money. He’s freaking out and she’s saying it will all work out somehow, yet she’s the one who has trouble holding a job. 

All in all, the most troubing aspect of the tale is it’s not very surprising. The whole article is fascinating in the details, but the overall arc of a road to hell paved with the best intentions is all too familiar. Some comments are coming in from people who sympathize or can relate to this exact situation, which is no surprise seeing how 1 in 5 homes are underwater. The American dream is increasingly, financed with debt.

Fiscally conservative Americans are the exception, not the rule — and a huge reason why we’re in this mess.