Is the credit crunch true?

[angieh]

My OH is very hard line about people borrowing more than they can afford and gets worked up about it being the fault of the individual. I'm with that to a certain point but do think that banks and credit companies are also very much to blame. I remember back in the early 70's when I wanted to borrow £250 to buy my first car, my parents had to guarantee the loan! It was all so innocent in those days - I remember actually writing to the loan company when I had paid it off and thanking them for lending me the money!!!!

[dandysmom]

Different times, Angie, weren't they? People used to save up to buy things they couldn't afford; now it seems to be instant gratification! My Mom had a horror of debt; so I was raised that way...I was well into my 30s before I even had a credit card!

[Kazz]

I think thats the point isn't it everything is wanted NOW....however maybe this may be for the good in the long run as nowadays no one is egged on or "laughed" at when they say they are on a budget or can't run to that much......which is a good thing. Whereas even 9 - 12 months ago people would have been egged on to putting it on their card.

I've pretty much always shopped with cash that way I can see it going, on a card you don't have that image in your head.

[dandysmom]

Credit cards are a great convenience if you use them sensibly: never charge more than you can pay for at the end of the month, and don't carry a balance. I agree with Kazz, it doesn't feel like money; I think that may be why many people get carried away....

[Kazz]

Also find a menu so to speak for a week/fortnight/month is a good way of budgeting....and you can save loads at places like Macro...warehouse's for basics.

[meep]

I am one of the very few people I know my age (22) who don't have any debt. I paid off my student loan, have a credit card with a limit of £250 that I've never used, and haven't been into my overdraft since I was a student. I earn a reasonable wage and can live comfortably off of it, so why buy more than I can afford. I'm going to have to pay it back at some point, which means penny-pinching one way or another. Some people just don't see it that way.

I think credit works well for buying an important, large thing that would take a little bit of saving from each pay-packet but you need to buy before you have the money: such as a car, a new tv / stereo, christmas presents etc, a holiday. And if you carefully plan out how much to take out of your wages aftewards to pay it back in a few months, then no harm done. It's people who go on a shopping spree for new shoes and end up maxing their credit card I really don't understand.

This country has been far too lenient in giving out credit and overdrafts. My friend from Uni lived in France for a year (she studied French) and she had to fill in a form and have a check done before she could get a £50 overdraft limit on her debit card! It took about a month to process, and she had to push for it.

Whilst I agree the individuals are to blame for getting themselves into more debt than they can handle, I also think the companies, the media, and the advertising is to blame for creating a false sense of security about credit. This is what has created our culture of living off credit, people become immune or unknowing to the dangers or finanical implications, and trust the advertising that, well, it must be ok to do!

I also agree with angie on the food crisis. It is becoming a very real problem; I've heard a lot about shortage of rice and how whilst our rice may have gone up in price on the shelf of morrisons, there are actual shortages of it in the east where it forms the basis of their staple diet.

[dandysmom]

What an excellent post, Meep! May I congratulate you on your financial good sense?! Pity more young people aren't as disciplined and sensible about money as you are. My Mom would have loved you!

[meep]

Thanks DM! That's quite ironic, as my mum loves her credit cards and shopping sprees

Money can be the root of so much unhappiness, I think people do need to pay slightly more attention to their finances rather than bury their head in the sand and they'll avoid any major stress later on when they realise they're x amount into their overdraft or credit limit!

I do like shopping, and one new thing will lead to another (new skirt, well I need new shoes to go! and of course a new top, and then makeup to match... and so it goes on) so I do have months where I spend more than I intended, but I get anxious and unhappy if I'm £100 away from my overdraft. I just seem to have this preconceived notion that being the red is BAD and makes me worry a lot! My mum used to call me a miser

But like I said, a little careful planning now saves a lot of heartache, stress, and worry later. It's a sad thing that money (often the borrowing and lending of) causes so many friends to fall out, couples to split up, and generally people unhappy.

[dandysmom]

I was a Great Depression baby; as I said earlier my Mom had a horror of debt, so I learned very early about budgeting and thrift. One of our brokerage houses, Merrill Lynch, used to have a plan called the monthly investment plan where you could make an initial contribution and then a monthly payment (not mandantory) to pool the money of investors together to buy partial shares of stocks. I opened an account at 23, and contributed to it regularly until I retired; and have a comfortable retirement now. What a pity that the plan has been discontinued; it was a great way for small investors to use the power of time and compound interest to build up savings for retirement....

[meep]

That sounds like such a good scheme, like you said, for someone who has the time and patience to invest. I have a few ISAs (tax-free) from summer-job money I had as a teenager and student, which I don't even think about really as money to spend. It's there for something big one day!

As frugal as I am, maths, numbers and money are not my strong point at all. I watched the film 'Rogue Trader' the other night and still don't entirely understand how the stock market works, and hence don't quite understand why the Great Depression came about. Well I do understand it, but not all the small in's and out's although I wish I did!

My OH explained to me how a wee while back all the gold was collected in and the Dollar stopped stating that you could trade in one dollar for its worth in Gold, then money turned into pure numbers and just floats around in cyber space now. That's what scares me - that by getting rid of gold = money value, there doesn't really seem to be a real value of anything any more. Designers produce items worth £1000s which are tat, value is now a culturally decided rather than by real wealth (does that make sense? Such as precious stones or gold). I think that's why the credit boom of the early 90s came about, as there was no longer the association of wealth to riches, but instead all welath was defined by was how much you had, ie. consumerism!

Sorry rant over :shy: I don't understand finance much but I do like to philosophise over it!