How the Economy Affects Personal Finance
Daily we are bombarded by the news media with all the negative turns in the economy. The government pundits have released a statement that the "recession" ended as of June 2009.
The fact of the matter is, this is not a recession. It is an outright depression, as bad as or worse than the 1929 stock market crash and resulting depression. Even the causes are similar. A lot of people lost a lot of money in the stock market this time, too. The reasons why that is so differ from 1929, but that does not matter in the end result.
Most average Americans cannot tell. In fact, most average Americans would reply, "Oh, really? How can I tell?!" In today's economic climate, I wager it would be impossible to walk down any street in this country, and not encounter someone who is out of work, in deep financial trouble, or who knows someone in those straits.
Even people of means lost a great deal of money in the initial collapse following the burst bubble of the over-inflated housing market. Then came the mis-guided bailout of the very financial institutions that caused the problem These self-same corporations then proceeded to use a large portion of their bailout to award top executives with massive bonuses and perks.
That was followed by emergency legislation to help homeowners re-negotiate their loans. In too many cases, the lenders did not comply at all with either the letter or the spirit of this legislation. People were told they could not be helped, at best, or at worst, upon applying, threatened with foreclosure proceedings as a penalty for applying.
How was this supposed to be helpful?
How the Government Puts People Into Financial Difficulties
In order to explain this, I'll have to detail some personal information, which I'm sure I share with many, many people.
My husband is on disability--a fixed income. Since my small business began suffering a downturn in advance of the crash, we were already in a cash-strapped postion while he fought to receive his disability income. During that time, we had no choice but an equity line of credit against our house to afford his medical insurance.
At the time, I was not even close to old enough to apply for Social Security (what a mis-nomer!), yet old enough to encounter age-discrimination in job hunting. (Yes, it still exists, despite laws to the contrary.)
It took three years and the involvment of an attorney before my husband was finally awarded his disability. By this time, our equity line was exhausted, and we had to re-finance as our only remaining option. Because of my husband's ill health, he was not quite up to par in reading over the loan documents, and we got stuck with a loan that was everything we had asked NOT to have. In short terms, it ended up being one of those 'predatory loans' about which we read so much these days.
The flaw with the government in granting these disability checks is the way they are calculated. It is a percentage of what you made at your last job. Not what you made as your highest-ever payment level. A percentage! It is not enough to live on. Once we pay our mortgage, we have only $67 dollars left for everything else!
My small business continued to lose income. On top of that, it is a 50-50 partnership with people we know, so, I only realize half of the actual amount of sale to the end customers. Some months--if I'm doing really well--I might earn as much as $350. Other months, I get no income at all. In 2009, I got zero income for 3 months running from February to April.
What were we to do? We were forced to rely on our credit cards for business supplies, auto mainenance, and even groceries. Of course, the inevitable happened, and we could not afford to pay off the cards in full, so the balances climbed until they maxed out. In the end, we were forced to default on all of them.
At that point, we had to swallow our pride and apply for food stamps (now re-named to "Supplemental Nutritional Assistance Program," or SNAP). Our initial award was, to our surprise, larger than we thought it would be for just two of us.
We still could not afford to pay our utilities on time, and past-due notices and 15-day warnings became commonplace.
Fast-forward to October 2010. I finally reached the age at whch I could apply (early) for my Social Security benefits; and I use the term loosely. More bad news. During the years when I was raising my children, I was a stay-at-home mom, just like my mother before me. I did not have enough "quarters" in to get any benefits from my years employed. So, I had to file against my husband's. Still more bad news: because I was applying three years early, I get a permanently reduced amount!! Had it been possible to wait until I was 65, I would have gotten almost $200 more, but our backs were against the wall, and we needed the extra money right then! Well, actually, we needed it three years prior, but that was not in the rules.
I do not believe it is at all fair to force a permanent reduction in benefits. It should be adjusted upwards to the full amount you would have gotten at age 65 upon that birthday.
Next problem: any additional income you make must be reported within 10 days to the food stamps office. Great. That SS grant resulted in chopping our food allotment in half! What's wrong with that picture? That money did not become available for food--it will only help me be not quite so far behind on my utility bills, and able to pay my insurance! For two years, I have been unable to pay my property taxes! I still have nothing leftover, and we are almost virtual prisoners in our home, for lack of enough money on a regular basis even for gas or bridge tolls. Do I sound bitter? You betcha! Do you blame me?
Eating out? Forget it! We can't even afford fast-food junk--which is not the cheap meal it used to be. Medical care for me? If you want to call it that. Here in California, we have a program called "Medi-Cal." My husband is eligible; I am not. Why? Because I am not:
- under 21
- over 65
What to do? I finally applied at the county level, and was admitted there. That's another whole story--suffice it to say, it is incomplete care, and I am a prisoner within my home county.
How We Got Into This Mess
It all started back in the 1970's with the so-called 'gas shortage.' How many of you are old enough to remember long lines at gas stations, and odd-even number rationing days? I am. My husband is.
The worst thing about that whole mess? It was a lie. There was no shortage. My husband and a friend went to take photos at the refineries. All the tanks were full. It was nothing more than a ploy to raise prices. They took their findings to the newspaper, which very carefully ignored the information.
To this day, no one has come forward to point a finger at the real culprits: Big Oil. They started us down the road to the mess we are in today. Well, here I am, and I'm pointing ALL my fingers!!
Once they were able to start inching the prices up, they continued to do so, and got bolder and bolder, making increases in ever-larger increments. They did not even try to be sneaky with a penny or two--look around today--it will go up a nickel or a dime overnight!
With these increases in the costs of transpportation, the cost of everything else followed. The problem was, most people's salaries did not keep pace. As the cost of manufacture rose, we then started to see the beginning of "outsourcing" our jobs to other countries, and people losing their jobs outright, nevermind inadequate salaries. People went from managing to unemployed in the blink of an eye.
Enter the banks who began making irresponsible loans to folks who could not truly afford the house they wanted to buy. From there to the present, most of you are familiar with the rest of the ugly details--I'll not go into them here.
I will say, however, that I find it an outrage that the corporations continue to follow their devastating practices, show no remorse, and their executives continue to get their unrealistic high salaries, bonuses and 'golden parachutes.'
Federal programs such as Medicare and SNAP are supposedly 'equally managed,' in that the feds set the ground rules and income guidelines.
However, the programs themselves are managed by the individual states using the federal rules. Here is where the inequality comes in. The feds conveniently choose as their baseline the area of the country with the lowest cost of living to apply their income standards.
What works in Tennessee does not work for California, which has one of the highest costs of lving in the country. So, you have people receiving 'assistance' that amounts to little or no help at all.
This Is Personal Finance?
You bet it is! Every single one of these self-serving decisions and strategies to increase the almighty 'bottom line' at the banks and corporations is a direct hit to the wallets of the American People!
It affects our personal finances at every level. It destroys our credit scores, and hampers our efforts at getting back on our feet for years to come. The current depression will affect not only this generation, but the one to follow as well, unless we as a voting public wake up and get mad, make phone calls, write letters, and let our elected officials know, en masse, that we are unhappy with the status quo!
So--getting out of debt? It's going to be a long, hard road, and there is little we, personally, will be able to do. Those who have lost income, jobs, their homes, have already cut to the bone and beyond. Articles about budgeting, tracking expenses, and spending wisely are at best irrelevant and at worst outright offensive to folks in those situations, but ironically, they are the ones who most need the help--help that is not forthcoming.
It will be up to the government to make some meaningful changes to existing rules and policies aimed at helping the American people, our job market and our assistance programs, and aimed less at boosting the salaries of politicians, and all their perks and per-diems that go with those inflated salaries.
It is of no help; in fact it is a great harm, that the highest interest is charged to those who can least afford it.
It only makes their situation worse. Had our credit card interest not been so high, we might not have gotten into as much difficulty. It is as if they WANT to force you into bankruptcy, or other kinds of financial peril.
Were the rates lower, it would be easier to make the payments every month. They would get their money. But, by trying to be greedy, and get more money out of people, who are then forced to default, because the outfit won't work with them on payments, they end up getting nothing. Remember the story in Aesop's Fables, about the dog with the bone??? They didn't get that message.
If you would please vote in the poll below, you may come back and visit later, and start to see a picture emerge of the true depth of this problem.
Votes remain anonymous and unconnected to any person whether or not they leave any comment.