Debt-On-Debt

First home equity lines get slashed - the latest is Washington Mutual. Combine that rising gas and food costs and stagnant or declining wages so many people are in such a financial slump they are doing what they think is best to make it through. Maybe one reason people have not made drastic spending changes is that day after day we hear the worst is over. But in reality there is still a long way to go. Some Great Housing Bubble luxuries will not be coming back any time soon - like 0% down home purchasing or borrowing 120% of one's equity. Today there is an interesting article from News 10 NY called "To spend debt-on-debt can sour future purchases."

With the fall of the housing market and the recent rise in fuel and food prices, more consumers are struggling to make ends meet. Many are relying heavily on credit cards, for not just their wants, but also their needs.
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“Credit cards are meant to be a convenience, not a crutch and when people start using credit cards for basics and then they can't make the minimum payment or they make the minimum payment and they start accumulating balances,” said [Frank Conrad, a retired bankruptcy judge and now an adjunct professor of bankruptcy at Touro College]. “This is a mistake. Debt-on-debt ultimately ends up in bankruptcy.”
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It will take some sacrifices now, but the new lifestyle will pay off in the future.

During the Great Housing Bubble it was very easy to live an unaffordable lifestyle - we just kept HELOCing. People are already doing cutbacks and still living well beyond their means. The debt culture has been so ingrained within our current generation that it will take something bigger than the part of the credit crunch and housing crisis we have seen so far to make us change our ways.

While changes are occurring more frequently on a individual basis, a paradigm shift will have to take place that requires us to have a fundamental outlook change on living beyond one's means.