Savings and Debt

One quarter of homeowners do have no savings. We would imagine that when the non-homeowners are factored in the savings level is even lower. And we really wonder of the three-quarters that claim to have savings have enough to carry them over for any substantial time period. Probably very few. Homeowner savings and some other interesting statistics are covered in an article from The Albany Business Review titled Survey: 25% of homeowners have no savings. Let's take a look -

Twenty-five percent of U.S. homeowners have no savings to cover their living expenses if they lose their job, according to a survey by Wells Fargo & Co.

The quarterly survey discovered that to cut costs, homeowners are taking extreme actions; 34 percent say they have had family members or friends move in with them in the past year.

It also says 42 percent of the respondents are spending less on their children in the weak economy.

Of those who have debt other than a mortgage, 43 percent say they think about their debt every day. And 24 percent think about it at least once a week.

Because of their debt, 36 percent say they’re cutting back on expenditures such as dining out and buying clothes.

Interesting information. Notice that those cutting back are due to debt. We wonder if you added the number of people who are cutting back out of fear for their jobs - probably brings that 36% up significantly higher. Then add in the number of people who have had their credit cut and just do not have the means to have additional expenditures. Since we all know that there are many who will spend that credit regardless of the debt piled up.

Neither the money nor the incentive to spend it there. And it looks like neither one will be there for some time to come.

Recession Renovations

People are still interested in improving and upgrading their properties - even if these tough times. But spending $50,000 grand and up for a new kitchen is bubble era thinking. Much easier is refacing the cabinets and having a new counter installed. Much cheaper and may look just as fresh. Apparently even liquid stainless steel to turn those white or black (or almond) appliances into trendy stainless is a very big thing. The change in renovation mindsets is illustrated in this Wall Street Journal article titled Major Home Remodeling Gives Way To Modest Upgrades. Perhaps no HELOCing needed for the new kitchen? Well let's take a look at the article -

Home-improvement spending is expected to decline 12% in 2009, according to Harvard University's Joint Center for Housing Studies. Lower financing costs may be starting to stabilize the downturn in existing home sales, but "they have not been enough to offset rising unemployment and falling consumer confidence and encourage homeowners to undertake major home improvement projects," said Kermit Baker, director of the Remodeling Futures Program at the Joint Center, in a news release.

It's much different than the days when home-equity lending was plentiful. Before doing anything, people are carefully considering how they should spend their money.

In the days of easy credit, "there was a feeling of 'we can't go wrong, let's just get started,'" said Bill Judson, an architect with HartmanBaldwin Design/Build, based in Claremont, Calif. "Now, it's harder to get money, in terms of credit, and homeowners are taking it a little slower and educating themselves a little more."

...

Nationally, the volume of countertop project requests rose 39% in the first quarter of 2009, compared with the first quarter of 2008, while major kitchen remodels are down 19%, according to ServiceMagic's most-recent Home Remodeling and Repair Index/Survey. The data comes from the company's service requests; the site received 4.2 million requests from homeowners in 2008. Service requests for bathroom remodels were down 10% in the first quarter of this year, according to the report.

At the recent Kitchen/Bath Industry Show, affordable remodeling products included liquid stainless steel to refinish appliances and do-it-yourself backsplashes, Sweet said.

Liquid stainless steel and the return of the staycation. People opting for affordable countertops instead of granite. Perhaps they would prefer real food over Top Ramen as well? Guess when your property does not pay you decisions have to be made much more carefully.

Holiday Cheer

During this season it's easy to get caught up in the shopping frenzy. Before the bubble burst it was easy overspend. Money was basically easy come, easy go. All one needed to do was request for credit and voila - they had more money to spend.

We know this holiday season is different. Whether we are spending less by choice or by force - it really is making a difference this year. That brings us to this article from CBS News titled Save, Don't Spend, During The Holidays. Lets take a look -

[Not holiday shopping] is, of course, exactly the opposite of what Washington officialdom wants you to do. I don't know exactly how this line of spendthrift thinking started, but my hunch is that its recent antecedents came from President Bush's post-9/11 line that Americans should "take their kids on vacations" and "ought to go to ball games." Bush's more recent suggestion was "I encourage you all to go shopping more."

...
The reality is that Americans have been on an unprecedented and unsustainable consumption binge for at least a decade. They paid bills with borrowed money. Savings was out, while leased BMWs, large-screen TVs charged to credit cards, and zero-down option ARMs were in.

Now, as the economy is trying to heal itself and return to normal, consumer spending has dropped off. This should be no surprise: When unemployment is rising, people save more because they're worried about losing their jobs. This is prudent and sensible; what's irresponsible is politicians urging visits to the mall when saving may be the wiser option.

A catalyst is that many consumers have pushed their credit cards to the limit and extracted as much as possible from their homes during the real estate bubble. Now that credit card issuers are becoming more restrictive, and the home equity loan spigot is being turned off, more debt is no longer as attractive (or as possible) an option.

...
Americans are planning to cut their Christmas spending by 50 percent this year, from $859 last year to $431 this year, according to American Research group, a market research firm. That indicates that, after many years of borrowing, people are starting to live within their means. It also shows they have more common sense than their elected representatives in Washington.

While it is going to hurt at first in the long run a new and sustainable economic paradigm is vital. Spending well beyond ones means is only asking for trouble. Perhaps the mindset will trickle up to Washington.

(If we are unable to post tomorrow - have a wonderful holiday!)

Can the Holiday Season go From Red to Black?

A recent Holiday season tradition has been to spend more money than one has available. No worries - just pay it back well into the new years. What better way to let your family and friends know how much you care then to spend beyond your means. After all, when a credit card was maxed out the bubble solution was to just shift the debt onto the mortgage and free yourself to spend more. And who would have thought such practical solutions would not be the eternal answer to managing finances (/snark). This article from the Bangor News titled Black Friday Blues lays out some of the issues we are facing. Lets take a look -

Prof. Jim McConnon, professor of economics at the University of Maine, refers to a chart from the Economic Report of the President that breaks down the GDP. In 1960, consumer spending — on durable and non-durable goods and services — made up 63.1 percent of GDP. That’s nearly two-thirds of the domestic economy.

But there is also evidence that grumpy Uncle Fred is right — the GDP has increasingly trended toward a consumer-spending reliance. Consumer spending as a percentage of GDP held steady at about 63 percent until 1980, when it began to grow. In 1990 it was 66.2 percent, in 1995 it was 67.2 percent, in 2000 it was 68.6 percent and in both 2005 and 2006 it was 70 percent.

The remainder of the economy is linked to business investment (16 percent), government spending (19 percent, a third of which is defense spending) and net exports, Prof. McConnon says. In recent years, as the trade deficit grows, the net export number has extended further into negative territory, which means any growth in the economy must be offset by more consumer spending. So that 7 percent growth in the percentage of GDP linked to consumer spending is even more significant, McConnon says.

The Bush administration has proposed an $800 billion stimulus package aimed at Main Street — not the $600 and $1,200 checks taxpayers got earlier this year, but a targeted investment to get bad mortgages and other debt off the hands of banks to they can begin loaning to consumers again. That may be the first sign that government policies are building bridges back to consumers, who hold the fate of the U.S. economy in their hands — or at least in the credit card they hold in their hands.

But at the same time, President-elect Obama must signal that consumers, whether government regulations intervene or not to save them from excess, must become more responsible. Buying $300,000 houses on annual earnings of $30,000 must end. So must spending home equity as if it is real money. Shop, but shop prudently. Gray Friday may be the best outcome.

A reliance on consumers whose purchases are from debt does not build a sustainable economy. Turning savings into debt and drowning in debt are not good ways to run a national economic policy. Hopefully patriotic shopping through ever-increasing debt does end, and out of the rubble a better national policy arises.

Credit Cards and Unemployment

The government has offered to infuse indefinite amount of funds to prevent a total collapse of the housing and mortgage market. While this is good on a macro scale very little it being done in other areas of the credit crunch or mortgage meltdown. This article from the Chicago Tribune titled Consumer debt defaults looming large addresses the other areas that are becoming problematic but have been largely ignored.

With more people out of work, that likely means many are having a tougher time paying their bills. If that leads to a surge in defaults on debt assets beyond just mortgages, such as credit cards, auto loans and more, we can forget about the credit crisis being over any time soon.

...
But the bailout can't be viewed as a cure-all for U.S. credit problems. The government is trying to prevent further deterioration in the mortgage market, but it hasn't done much to ease other credit troubles.

...
Americans this year have been increasingly using their credit cards to make purchases. Banks have tightened lending standards on such things has home equity loans, which consumers used heavily in recent years to finance spending. New data from the Federal Reserve show that consumer borrowing on credit cards grew at an annual rate of 4.8 percent in July, up from a growth rate of 3.5 percent in June.

But as credit card use has surged, payments on those cards have fallen, even though $106.7 billion flowed into Americans' wallets in recent months from the U.S. economic stimulus package. Card payment rates fell 6.2 percent on a year-over-year basis in July, the ninth consecutive monthly decline. That's the second-biggest pullback in the records kept by the banking analysts at Oppenheimer & Co., behind March's year-over-year decline of 7.4 percent.

With prices going up and real wages going down people are depending more and more on credit cards. Most people do not make drastic changes the minute they hit the unemployment lines. Those changes come slowly as the difficulty in finding new employment increases. But the real shocker from the article is that people who are unemployed are not paying their bills - event their credit cards. Lets take a look -

Research by Merrill's economics team found that there is a tight historical link between the unemployment rate and consumer credit card delinquencies.

"So even with this dramatic support just unveiled for the mortgage market, we anticipate the next phase of the credit crunch will be in the form of lenders being forced to revise up their consumer-credit loss estimates once they start to more fully take into account a deteriorating employment backdrop," Rosenberg said.

The losses might not begin to intensify until 2009, because there is a lag between when someone is out of work and when loan defaults begin.

Wow a find. Could there be a link between people buying house and cars and the unemployment rate? Unemployment and foreclosure?

And 2009? What else do we expect to see imploding in 2009? Oh yeah the Option ARM implosion will just be beginning. Boy does 2009 look to be a difficult year.

Didn't We Almost Have It All

There was a point during the Great Housing Bubble where it seemed one could have it all. You wanted a dream house? Just find someone to give you a no doc loan with a teaser rate and 100% financing and you could have any home you wanted. No commitments and no compromises were required. No need to worry about the rates resetting - the advice was to just refinance or sell the property. After a year or two of ownership why not take out some equity out to buy your dream car to go with that dream house. For those who fed into the ideals it was like we almost had it all.

Almost... but those days are gone. Those who bought into the bubble's ideals are in the most trouble. Those who hesitated know that the bubble paradigm has changed. The new paradigm is very similar to the pre-bubble paradigm. The big shift is down payments. Not only are they required again - but in Sunday's Record about sacrificing for a down payment. (For those still in trying to maintain the bubble mentality sacrifice means "forfeiture of something highly valued for the sake of one considered to have a greater value or claim.") The article is titled How to raise a solid down payment. Lets take a look -

In rare instances, low- to no-down-payment loans are still available to novice buyers seeking to purchase a starter home. But such mortgages are now much harder to obtain - especially if you're self-employed or have blemished credit, says Eric Tyson, co-author of "Mortgages for Dummies."

"In this era of foreclosures, lenders are extremely conservative about their standards. Anyway, people with a solid, 20 percent down payment always get the best possible terms on a mortgage," Tyson says.

...
If you've long been accustomed to the freedom of having at least one car per driver in your household, scaling back could at first seem like a drastic downshift in your lifestyle. Yet as Moore points out, this needn't be a permanent change

...
As financial advisers can attest, the first step toward freeing up money for savings is to hack away at your routine spending. That means taking several hours to review your checkbook and credit card statements to see where your money is now going. While doing so, many people are shocked to see how much money slips away through small expenditures, such as buying the latest CDs or going out to lunch with co-workers.

...
Mortgage lenders frown on the use of borrowed money for a down payment - even if it comes from your best friend on the easiest of repayment terms. But most are fine with the use of a cash gift for all or part of your down payment.

During the bubble we almost had it all. We did not need to give up cars for a down payment - we did not need a down payment. We did not need to give up indulgences - with teaser rates we could afford our cars, home and all the indulgences we wanted. Unfortunately we can not have it all. And we are paying the price for trying. Also unfortunately some are paying the price more than other.

Our Battered Wallets

Money seems to be tight and getting tighter - at least for the average person. Food and gas prices have risen substantially the last few years there is not alot of extra money in the average person's paycheck. As foreclosures and bankruptcy get more commonplace they will also be more acceptable. Today we find a portrayal from the USA Today regarding how much consumers are financially falling. Let's take a look -

Consumers are behind schedule in payments or have walked away from nearly $800 billion in household debt of all kinds — mortgages, credit cards, car loans, says Mark Zandi, chief economist for economy.com. "Household credit quality has arguably never been worse," he says.

That is a lot of write-offs. And we are still in decline mode. This still has a way to go before leveling off. What is propagating this downward spiral - job losses, equity losses and rising prices, as per the article -

•The housing downturn. Projected declines in house prices, home sales and housing starts are all worse than the housing collapses of the 1980s and 1990s, Zandi says. He projects a nationwide home price decline of 26% from the peak in 2006.

...
•A weakening job market. The unemployment rate has risen to 5.5% from 4.6% 12 months earlier.

•Higher prices. For people in the bottom third of the nation's income distribution, energy costs were about 11% of consumer spending in 2006 when oil averaged about $75 a barrel. Now, with oil around $125 a barrel, "You could argue that nearly half of their disposable income is now going to food and energy," Zandi says.

During the Great Housing Bubble credit was easy to obtain, people who never would have normally qualified for a house normally were somehow getting 100% financing. People were getting loans with payments that they could never afford. Lenders were giving loans based on valued assets with a mind frame that housing would never decline and people would never default.

Just for the counter-point argument to the state of the economy, the article threw in this closing paragraph -

Other economists are more optimistic. "Yes, we're seeing this erosion of household balance sheets," says Brian Bethune, chief financial economist for Global Insight. But, he says, consumers are making good choices: paying down debts, using less fuel and shopping at discount stores.

Consumers are not really making these choices - they do not have the funds to do other things. Many people are adapting to the new market rules - less credit, no access to equity, and higher prices. These are not necessarily choices, rather external market forces.

Cool and Frugal

Yet another day to be cool and frugal. Being a spendthrift is out. Saving money and being a smart, sensible shopper is in ...again. People realize that during the boom when it seemed banks were giving away money to anyone for anything is not the reality of today. The reality today is to live within or below your means. Which brings us to an article from MSNBC called Is frugal the new black? Lets take a look -

Now, as the reality of a down economy begins to sink in, experts say consumers are starting to embrace the simple life: staying close to home, cooking more, planting a garden and even delighting in bargain hunting. Some retailers, trying to make the best of the situation, have begun looking for ways to latch onto the trend as well.

“Americans as a whole are pretty … adaptable, so when it gets tough, we make it cool to be frugal,” said Anna D’Agrosa, director of consumer insight with Zandl Group, a trend forecasting group.

...
For example, people who choose to stay at home rather than go bar-hopping tend to buy higher-end liquor because it’s still cheaper than what they would pay at a bar, D'Agrosa said. Online retailers also stand to benefit because they allow customers to save on gas, and lower-priced alternatives such as grocer Trader Joe’s and clothing store H&M also stand to profit.

...
While George Reese, 51, admits that it might be nice to get a new car or fill up the tank without a second thought, the lifelong frugal shopper also takes pride in the unexpected deals he finds during his frequent trips to discount stores. The other day, the Ventura County, Calif., resident was pleasantly surprised to come across half-gallons of name brand ice cream for just 99 cents.

“Being frugal is not anything to be ashamed of. It’s just the way of life,” he said. “It’s something you have to do to, if not to beat the system, then to keep up with it.”

Not all frugality needs to be so visible either. Changing to the supermarket brand rather than the store brand. Unless people look in your cupboards how will they know? Using less of an item.

Here is one tip - when using a dishwasher we have found that only filling up the dispenser a quarter of the way gets the dishes just as clean as when we fill it up all the way. Go from buying detergent weekly to monthly. Laundry soap also does not need to be overflowing.

Another tip is to bring lunch to work instead of eating out. Instead of throwing out leftovers, just package them up for lunches. Saves time and money.

There are lots of ways to be frugal and not feel like you are giving things up. That is the big challenge. As Mr. Reeves states in the article - frugality can help you beat the system and not let it beat you.

How does this relate to housing? At least once a week or more we feature foreclosed properties. Some of the people have no real choice. Be it life circumstances or houses that were never affordable, this group is destined to lose a property. But the other group could just cut back. Maybe drastic, life altering cutbacks if necessary - like canceling cable, cutting back cell service, no vacations, no eating out, no leasing vehicles, etc. Losing your home will be incredibly life altering experience. If there are ways one could avoid it our recommendation is to take it. Once again we recommend the book Tightwad Gazette (we are not affiliated with the author and get no money for the recommendation - it is just jam-packed with advice!). Buy it or be frugal and borrow it from the library. Make note of all the small changes that can add up to big money.

Subprime got you down? Enjoy your Staycation!

Are you sick of spending so much money on airfare or gas? Sick of the over priced rentals long the shore blocks from the beach? Not enough money to go to Florida AND pay your mortgage? Enjoy a luxurious staycation!

There are two schools of thought going into the staycation - one is by choice and other is by force. If you have the mindset of the staycations being a frugal choice - rather than you do not have the money to travel you can enjoy yourself so much more!

A great video about Staycations (called Holistays) from the Daily Show -



Is is sad or funny that the line "Paris will always be there, but judging from the subprime crisis chances are your home won't" received such a huge laugh from the audience?

Jersey Tightwads? Not by choice, of course

Interesting article from todays Star Ledger with the long title of As indicators point to recession jittery Jerseyans look for ways to curtail their spending. For many, it means tough choices. This article is chock full of examples of middle class people living like they are rich. Eating out $4 coffees, two-three times per week, cleaning services, yard service, $7000 vacations, and high end hair salons. This is the outward lifestyle parallel to pergraniteel inside the homes. More cases of people using their equity to provide a second income in order to live a lifestyle they really can not afford. The tough choices in the following stories come from people who appear to not know how to live within their means.

The grande mocha, as it turns out, says a lot about the economy.

A few months ago, even before consumer confidence officially began slipping, Lori Mozenter put an end to her regular visits to the local Starbucks, where she would plunk down nearly $4 for a cup of the rich, chocolatey coffee drink.

"I would drag my kids to Barnes & Noble just so I could go to Starbucks," said Mozenter, a nurse who lives in West Windsor with her husband and kids.

It is amazing how much people throw their money away without even thinking. The $4 is jut for her drink - how much does she spend buying her kids a treat or the $1 cookies they sell. Starbucks is a great place to burn through your money. I stopped frequenting Starbucks years ago - when I realized that for the same price of a day's coffee I could buy a weeks worth and high quality coffee too. Now the local supermarkets sell starbucks coffee beans at the supermarket why bother shelling out that much more. Once in a great while it be nice as a treat just like eating out - for a financial prudent person it is considered a splurge not a routine.

... These are signs, too: A retired Monroe Township couple canceled their annual summer vacation, which has amounted to as much as $7,000 in past years. Middle-class families are reconsidering whether they can afford a $650 swim club membership for the kids this summer.

A retired couple throwing away $7000 on a vacation. That is fine if you are rich, but how many people are using their equity when you are using your equity it does not make any sense. As for the swim club, people really need to figure out how much one uses the facilities. It is probably a good deal for some and others are just throwing their money away. Compared to upkeeping your own pool, $650 is very reasonable. However, if you only go once in a while on weekends it is not worth the cost.

...Lisa Evans, a single mom from East Windsor who works as an engineer, said last year she ate out two, and often three, nights a week. Now, she limits herself to one night.

And when she does go to a restaurant, it's usually for takeout so she doesn't have to leave a tip.

"You've got to do what you've got to do," Evans said.

A few months ago, Vickie Ciotta of Bridgewater and her husband decided they had to budget a specific amount to keep their dining expenses limited. "We still do it. We do it less fancy and with more thought," Ciotta said. "You see your money going on gas and you think, we have to economize."

Between tips and the huge mark-up on drinks going out to eat is expensive. As I said before when growing eating out was considered a special treat, now it is a weekly event. If people compared their weekly grocery store expenses against what they spend to eat out they will realize they are throwing away a lot of money. When I first started working it seemed nice in the 'I deserve it' mentality. People also do not always realize the efforts in going out - once kids come in the picture it is very evident. The whole relaxing issue is out the window.

Just wait until articles start mentioning Whole Foods - especially the prepared foods. When I added up what my family spent of prepared food I found we could have gone to a restaurant instead. Naturally when we have to pick up one of their specialty items we only get one or two things from the prepared foods. Due to Whole Foods high costs and strong temptations I try to reduce my trips and buy only what I came for.

...The mantra among many consumers with trepidations about their jobs, their investments and what troubles may still be coming, seems to be that even making little cuts will help.

Bridgewater resident Regina Tegeler is shopping around for a new internet provider in an effort to reduce her monthly expenses, and she has decided that she spends too much at the hair salon.

"I'm not getting my hair styled and colored as much," said Tegeler, a strawberry blonde sporting a short cut. "I'm doing a little bit more myself."

At the John Roberts salon in Metuchen, stylist Richard Sauer said his business is down 20 percent compared with last year. After the winter holidays, business normally falls off, he said, and then it starts coming back in February. Only this year, it never rebounded.

"I just feel that people are stretching it out. If they normally come for a coloring every four to six weeks, they're waiting eight to 10 weeks to come in," he said. "The cheaper salons are probably doing better."

Frequent trips to the salon is quite expensive - and Northern NJ has few afford ones - their seems to either be the cheap SuperCuts or at minimum $50 a cut salons. At least she realizes she could buy a box and color her hair for under $10 herself versus the $100 a salon charges. I think we will begin to see nail salons close soon. This is another thing that also grew during the boom. Growing up people only had manicures and pedicures for very special occasions and many just did it themselves, now going to the nail salon has become a bi-weekly event with the occasional "nail" emergencies.

..."When we decided to do the renovation, we started tightening our belts more," Murdock said. The lawn service went. So did the cleaning woman, easily trimming their monthly spending by $1,000.

"Now," she said, "it's purely a matter of watching our expenses."

Here are two more things that were only used by the wealthy that are now common place. Average people having landscaping service and maid service. As for yard service what happen to neighborhood kids coming by to cut the grass. Now we have expensive professionals come by small yards with their riding mowers and people paying $200 per month to cut a 50X100 lot. I understand the need by the elderly or those with physical limitations, but when the same healthy person is paying $100 and month to go to a gym and paying someone a $200 to do a little yard work they are just throwing their money away. Throwing away money on house cleaning is also incredibly excessive. I can understand using a service prior to a fancy dinner party or very special occasions, but many people have someone come by just to clean their toilet and vacuum their carpets every week.

Another area where I expect to see a drastic change is the shopping habits of us middle class New Jerseyans such as the suddenly ubiquitous Coach bags and regular trips to Nordstram and Neiman Marcus.

We will look back on all of the excess one day and wonder what we were thinking.

Update to the Tightwad Post

I did not catch this on the first read - but you know HELOC is the blame when a statistic like this pops up in the budgeting article -

Merrill Lynch's Rosenberg said that in the fourth quarter of 2007, Americans' household debt almost equaled 140 percent of their after-tax income and that they were spending 14.3 percent of their after-tax income paying down that debt.

"Simply put, that means Americans are spending more on servicing their debt than they do on food," Rosenberg said. "This is not just affecting stressed-out or soon-to-be-foreclosed home owners. This hurts everybody."

It would be very hard to have the average spending done on credit cards alone - they are very expensive and it is much easier and cheaper to HELOC it. To many people it seemed like easy money, just refi and you suddenly have more money and none of those credit cards bills. People are spending more on debt fees than on food. How long can that last, especially with the good times ending? Like I said before, with the HELOC and refi house money drying up, it is like millions of Americans have lost a high paying second income. Remember, people were using their HELOCs to pay their mortgages!?! Crazy as it sounds it become rationalized during the bubble.

Tightwads Everywhere

This nation is going to change from spendthrifts to tightwads as people lose those second incomes (HELOCs). We are seeing article after article of people having to change their ways. Today The Guardian has an article about the changes that people are having to make in order to save their homes - but is going out to eat and reducing your shopping really that much of a sacrifice?

After years of living large, U.S. households are finally learning what financial experts thought they never would: to live within their means.

Economists have long warned that the U.S. consumer was on an unsustainable spending frenzy and that savings rates were dangerously low. Now, families are being forced into financial responsibility by the housing downturn and a weakening economy.

... "Frugality is in, extravagance is out," he added.

... "We had to cut eating out at restaurants and we had to stop shopping," Parks said. "That was the hardest part for my teenage daughters because they love to shop. But I sat them down and we agreed we'd do anything to keep our home."

... "We get home owners coming to us in trouble, but then we look and see they have only make $50,000 a year and yet they own an Escalade," he said, referring to a Cadillac sport utility vehicle that sells for about $55,000. "And you have to ask them 'What on earth were you thinking?'"

Giving up shopping for non-essentials, eating out, high end cars and expensive vacations are not really hardships for anyone. Has life has in America become so cushy that cooking for yourself is something to be sad about? Sadly I think it has. Remember the best thing we could do after 9/11 was to shop. So I guess eating out was not about luxury it was about saving the country and being patriotic.

When the Tightwad Gazette is on the best sellers list we will know the nation has turned a corner. Personally, if I worked at one of these debt agencies the first thing I would tell people was to read the book. Take it out of the library if you can not afford to buy it. You will learn so much about how you are throwing away your money even on the little things that require no real changes. Even little things can add up. And until you start recycling your plastic bags, canceling cable and the internet, and consider your big no-cooking treat left-over night you are not really being frugal. There is a giant difference between living in your means and becoming frugal. None of the people in the article are even close. If giving up eating out is now considered frugal we have a long, long, LONG way to go...