Recession drags rising number of Albertans into financial ruin

[taco.vidal]

Originally Posted by CliffFletcher

If you spend $4500 to $5000 a month on mortgage and cars, then presumably you're in a household with two high-earning professionals, and you have the resources to put away a significant amount of money for savings. If you have those kind of expenses and you're not in a household with two high-earning professionals, or you are but didn't set aside savings, then you're an idiot. There are plenty of houses in Calgary under 500k, and plenty of cars for under 25k.

A lot of people dont save much if at all. I have friends (couples) where each spouse makes over $100k per year yet they live pretty much pay cheque to pay cheque. I dont think its that uncommon. Its easy to get into a situation like that. Take the max mortgage the bank will give you and then finance some new vehicles.

Add to the problem people who took out HELOCS after their homes skyrocketed in value. So now instead of having significant equity in their homes, they have more debt.

[heep223]

Originally Posted by Shazam

No, why? Should I be?

Because you think paying $2k/month for housing is expensive? Unless I misinterpreted?

Edit: I think I misinterpreted. Sorry about that

[Husky]

Originally Posted by btimbit

Reading the article it doesn't sound like the guy was eligible for EI.



But still, to settle my curiosity, say you're about 25, rent a decent townhouse, and have a cheap older car that's completely paid off.

Max EI - $475/week ($950 every 2 weeks)

Monthly expenses:

Rent: $1500
Insurance: $50 (assuming no collision or comprehensive, perfect driving record)
Cell phone: $50
Gas: $100-$200
Cable/Internet: $30
Utilities: $100 - $150

Sure doesn't leave you much for food. Add a kid or two in there and that's a complete nightmare. If you're lucky you have a wife/girlfriend, say they are also on EI, but that also effectively doubles a lot of the bills. Then God forbid any extra expenses pop up (My basement flooded when I was EI. Not fun).

And that's assuming you have zero debt. I dunno, I don't see many options for that guy. Move to a cheaper place? If you're lucky your lease is coming up and that's an option. Find a roommate? Sure, if your lease even allows it (none of mine ever did when I was renting) Get rid of the car entirely? That'd free up some money for sure, plus make you some. Say public transit isn't an option though. Plus in my experience a lot of employers aren't too keen to hire someone relying on bus times to show up to work on time.

Definitely not sure I could do that. I was on EI for a little during the spring, luckily I have some savings, my wife works, and I could have easily sold/downsized some stuff like vehicles if it came to that.


So in my scenario above, people will still claim that guy was living beyond his means. "Where were his savings?" He's 25, what savings? Maybe he'd have $5000 in an account. Should he have had a crappy apartment in a crappy neighborhood with a ####ty roommate? Maybe. But if before losing his job he could afford to not have to life like that, why wouldn't he?



I do agree, it's pretty hard to feel bad for the people that claim they're broke, when in the last 4 years have bought a $500k house, a $50k RV, $120k in vehicles and another $20k in dirtbikes or snowmobiles or something. But that's the minority here. Not everyone struggling to make ends meet on EI was living beyond their means.

You are forgetting that lower income earners get a few hundred dollars per child from government as well.

[FlamesAddiction]

Originally Posted by taco.vidal

A lot of people dont save much if at all. I have friends (couples) where each spouse makes over $100k per year yet they live pretty much pay cheque to pay cheque. I dont think its that uncommon. Its easy to get into a situation like that. Take the max mortgage the bank will give you and then finance some new vehicles.

Add to the problem people who took out HELOCS after their homes skyrocketed in value. So now instead of having significant equity in their homes, they have more debt.

Making car payments for a personal vehicle is probably the biggest financial mistake people make and ruins a lot of people.

[Shazam]

Originally Posted by heep223

Because you think paying $2k/month for housing is expensive? Unless I misinterpreted?

Edit: I think I misinterpreted. Sorry about that

No worries. Yeah, just throwing out $450K as something that would be reasonable and yet I guess there are people paying 50% more.

Not to mention the corresponding increase in property tax. Yarg.

[Locke]

Originally Posted by Shazam

No worries. Yeah, just throwing out $450K as something that would be reasonable and yet I guess there are people paying 50% more.

Not to mention the corresponding increase in property tax. Yarg.

Not to mention what its going to soon cost to heat and power these places.

I'm thinking I'm going to get my own coal-firing furnace and see about scooping up some dirt cheap decommissioned coal and heating my house with it.

[flamesfever]

The economic factors and prevailing attitudes affect how many people handle their money. As most of you have probably observed, those that were affected by the Great Depression are in their late 80's and 90's and are extremely frugal. I knew a person who used to pull the plug on her electric clock, when she left the house, to save money. The fear of being destitute must have been so intense that it changed their spending behavior for the rest of their lives.

Nowadays, people think they should have everything before they earn it. They end up paying much more for everything, and miss half the fun of looking forward to owning something after they have worked for it.

Also it baffles me to see people thinking they wouldn't be happy with any house that is less than 2000 square ft, when no matter how small the space, the human brain will automatically adjust to make it comfortable in a short period of time. Some are starting to realize this, with the advent of the "mini houses" being built with only a few hundred square ft.

Also I see people thinking that if something is more than 10 years old, it must be due for replacement. Just look at the number of things in landfills that still have good use left in them.

In order to keep up with the Joneses, many think they have to drive an expensive car, when the sum of the intitial cost, the fuel, the insurance, and the maintenance is killing them financially.

I can't believe how much people spend on being continually entertained. Whether it's the internet, phone bills, movies, eating out, etc., it's keeping many people poor and unable to save for "rainy days" or retirement.

The unusually long period of big wages that came with the $100. oil in Calgary only helped to reinforce the above attitudes. Those that didn't realize what forces were acting on them, and that history always repeats itself, are doomed to suffer the consequences.

[chemgear]

Originally Posted by flamesfever

The unusually long period of big wages that came with the $100. oil in Calgary only helped to reinforce the above attitudes. Those that didn't realize what forces were acting on them, and that history always repeats itself, are doomed to suffer the consequences.

Whoooo-hoooo! We're going back to $100 oil and double meat subs!

[FlamesAddiction]

Originally Posted by flamesfever

The economic factors and prevailing attitudes affect how many people handle their money. As most of you have probably observed, those that were affected by the Great Depression are in their late 80's and 90's and are extremely frugal. I knew a person who used to pull the plug on her electric clock, when she left the house, to save money. The fear of being destitute must have been so intense that it changed their spending behavior for the rest of their lives.

Nowadays, people think they should have everything before they earn it. They end up paying much more for everything, and miss half the fun of looking forward to owning something after they have worked for it.

Also it baffles me to see people thinking they wouldn't be happy with any house that is less than 2000 square ft, when no matter how small the space, the human brain will automatically adjust to make it comfortable in a short period of time. Some are starting to realize this, with the advent of the "mini houses" being built with only a few hundred square ft.

Also I see people thinking that if something is more than 10 years old, it must be due for replacement. Just look at the number of things in landfills that still have good use left in them.

In order to keep up with the Joneses, many think they have to drive an expensive car, when the sum of the intitial cost, the fuel, the insurance, and the maintenance is killing them financially.

I can't believe how much people spend on being continually entertained. Whether it's the internet, phone bills, movies, eating out, etc., it's keeping many people poor and unable to save for "rainy days" or retirement.

The unusually long period of big wages that came with the $100. oil in Calgary only helped to reinforce the above attitudes. Those that didn't realize what forces were acting on them, and that history always repeats itself, are doomed to suffer the consequences.

Agree with this. I know people who at one time thought going on a vacation somewhere like Mexico would be a once in a life time thing, and now they expect it every year. Heck, I know a guy in Calgary whose wife left him and the kids because they didn't go on a vacation in 3 years and she couldn't stand another "Calgary winter" without going somewhere.

We live in a very decadent time and are constantly bombarded with images of grandeur that we expect ourselves to acheive. I grew up in an apartment and remember riding the bus with my mother to get groceries, and now it seems like a hassle to not have a spare bedroom for guests and 2 vehicles. Even then, I am frugal compared to most people I know, but I am still guilty of falling into the same trap to a degree.

[MoneyGuy]

Originally Posted by FlamesAddiction

Making car payments for a personal vehicle is probably the biggest financial mistake people make and ruins a lot of people.

I've seen much bigger mistakes than that. If you need a car and can't buy it outright, what else are you going to do?

[Derek Sutton]

Originally Posted by FlamesAddiction

Making car payments for a personal vehicle is probably the biggest financial mistake people make and ruins a lot of people.

You shouldn't paint so many people with such a broad brush. Having payments that are too high by not putting enough money down or having two or more car payments can really put a strain of budgets. One thing that I see on a weekly basis is people who are upside down in their car which is a reel problem, and can be brought on by many different reasons (another topics for discussion altogether). But for myself having a good reliable vehicle that is safe, looks and drives good and is covered under warranty is very valuable. I would and have "sacrificed" in many other area of lifestyle in order to have a good car. Not going on vacations, not eating out, not drinking and having several roommates at one time, saved me more then enough money to make a car payment during some lean times. I personally consider having a good vehicle as a need, one primary reason is because I have always needed a good vehicle to get to and from work as where I live public transit is not an option.

There is nothing wrong with having a modest car payment, bigger financial mistakes include pay day loans, credit card payments, lines of credit, divorce, jail time, alcohol, cigarettes, drugs, gambling, job loss, having kids or too many kids, moving constantly, daily Starbucks/ booster juice, not cooking at home, not learning simple skills and having to hire too many people to do basic jobs.

[FlamesAddiction]

Originally Posted by MoneyGuy

I've seen much bigger mistakes than that. If you need a car and can't buy it outright, what else are you going to do?

If you can afford a few months of car payments, then you can afford a used car to get by on. I have never bought a new car and don't feel it's ever held me back. Especially if you live in any town or city, transit can get you by for a few months.

Having just gone through the mortgage process, the broker mentioned to me how car payment defaults are the biggest reasons why people ruin their credit and can't qualify for mortgages.

[OutOfTheCube]

Did the guy's wife get laid off at the same time too? That would just be some horrible luck.

I know with us, we could make it work on one income + one EI (and hopefully the unemployed person would've found a position before EI runs out).

[Derek Sutton]

Originally Posted by FlamesAddiction

If you can afford a few months of car payments, then you can afford a used car to get by on. I have never bought a new car and don't feel it's ever held me back. Especially if you live in any town or city, transit can get you by for a few months.

Having just gone through the mortgage process, the broker mentioned to me how car payment defaults are the biggest reasons why people ruin their credit and can't qualify for mortgages.

Ok there is a massive difference having a car payment and defaulting on a car payment.

[Cecil Terwilliger]

Originally Posted by FlamesAddiction

If you can afford a few months of car payments, then you can afford a used car to get by on. I have never bought a new car and don't feel it's ever held me back. Especially if you live in any town or city, transit can get you by for a few months.

Having just gone through the mortgage process, the broker mentioned to me how car payment defaults are the biggest reasons why people ruin their credit and can't qualify for mortgages.

I'm not sure what your point is. Are you saying that everyone should only drive old used cars....because you say so? This makes no sense at all.

What people spend their money on is their business. The point of this discussion is whether or not it is responsible to spend all of your money, regardless of what it is spent on.

[polak]

My car payment is $300 a month and costs me 2 grand in interest over the life of the loan. Hardly any reason to lose sleep and it means I have a car that is covered under warranty, is reliable, fun to drive (it brings me enjoyment) and doesn't scare the women away.

[MoneyGuy]

Originally Posted by FlamesAddiction

If you can afford a few months of car payments, then you can afford a used car to get by on. I have never bought a new car and don't feel it's ever held me back. Especially if you live in any town or city, transit can get you by for a few months.

Having just gone through the mortgage process, the broker mentioned to me how car payment defaults are the biggest reasons why people ruin their credit and can't qualify for mortgages.

There is nothing wrong, in my opinion, with buying new if you want reliability and own your cars for 10 years. Maybe folks want to use their money for some other purpose. Or maybe someone has a very secure income (it's possible even in a recession) and can pay off that car over two or three years. If you want examples of bigger money mistakes I have a couple I can give you that will knock your socks off.

[Derek Sutton]

Originally Posted by taco.vidal

http://calgaryherald.com/business/lo...financial-ruin

There are so many details and possible contributing factors omitted from this article, i understand not wanting to divulge ones personal finances to everybody, but really too me it reads they took on too high of a mortgage, added several other debts, didn't save enough and lost their jobs. How does it work getting a mortgage when working as a temp?

My wife and I spent nearly a year living off one income knowing what was coming with my job, and knowing that my next (current) job, whatever it was, was likely going to pay me about half what I'd made the previous 4 years. Not fun, but reality.

[flamesfever]

Originally Posted by OutOfTheCube

Did the guy's wife get laid off at the same time too? That would just be some horrible luck.

I know with us, we could make it work on one income + one EI (and hopefully the unemployed person would've found a position before EI runs out).

That's a good point. I think most couples, raising a family these days, need two incomes to survive. Losing two incomes all of a sudden would be extremely difficult. I hope they find something soon.

I also believe that many people, dependent on the oil industry, are going to have to consider:

- moving elsewhere

- finding a job that makes use of their skills, but is outside their usual field of endeavor

- change their skill set altogether

[FlamesAddiction]

Originally Posted by Cecil Terwilliger

I'm not sure what your point is. Are you saying that everyone should only drive old used cars....because you say so? This makes no sense at all.

What people spend their money on is their business. The point of this discussion is whether or not it is responsible to spend all of your money, regardless of what it is spent on.

All I said was that it was one of the biggest financial mistakes people can make. I didn't say it was a mistake for everyone every time.

When you buy a car on credit you have to accept that you are going to overpay on something that is most likely going to depreciate in value greatly.