It's the economy, smarties

Good news--but I can't share with the internets until the real-life players know. Maybe next week, so stay tuned.

As you all know, I live in NYC, where there's a whole lotta finance going on. And all the recent economic things are freaking people out here. I kind of don't know what to think. I don't anticipate that my kids and I will be out on the street, and I'm fairly certain that the economy will eventually recover.

But I know a lot of people are really worried about things. I thought maybe here would be a place where people could talk about it in a safe way, where we could share the "trivial" worries we have. If there are any economy wonk parents here maybe you could give us your predictions. I'd also be interested to hear from people who are not in the US about what's happening where you live. (And I know so many of us are waiting to see how things turn out with the US elections, but I'm hoping we can stay meta with any political analysis and not get too invested in ways that could be hurtful to others.)

I'll start with the first question: I was thinking now might be a good time to call my credit card company and ask them to lower my balance. (I'm a single mom stuck in a too-expensive apartment and a not-high-paying job--of course I carry a balance.) Do you think they'll be more willing to go lower right now?

Comments

[Johanna]

To actually lower your balance or your interest rate? In my experience, if you take the time to call they are very likely to lower your rate. I've never heard of them forgiving part of the balance, though. That seems unlikely.

Me, I'm worried that if there's a major credit freeze, my life in Michigan, with one of my household's incomes coming straight from the Big 3, will...well, end. So to speak. If the job is lost or the income is slashed, we will need to unload our house much, much quicker than the "in the next 6 months" time frame we had originally planned. We will need to find an apartment that is cheap enough to free up enough money for a second day care bill, big enough to keep us from killing each other, urban enough to keep me from feeling suburban, and "good" enough so that we won't be moving in another year. And then my husband will need to find another job in this, the state with (I think) the worst economy in the nation. And the delicate balance between efficiency and happiness will be lost.

[flea]

My state-funded university is looking at 6% budget cuts as a best-case scenario; 10% is on the table. They are working hard to not cut jobs, but this means things like some departments have given up their telephones.

Tuesday I learned that due to federal budget cuts my 2 year old's daycare (at my husband's federal workplace) is closing in December. Child care is a nightmare here (as everywhere) and I am barely holding off despair.

In general, though, my family income has more than doubled this year (due to PhD completion), and we bought a house, and we've been spending a lot on things that had been deferred for the past 6 years (like a bed, and sheets for the children's beds) and it feels very strange to be so out of step with the economy as a whole.

[MelanieTM]

I posted earlier about how I am leaving the Bahamas after 5 years for a whole host of reasons but one of the main reasons right now is the economy here. It's getting so bad.

Our clients can't pay us. Their clients can't pay them. Everyone is taking out loans just to make payroll.

Our favorite grocery store has taking to filling in the shelves with random crap (bakery cakes, bottled water) so you can't tell how empty they are and they only turn half the lights on in the store at a time. They haven't had my daughters diaper size for the past month. They also have been out of eggs and cheese for the past 2 weeks.

My power bill was $740.00 for the month of July and I don't have central air. I have ductless air conditioners in 4 rooms of my house and only ever run two at the same time.

I live less than half a mile from a pizza joint but I had them deliver Monday night because my gas tank was empty ($5.83/gallon).

The driver for the pizza joint asked me to borrow $20.00 so she could get some food for her kids because her salary and tips just weren't cutting it.

Our house is on the market with a few interested parties and we have a buyer for our business (thank god), but the buyer says they can't pay in full for 60 days. That is totally stressing me out. I need that money to get out of here.

As bad as it is in the U.S., it has to be better than it is here.

[Mom2Boys]

On the local morning radio show, people are calling in about credit card companies lowering their credit limits to just above the balance they carry which has the effect of lowering their overall credit score, since your balance to credit ratio plays some part in determining your credit score, and then in turn with a lower credit score it is that much harder to go get additional credit. Seems like a pretty viscious cycle.

I have two loans to pay for school this semester and one is somewhere in a void of processing. Thankfully it was just an extra back-up to have in case and I didn't need it for tuition or living expenses or I'd really be in a jam.

I have two friends who have lost their jobs, one took a pay cut to keep her job and others where their companies have been doing major layoffs.

I'm in real estate right now and pretty thankful to still have a job.

[Michelle]

I'm an economist but work in banking (although ag/food related not investment).

I guess I'm a little confused about your question. Do you want your credit card company to lower your available credit or lower the interest rate? I don't think any company would lower the balance that you owe them but its early so maybe I'm just not understanding what you are asking. If you have a good history of making your payments on time, then they probably will lower your interest rate. Not as much as you might like. My concern if you ask them to lower your available credit on the card is that this can negatively effect your credit rating. One of the factors on your credit score is the ratio of debt owed to debt available. If you lower your available credit on the card and the amount you owe stays roughly the same then this ratio looks worse. Make sense?

Yes, the stock market sucks and most companies is finance are protecting capital like crazy. Which means it will be difficult to get a mortgage or other loan in the next 3 months regardless of how good your credit is. But I think the economy will work its way out of this; it will just take time...probably 6-9 months or so before things start really improving and maybe longer before things seem good again.

My family is paying off the very last of our credit card debt this month (plane tickets for the holidays) and we are focusing on building up our savings account. I'm trying to buy some of our Christmas gifts now to a) spread out the spending and b)support retailers and the general economy. We are much more thoughtful about driving around for errands, combining trips and taking my husbands more fuel efficient vehicle on longer trips.

I would tell everyone to not panic. Try to build up a nest egg and be conscious of your spending but the market will rebound. Just give it time.

[Shannon]

My problems are very trivial indeed. I am going to acknowledge that now. BUT. I am stuck in an awful job I hate, and I want to get out, but at this point I feel like I should just be grateful that I have a job at all. I am just so sad every single day at this job, and I think it is contributing to my depression. I don't feel valued or creatively fulfilled. I guess we would be okay financially in the short-term if I quit, but I don't like relying on one income in a shaky economy like this one. Anyway, that's my petty problem.

[Jan]

I'm sure you meant interest rate, not balance, right Moxie? If your credit score is good, you could probably get a rate cut, but the balance? Not so much. Unless you're on the brink of bankruptcy and they're afraid they're going to get nothing.

I've got real estate woes. We bought a new house in January. We borrowed the whole wad to pay for it from my parents. The idea at the time was that we'd sell our old place and sell a rental that we own and be able to pay off the loan almost completely. Well now the real estate market is in the toilet and our old place hasn't sold. We gave up ages ago on the rental, and have at least re-rented it (so there's income). But I'm not having any luck so far on getting our old place rented AND there's the not-so-small matter of paying my parents back.

The worst part for me (my husband would probably say the worst part was owing his in-laws a king's ransom) is that once we had our house paid off, we thought we'd be in a position for me to quit my soul-sucking job and finally get to stay home with the kids, something I've wanted to do for 20 years, and something my daughter seems to desperately need.

I know in a million ways I'm very, very lucky. Listen to me complaining about all our houses. But believe me we've made a lot of sacrifices to get where we are and I want the payoff, damn it! I care about this one thing (staying home with the kids) more than anything else (OK, I guess more than anything besides our financial safety) and it isn't something that can just wait. In a couple of years, the Munchkin will be in school full-time and it will be too late to spend that time with her. I have trouble expressing how sad that makes me. It hurts down in my soul, you know?

So that's my bitch for today.

Moxie, do you (and anybody else carrying credit card debt) know about "snowball"-ing? It's (in my totally amateur, but somewhat studied, opinion) absolutely the way to go for getting debt paid off.

[neilio]

Ultimately I'm not TOO worried yet, assuming the bottom doesn't completely drop out of the financial markets. If that happens, there will be a lot more to worry about than thinking about my RSPs and other investments.

Interestingly, the economy is having a fairly noticeable effect on the Canadian elections as well. The Conservative party (basically the Republicans, but Canadian) are the incumbent party and were all but assumed to be calkwalking their way to another win this fall, but the economy has really put that in question.

I'm really not surprised we're in the position we're in. The market goes up and the market goes down, and we're long overdue for a major correction after the heady days of the Clinton administration. I think the correction is going to be extra painful this time because things were going SO good for so long, but what goes down will eventually go up as well.

That said, there are going to be people directly affected by this. I just gave to my local food bank yesterday, and you should to, if you can afford to.

[rudyinparis]

MelanieTM, holy cow, how scary. I feel so sad for you and the other folks living in your area. I hope you're able to leave, if that's what you want (sounds like it is.)

Just last week I found out a largish number of people in my department no longer have a job here in 2009. I mean, people are getting laid off right next to me. I am expendable. I'm trying to be real Zen about my chances... truthfully, I never saw myself in this kind of setting, but have gotten too comfortable. A push could be what I need. Although that's a scary thought. A few months ago I reached out to some contacts and I know if I got laid off I would have freelance work the next day, if I wished. But no health insurance. DH is self-employed.

This next part may be smug (it is, I know) and I hope I won't come across as wildly unsympathetic, but we live, have been living all along, extremely frugally even though we could afford maybe some fancy things. What this means is our cars are paid off. We have no credit card debt. We have an emergency fund. We put money into our savings account every month. Etc. When we bought our house 6 years ago, we couldn't believe the amount of money we were approved for. It was thousands and thousands and thousands more than we could afford. We stuck to our home-buying budget, even though it was hard, and the bank was really trying to throw money at us. But we knew better. So I feel now that as long as we keep our heads down, and stay real calm and keep putting one foot in front of the other, I think we can weather this. I hope so. It's a scary time, a very scary time. I feel a lot of fear, mostly for my kids, and their future. I also feel very lucky to have a partner that shares my financial values and my world view, so we don't have conflict there. We have conflict in other areas. Like Halloween costumes and how he never changes the damn cat litter. Bastard.

[flea]

Also, if you're interested in learning more, I suggest Paul Krugman (this is priceless: http://krugman.blogs.nytimes.com/2008/10/08/a-morning-thought/) and This American Life has done some magnificent episodes recently (http://www.thisamericanlife.org/Radio_Episode.aspx?episode=365)

[Joy]

I would totally call and ask if you could get your interest rate lowered, and if the first cust. svc. rep you talk to says he/she can't, ask to speak to a supervisor, and if they say no, ask to speak to their supervisor, etc. And be as polite and sugar- coated as you can, build as much rapport with the people as you can, etc. Catch more flies with honey, as they say. My dh, the eternal salesman, is much better at this kind of thing than I am, and it's worked for him in the past.
Our situation is pretty good other than the fact that the commissions from dh's sales job aren't what they've been. My home daycare business is as good as ever... it's a blessing in more ways than one. Luckily, we've been living beneath our means for a while and have a good savings built up, but I'm worried about our (very small already) investments, savings for college and retirement, and watching our balances go down instead of up. Makes me want to sell them and stuff the cash in the mattress...

[Julie]

I'm a teacher with 11 years in my district, so I feel my job and salary are safe. My husband is a realtor, which means his income has taken a significant drop. We are selling our house. We priced it aggressively (read: at a loss, lower than other comps in our area). Totally remodeled, beautiful, and big. No one is biting. No one has written an offer. We NEED to sell this house b/c we cannot borrow more $$ from our families to pay our mortgage. I"m hopeful once this banking stuff gets sorted out and the market evens out, people will be out there looking for "deals". But loans seem nearly impossible to get these days. As someone who bought her OWN house at age 30 alone, I'm looking at the possibility of renting again because WE might not qualify for a loan in these times.

Depressing. Worrisome. And 2nd baby due in Feb.

But thank goodness I have health benefits and a secure job. I am very grateful for that. The rest of the stuff will work itself out.

[heather]

I am not too worried about my family's situation. My husband and I survived the tech-bubble-burst of 2001 so we learned to live frugally, plan ahead, and SAVE $ (well, we were inclined towards those behaviours before, but seeing coworkers get laid off and companies go bankrupt really drove the point home). We have worked hard to pay off our debts and we are careful to live *below* our means.

I do worry for friends who are living at or above their means. Interest rates don't have to go up too much for several friends to loose their houses.

[Maria]

I'm so scared. Single mom, moving in TWO DAYS 300 miles away from the family farm where I've been living the past 2.5 years into a more expensive apartment. There are lots of good reasons to move, but I know I can get evicted from the new place and while my rent here isn't cheap, if I don't pay it I know I won't get evicted.

I've been living almost completely on the stock market for the past couple of years, work has been drying up and I am terrified I'm going to lose everything and be unable to support myself.

[Moxie]

No, I'm just asking about lowering my rate. Not my balance--that would be a magic fairy-world in which unicorns play alongside flying pigs. I've had calling to get my rate lowered on my list of things to do for a few months, but thought this morning that my procrastination might have paid off if I can get them to go lower now than I would have had I called a few months ago.

[Moxie]

Oh, and Jan, post about snowballing, please. I know what it is, but it would be helpful to people to have it laid out here in the comments, I think.

[Michelle]

Moxie, you might have better luck getting your rate lowered now. But most companies have a maximum that they are will to reduce the rate at any one time. I've done this a couple times and they generally will lower the rate and then say to call back in 6 months and they will consider lowering it again. Which is a pain but if you keep after it, you can get a much more reasonable rate.

Someone above made a good point about the food banks. I think a lot of families are going to really struggle this winter. So I've been picking up a few extras when grocery shopping. Basically shopping the sales so when Annie's mac n cheese was $1 a box, I bought 5 boxes to donate to the food bank.

Also I have had good luck selling odds and ends on ebay or Craigslist. Someone is coming to pick up last year's Winnie the Pooh costume on Friday. It's only $20 but that's another $20 in the savings account.

[ivymae]

My husband works for the US Gov in a job we both hate, but right now we are both glad that there is little-to-no chance of his job being cut. I'm currently a SAHM, so if he were still with his previous company (a small airlines that is cutting jobs like crazy) we would be in real trouble.

And about credit cards, do call, because we recently called both of ours, and my husband talked them down to a single digit from a hiiiigh rate. We missed a payment over a year ago and have been paying out the nose for that mistake, but have paid down the cards in the last year. He told them both that we were looking at closing our account all together if we couldn't get a better rate, and they both perked right up and offered a great rate.

[cat, galloping]

I'm relieved to see you clarified that you meant lower your rate, not your balance! By all means, call and ask. Or do a balance transfer to a 0% APR card and pay it off over the introductory period.

Here. I just did a quick search for Balance Transfer and found lots of cards that will give you 0% for 12 months: http://www.creditcardguide.com/balance-transfer.html

[rudyinparis]

http://www.daveramsey.com/etc/cms/index.cfm?intContentID=4055

The snowball method is a Dave Ramsey thing. He's pretty good for common-sense financial advice. Definitely worth reading. He does quote scripture, but he's not religious-based, just kind of guided. We used this method to pay off DH's vehicle.

[Cloud]

@rudyinparis- I work in biotech, which is an industry in which you can be laid off at any time, regardless of what the wider markets are doing. I've been through several rounds of lay offs, both as a survivor and someone getting laid off. I can tell you that it is not as horrible being laid off as you think it will be when you're a survivor. It is scary, but if you've got your financial house in order (and it sounds like you do), you'll be fine. You'd use COBRA to keep your health insurance for awhile or, if you're healthy types, shop around and buy individual insurance. To me, the worst thing about it all is when you first realize how expendable you are- no one is irreplaceable. But once I made peace with that, I decided that I like what I do and I like working in this industry, so I'd just plan for the lack of job security.

We've made pretty much the same financial decisions you did, so I also can't really complain about our finances. But it is interesting how even so, we've changed our habits and are buying less and saving more. Part of this is that we're thinking about having #2, and there is a reasonable chance that if we did so, I could be laid off while heavily pregnant- which would greatly complicate looking for a new job and would mean we'd need to survive without my income for quite a while. In my line of work, you need at least 3 months, probably more like 6 months, to find a new job. So we're hoarding money, trying to convince ourselves we should take the leap. Oh, and I'm still on the fence about the second baby idea because the first baby (now 18 months old) is still a crappy sleeper!

[anonymous just this once]

My brother's a contractor. He and his wife have 5 kids (two sets of twins = 4 kids under 2!) so they have to move to a bigger place.

They spent this last year looking for a house they could afford. My dad is postponing retirement, took all of the savings he could, and bought them a house that had been foreclosed on.

The house is a MAJOR fixer-upper, and since my brother has his crew working on HIS house, he has to make payroll without anyone paying him.

Sister-in-law had to ask him to stop working one day so he could take a load of scrap metal to sell, so that they could get some cash so that she could fill the tank on the minivan, so she could take eldest to Kindergarten. It sounds like the Great Depression, doesn't it?

Meanwhile, my husband makes a lot more money than my brother, so I feel guilty about not helping out more. HOWEVER, we live in different regions of the country. Salaries are higher here, but instead of $20,000 getting you into a "handyman's special" starter home, you need almost half a million to get into a reasonable house or condo where we live.

Suddenly our plans have changed. We bought a smallish house that we planned to do some cosmetic remodeling on, and turn around and sell in 2-3 years for a big house with another bedroom or two before having another baby. Now we're looking at being in this place indefinitely, figuring out how to fit future children in the house we have, and canceling our remodeling plans. And my husband is sticking with the job he's not totally happy with, just because he doesn't want to change jobs and be the last one hired. If anyone's even hiring at all.

Now, if someone can figure out how to live in the middle of nowhere while pulling down a major metro area salary, please let us all know!

[Cloud]

@anonymous just this once- I know you were joking about how to pull down a major metro area salary and live in a cheaper place, but I actually know several people who pulled that off. My former employer was a contracting company (IT and science, not construction). A lot of our projects required remote work- the customer was in one state, we were based in another. So really, no one cared where you were based. Some people would move and take their jobs (with current salaries) with them.

The downside is that you have to be willing and able to do some travel- usually about once a month.

And since you aren't in the office getting face time, you have to be pretty proactive about lining up the next project when the one you're working on finishes. It wasn't for me (I like living in my ridiculously expensive metro area too much), but it worked well for some of my colleagues.

[anontoday]

I work in the hedge fund world so I think this area of the financial world (with the exception of the brokerage firms going out of business) is being hit the hardest right now and in the near future. All the government knee-jerk reactions have affected the way we do business. We don't do anything evil (like the journalist might imply) - we are just managing pension assets in a more risk-adjusted/hedged way. The new rules and credit tightening is making it almost impossible to do this.

So, I'm terrified that my company could go under; that we'll lose lots of clients; that the hedge fund industry in general will shrivel up substantially and so the ability for finding a new job if my company goes under becomes rather slim. No job means no house. I know it is just a house but I'm so scared to go there.

Either way, I think this is going to take many months (if not years) for this to bounce back. In the meantime, all the being disciplined and putting money in my retirement account was a waste. Those totals have been cut in half - which means I could have put in half as much and not invested it and have the same balance I have today (which is now not very much). Ugh. Frustrating.

[Rosemary]

Australian here. Our economy is actually very strong but we have a saying "When the USA sneezes, Australia catches a pneumonia." The instability caused by the US mortgage crisis (which is how the rest of the world was reporting it until US merchant banks started going under)has sent our share market into a nosedive. But, we haven't seen the same general level of nervousness here that it seems that is in normal folk in the USA.

When I lived in the USA, it always surprised me that so many Americans were really shocked to discover how much impact local US politics could have on other countries. It made for some really fruitful, interesting and valuable discussions.

For those of you with all that stress and worry about your jobs, houses and finance, I wish you a few moments of peace during your day, and I hope these difficulties are short.

[toomuchstrong]

I had a very interesting conversation this past weekend with an economist fairly high-up at the FED and his general advice for me was to tighten my belt and to be very frugal. He feels that it will be at least 2 years until we can even understand the ramifications of the current financial crisis so now is the time to stop spending. He also said that the entire credit/lending process will be completely different once things get sorted out. Basically, our financial institutions will never be the same again which is probably not such a bad thing.
This piece of advice has made me sit up and take notice because we are on the verge of having our second child and I know that usually comes with some fair amount of spending. Our house is small too so it would be nice to be able to start dreaming about expanding it in the near future. However, my husband and I have completely adjusted our expectations for the next five years now.
Here are some very basic adjustments we are making to our near future plans:
-no major house projects, only minor repairs which will hopefully actually help us save money in the long run
-no new furniture, clothing or toy purchases for either children. we now only buy used things and scavenge for as much free stuff as possible.
-possibly canceling vacations for our family next year. we usually visit our families which cuts down on cost, but now we have to buy 3 tickets since our 1st child is already two so we may not be able to afford the travel any more.
-convert to a fixed rate and pay off our line of credit as soon as possible.
-cancel home phone service. no need since we have cell phones.
-stop going out to eat. we have cut this down to a minimum already, but after the second baby is born, this will turn to zero.
-find more free entertainment for our kids. we are already pretty good at this, but we need to branch out more in order to take advantage all that our city offers (which is a lot!).
-my husband is changing jobs so he can make more money. i know it's counter-intuitive in this economy but in his profession, it's the smart thing to do. plus they will give him a car allowance which may actually help us pay off our new car much faster.
-conserve energy! dress warmly and keep the heat down. we've done a great job with the AC this summer so i'm hoping we can do the same with the heat this winter. do the same with water. both heating and water costs are going up considerably (again).
-we may cancel cable in the spring.
-i only serve our 2 year old what we eat thereby saving us lots of time and money in having to cook extra meals for her.
-i plan on breastfeeding baby as long as possible.
-i plan on using cloth diapers for this baby.
-all the clothes for #2 are hand-me downs. hopefully we will only need a handful of things to purchase. i will shamelessly borrow everything that we don't have.
I'd like to say that we are going to try to save more, but we can't do that until we pay off more of our debt.

[danish]

Hi, first of all I am so bummed that I cannot meet up with my fellow Atlantans tomorrow night! I don't know if I have ever posted here but I am a faithful reader.

That being said, I am an analyst for a merchant credit card processing company. So if your business accepts credit cards from its customers, you would pay us a percentage of every transaction. My job is to keep people from leaving to go to another processing company. We have been instructed to pretty much do whatever it takes to keep the business. It is very difficult and soul-sucking work. I would think your credit card company would be happy to reduce your interest rates, and you wouldn't be the first to ask about it.

My personal crisis? My husband has been in prison since April 1 of 07. He was caught with drugs a couple of years before I met him. (He had straightened his life out after that and before we met.) We have a 2.5 yr old boy. I made more $ than him before he went away (he is tentatively supposed to be home in December so I am just beside myself waiting for this to be over.) Even with 2 raises this year, I cannot cover our costs without having to dip into our savings every month. I am deeply concerned about our investments too. We have a small condo, and we would love to be in a house. Not sure that I will be able to sell our condo and upgrade any time soon. The ramifications of his prison stay are tremendous for us. There will be major fines to pay, and the loss of his salary for all these months has been very difficult.

I bought all of our son's fall clothes at consignment sales and Goodwill. I am looking at wearing the same clothes this fall that I have been wearing for 2-3 years and I would really love to update my wardrobe too.

[jlg]

@toomuchstrong Thanks for posting the advice from the economist and the steps your family is taking to be more frugal.

I am a little worried about the current crisis, mainly because there are so many unknowns. Will our jobs be safe? Will gas/fuel prices spike again? How much more is my grocery bill going to go up? What's going to happen to our retirement investments?

I work hourly part-time. For now, my employer allows me to work as much as I want, so I will be putting in extra hours and socking the money away in savings. On top of that, we will be lowering the thermostat, shopping the thrift stores, buying meat on sale and freezing it, cooking with the crock pot and eating lots of leftovers, cutting back this Christmas -- anything we can do to build up our emergency savings.

I am especially worried about my parents. They are close to retirement age with health problems, medical bills, and debt. I'm sure their retirement accounts are taking a big hit with the instability in the markets.

[SarcastiCarrie]

To the people who want to lower their balances...my secretary did that. She called the credit card company, told them there was no way she could pay it off (series of very bad money management decisions) and that she would file for bankruptcy if they didn't lower the balance (as in, forgive part of the debt) so that her monthly payments would be lower. They did it, BUT she got a huge surprise at tax time because that debt forgiveness counts as income, and you are taxed on it. She was not in any position to pay a tax bill. Fortunately, it just wiped out her refund, but it could have been worse if her withholding had been closer to her actual tax bill.

rudyinparis - We're like you. We live conisderably below our means, and we were approved for not just thousands of dollars in mortgage more than we wanted/needed, but tens of thousands, actually hundreds of thousands. I never thought I would be comfortable with that level of debt and that kind of payment and I wondered who would borrow that much.

The only thing the economic slump makes me want to do is buy a new car with 0% interest and awesome rebates. Oh, and I look at my 401(k) balance and note that although I keep adding money, the balance keeps going down.

We've made a host of decisions over the years that aren't fun, but do afford us the luxury of no worry. Some people would not be comfortable making the tradeoffs we have, but the peace of mind is worth it to us. (Decisions like what major in college, how much to borrow for college, where to live, jobs with big, soul-less companies with 401(k) and health care, driving 10-year old but paid off cars, wearing second-hand clothes, grocery shopping at the cheap store where you have to bag your own groceries, having two working parents and day care instead of an at-home parent (although we did that for a year or so), vacationing in Wisconsin, Michigan, and Missouri instead of Disney and cruises.)

[Jen]

I am freaking out! My husband and I bid on a house a few weeks ago, our first home. We have been extremely careful about our money and keep close track of our budget, but this house is going to change our lifestyle. It will be fine as long as we have jobs, and my job is pretty stable. DH's job, though, is just a normal job--as many have pointed out anyone is expendable! I am so terrified that we've gotten ourselves into this house now, with the economy crumbling. Plus, we are actively trying for a baby. I am considering putting that on hold because I'm worried about our money, which may be a moot point anyway since I'm so stressed I doubt anything will happen. :(

I'm 30-ish and struggled my whole life to save money and build up a savings. I'm so scared that it could all go away in a second!

[Neener]

The economy has not affected us at all -- at least yet. But, I have to say we live well below our means. We have no debt except our mortgage and a goal to pay that off in about 4 years. Our house payment is far below what the banks said we could afford. We have always lived on one income, even when we were both working. I stay home, so day care is not an issue. If my husband were to lose his job, I could be employed by the next day as my degrees/career is hugely in demand. I could not replace my husband's salary, but we could make ends meet and have health insurance. God has richly blessed us. The best place for financial info IMO is Dave Ramsey http://www.daveramsey.com/

[Presley]

Honestly, I can't say that I'm at all worried. Not in the slightest. In fact, I'm so not worried, that I quit my job last week. I then put up a resume on monster (on friday), and have received about a bajillion calls since then, and have several interviews set up.

I think the media is creating a huge hype about this, and that people are needlessly worrying. Really, the fact that the Dow went down 500 points yesterday doesn't effect me in the least bit. I have yet to see an real evidence, in my personal life, that says this "crisis" is actually happening.

As long as you haven't over-extended yourself in the past, then you should be fine. If you have over-extended yourself when it comes to outstanding debt... well then, that's your own fault, and how well Wall Street is doing has very little to do with that.

[Margot]

Well, I work for Washington Mutual, which just got taken over by the Feds, then bought by JP Morgan Chase. So I'm almost certain to be out of a job soon (not to mention that my 401k is losing $$ by the minute and my Wamu stock is worthless). I also live in the SF Bay area, which means I'm paying an insane amount on my mortgage, for a home that is now worth 20% less than what we paid for it 2 years ago. And I have a new baby. And the California unemployment rate is on the rise. So yeah, I'm a little stressed.

I thank god that my husband's job is secure, we're all on his healthcare plan, and that we have some savings and no credit card debt. But I'm nervous about finding a new job quickly. I am 50% of our income so I don't have the option of not working, or even working at a moderately reduced income, as we need every penny we can get.

[Johanna]

@Presley: Oh my god, seriously? I take no issue with the account of your individual situation, but to say that others aren't/shouldn't be feeling this crisis? Oh how wrong you are.

I am seriously lucky in so many ways, but even I feel it. My husband works for Ford and is ducking layoffs left and right. If credit lines 'freeze' Ford may go bankrupt and my husband will either be layed off in short order or take an extreme (30%? 40%) pay cut.

My 403b (the non-profit world's 401k - I work at a University) is shrinking. Hard-earned money over the years put into an awesome 200% matching 403b is just going away. Thankfully, retirement is decades away. Others are much closer and need that money now.

It is harsh, unrealistic, and unwise to assume that folks with debt are getting what they deserve, as you seem to be saying. Life's not that black and white, and not everyone is lucky. There are millions of decent people who have made good, bad, and borderline financial decisions that have turned out to be deadly in this moment.

[jessica]

What I want to know is...

WHY did the Rent Stabalization people vote for a 4.5% increase in one year leases and a 7.5% increase for 2 year leases?

I'm still steaming mad about it. How could they in this ecnomy.

How dare they do that.

[Slim]

For those of you feeling discouraged by your shrinking retirement funds (or other investments), I offer the following nugget of delayed-action reassurance, from a columnist for Money: You make most of your money in a down market. It just doesn't feel like it at the time.

[enu]

I am mostly worried about other folks right now - very worried. A lot of futures were planned in my area based on ever increasing home values. And a lot more people were living fairly marginally before all this happened.

Not so worried about us, just a totally selfish despair that after almost a year of cancer treatment and no vacation since a long time before that, we oughtn't to spend money on that sort of frivolitry now, but I "need" it desperately, I am so tired and worn out. I feel like if I can't get away for an extended (longer than a 3 day weekend, anyway) period of time and stare at the ocean I'll never feel myself again. I may be kidding myself that the ocean will "cure" me, but it's always done me good before!

[violingirl]

I am somewhat worried. We've been really careful about money for about 2 years now, our debt is almost paid off, and we stayed in our tiny townhouse to make that happen. Thing is, I teach music lessons and that's considered an extra for many families. If things get tight I'm sure music lessons will be one of the first things to go for some families. I completely understand, but at the same time, that's my income.

My husband is going to school full time and working a crappy job installing cable, paid by the job. We're trying to get him through school debt free, but if either of our work hours drop down he'll have to either stop school or hope for a student loan which he probably won't be able to get at that point.

Hoping we'll be okay here.

[Cloud]

I want to second what Slim said about the shrinking retirement funds. Mine are way down, too, and while that isn't a lot of fun to see, it is NOT one of the things that worries me right now. I won't be retiring for at least 20 years, probably closer to 30. The shares I own in the retirement fund aren't disappearing, they are just declining in value. Chances are extremely good that they will gain value again before I am close to retiring. I think of this market downturn as a time when the amount of money I'm putting in to my retirement fund is buying me more shares per dollar. Which will probably mean good things in the long run.

If I were retiring in 5 years, I'd be a lot more worried. But I don't plan on having so much of my retirement savings in stocks when I'm that close to retirement.

I also want to second Johanna. As I posted above, I'm feeling pretty fortunate in my personal situation. But that doesn't mean that I don't worry, and it doesn't mean that I can't see that there are other people hurting. Some of them made bad decisions, some didn't. Few of them really deserve the consequences they are facing now.

In my personal life, I worry about being upside down on my mortgage. We knew it would happen when we bought, because we knew the market was going down, but we needed more space. We can afford our payments on our fixed-rate loan... but it still makes me feel a bit exposed, if you know what I mean.

From a broader standpoint, I worry about the people who aren't as lucky as I am. Who couldn't afford COBRA if they lost the job that provides health insurance. Whose insecure jobs don't pay as well as mine, so they weren't able to build up a big enough safety net. Who maybe took a little calculated risk trying to get into a better neighborhood for their children and had that go bad in a big way.

We rely so heavily on individuals giving to charities to make up our safety net in this country, and with even those of us who can afford to give to charities feeling that we need to save more and look out for our own families first... well, I worry that a lot of people will be hurting in a big way.

[Cloud]

@enu- I think you should go on your vacation, and think of it as your contribution to improving the economy.

[rudyinparis]

Enu, have a wonderful vacation. Say hi to the ocean for me. This strikes me in no way as being frivolous. It's preventive care, right? And isn't that one way that we're going to transform the health care industry? By investing in preventive care? So there you go.

Slim's right. I know that growing up I always heard my parents talking about the Carter-era recession and how it benefitted them. Something like, "Blah blah blah blah interest rates blah blah blah." Note to self: call parents and ask about this.

A great conversation today. Lots of viewpoints. And thanks for the reminder to give more to the food shelf.

[Bella Spruce]

I'm really surprised how many of my peers don't seem to understand the scale of this crisis. It will affect everyone besides the very wealthy, whether we've done anything to deserve it or not. It's not an exaggeration to say it's the meltdown of the current western financial system. It's like watching a car drive over the side of a cliff, complete with narration from all the people who called it a long time ago. (e.g. see today’s entry at http://www.rgemonitor.com/blog/roubini).

Tightening the belt is never a bad idea, but it's certainly not going to be enough when everything grinds to a halt and one's employer can't make payroll because the bank can't offer a loan, etc. The people I really feel bad for are the boomers who have been dutifully saving for retirement all these years only to find they've got nothing to retire on. While I imagine the markets will stabilise enough in my lifetime to allow me to retire eventually, my parents are probably out of luck.

As a matter of fact, that will affect me too. My parents still have kids to send to college and retirement to pay for. It's not unreasonable to suspect that I will find myself putting siblings through school, supporting my parents, putting my own children through school, and trying to save for retirement simultaneously.

Yup, this is going to have long term repercussions.

[Katie B.]

I hadn't been paying much attention to it all... but I think I need to now. And I think we need to make sure we don't get pregnant again nearly as soon as I wanted to! We just bought a house (pretty low, fixed rate). We had to buy a car a year ago. We have NEVER had extra, and DH is working on switching careers in such a way that our income will be less for a while. AND we're looking at buying a second car (but a much cheaper one this time) so that I can work and have more transportation freedom for taking care of Little Girl (once I get my license >.<). However, I'm going to have a little income trickling in, as I've started babysitting a friend's daughter (so she can go work a few hours at a crappy job), and I have an interview in a few days for a part-time on-call position. Luckily, I can ask my MIL for child care help (which she's delighted to provide), even if she doesn't believe the same things about said care as me (I believe in neither CIO nor giving Coke to infants *sigh*). But if it's what I have to do, it's what I have to do.

So, I'll work harder on economizing. No more new baby things! Much as I want to accessorize.

[mo]

@Presley - good for you for being lucky enough to pick an industry that isn't affected by this financial crisis. Anyone that currently works in the financial industry (and that is 100s of thousands if not millions) are at risk. The folks at Lehman (20 some-odd thousand) no longer have a job - some of those may be the sole breadwinner in their family. They most likely live in NY where the cost of living is pretty high and also now where there are a lot of unemployeed brokerage folks in the same situation, a lot of unemployed investment advisers and hedge fund managers (probably 3/4th of all those folks are based out of NY). Good luck with them finding a job no matter how great they are at what they do. No brokerage firms are hiring. Was that a poor investment decision on their part to work for Lehman? How in the world were they to know what was coming (really, only the high ups knew that - if more knew what was coming it would have been public knowledge before Sunday).

Even if they had no debt, lived within their means (based on their salary), and only bought a house they could truly afford (not what the bank said they could afford) and had some savings (most advisors recommend 3 months of income), without a job and no prospect for one in the near future, how fast will they be going through that savings. They'll need to sell their home (at depressed prices). Most will land on their feet eventually but still so unfortunate. I know some people that work(ed) at Lehman since I'm in the financial world and I really feel for them - they were just the unlucky joe-shmoe as it could have just as easily have happened to the guys at Bear (lucked out by being bailed out in a way by the Feds), AIG (again bailed otu), or Citigroup, GS, etc.

Maybe try to have a little empathy while you enjoy your perfect situation. My retirement fund is lower by 30-40% since the beginning of the year. Luckily for me, I'm young enough that it will probably bounce back. Many that are only 5-6 years out aren't so lucky. Keep in mind many of the companies going bankrupt were rated AAA so they were considered safe investments.

I am scared each and every Sunday now to see what new announcement will be made by some unfortunate bank/financial institution. Or as Lehman makes an announcement as to how little of the securities/monies held by them (as a brokerage firm - like a bank) will be returned to clients. Many of those clients are pension funds by the way.

I'm trying not to panic and do too many what-ifs. It's hard. Some of it is out of my control at this point and I'll just have to ride the wave like everyone else is doing and hope the wave doesn't wind up wiping me out.

[Rbelle]

On a broad level, I find the crisis fascinating to watch, in a train-wreck sort of way. On an individual level, nothing going on is affecting my husband or I directly - yet. However ...

-I worry about our plans to buy a house now that prices have dropped. It's probably the only way we can afford one where we live, but will we get a decent loan? Should we do it when we'd planned (this winter) or wait another six months? I have high, high hopes that in 5 or so years, we'll be able to move closer to my family (from very expensive SoCal to very, very expensive Bay Area), but if we buy a house now and it doesn't appreciate, will that even be an option? Especially since I want to quit and go freelance once we have kids, which will reduce our overall income?

- I worry about our rent going up. We currently live off of one income (I know, lucky us), and are saving as much as possible of the other. If the landlord raises our rent when our lease is up at the end of the year, it could affect our decision about home buying, and ... well, see item one.

- I worry about my sister and her family. She's a SAHM, he quit a crappy job a year or so ago for one that pays as much but has no benefits and is only part-time. If they cut his hours back any more (and he's in environmental contracting, so it's entirely possible in this economy), they will be forced to dip into their savings. Baby number four is due Christmas day.

-I worry about my husband's job. It's currently very stable, but he works for a company that gets a lot of city contracts. If those cities are slashing their budgets, it could (but might not) affect how much work my husband's company gets, which could affect his chances for a promotion this year, and whether the company will expand in the future.

-I worry about friends of ours who bought at the top of the market, and now owe more on their teeny, tiny condo than it's worth. He works for several different community colleges, and any one of them could cancel the adult ed classes he teaches at any time. He's trying to refinance before his *prime* ARM readjusts, but with credit so tight, I don't know if he'll be able to.

-Finally, I worry that we'll make one financial misstep in this crazy economy, and I'll be stuck in my hateful, hateful job for the next 10 years.

I know that we are so, so lucky even to be employed, and to be able to save as much money as we have without denying ourselves a few little luxuries. But that doesn't mean it couldn't all shift on a dime, and that worries me most of all.

[professor mama]

I feel okay with our situation. We both have stable jobs in academia with generous benefits. And while tuition is on the rise and salary increases are frozen, we're managing with a reasonable mortgage, very little credit card debt, and good savings. We're cutting back on frivolous things like eating out, and we had a second boy who doesn't need anything new. I do tend to spend $$ on new, high quality clothing for boy #1, but I only purchase a few items that will wash well (read twice per week) and will hold up as hand-me-downs, so I don't stress too much about clothing expense.
I am too concerned about others who may hurt more than us. We recently had a baby shower for the new baby and got a lot of things we didn't need. I took it all straight to the homeless shelter, and I bought essentials with the gifts cards we got and donated them to the shelter as well. And, we're really, really going to limit Christmas giving within our family this year.
Oh, and I don't even open my retirement statements anymore....

[Carla Hinkle]

@Moxie: asking to lower your interest rate is a good idea, but why not transfer to a new, 0% rate card? There are lots of cards that will do no interest for a while.

[Sky]

I'm in Ireland and this country is now officially in recession. All of the Irish banks have, this week, been given a bail-out by the Irish government and savings in these banks have been guaranteed up to 50,000euro.

That is something very important for everyone with savings to look at - if your bank goes bust, how much is your government guarantee of savings? For instance, if I have 100,000 euro in an Irish bank in a single name account (not a joint account), then I will only get 50,000 euro back if the bank fails. With banks going bust/nationalised one after another, if you have hundreds of thousands of dollars in one bank, you really need to check out how safe it is.

Since my husband and I met we have been living well beneath our means, but we are going to be doing some belt tightening. As well as phoning your credit card company for a better rate, I would also suggest phoning your car insurance/house insurance/life insurance etc. I do this each year and say I have been offered a better rate by another company but I am impressed by the service of my provider so I am giving them the opportunity to match the rate/lower price. It always works.

I am now eagle eyed for food 'buy one get one free' offers and plan on breast feeding baby no: 2 as long as I can. Next year I plan on planting more vegetables in the garden and visiting 'pick your own' farms to pick and freeze fruit and veg. Meals out are now very special occasions.

Unless my husband loses his job (please God, no!), I think we will be ok, but I am making it my job as a SAHM to help us live well within our financial limits. I am more worried for my parents, who are trying to sell their house in the UK to buy a smaller one and free up money for their retirement.

According to an old friend who used to work in the Financial Regulator, the financial system will change permanently. Easy credit will no longer be available. Personally, I reckon it will take 5-10 years before we get back to where we were.

[anotheranon]

My DH works in financial services, but luckily, his job and his employer are on sound footing, at least for the next 2 years or so (even if things continue to worsen). It is the consensus of everyone he talks to that this is the start of a 2-3 year depression/recession, although the Fed's actions yesterday in guaranteeing commercial paper and the giant bailout package, once it gets going, may actually work as designed, to soften the severity and the duration. And for those with cash to hand, the next year or so will be a once-in-a-lifetime investment opportunity, like the Carter years recession that a PP mentioned.

We moved our 401k holdings into Treasuries at the beginning of the year, so thankfully, have averted the losses that so may are suffering. We also have lived a little below our means for some time and since we are not planning to sell our house anytime soon, we are not terribly worried, as we can weather out a bad economy - for a while. If things get REALLY bad - DH loses his job & can't find another (he is the sole income earner), then we would be in trouble, after we go through our 6 months living expenses savings. It's unlikely we could see our house for what we paid for it. I do not even want to think about this scenario. I guess we would take the tax hit and cash out some of our 401k. We'd still have 20 years or so to build it up again.

I am especially concerned for my mom, who lives on her Social Security income - gas and food costs have risen 15-20% where she lives (rural Louisiana) and she just doesn't have the extra money, so she has to cut back. We don't have extra cash on hand to help her, and she was never prudent with her finances and so did not save for retirement. Yep, it's her own fault, but it really hurts to hear your mom say she's eating peanut butter crackers for dinner the 3rd time that week. I think she will end up being one of those who goes to the food bank that some of y'all will be donating to.

[Cathy]

Enu - I think it's your patriotic duty to take at least a little vacation. :^)

I think we're OK - only one car loan, house is fixed rate and not bad, cc debt reasonable, jobs pretty secure.

I worry though, about all of the for-rent houses in the neighborhoods around me, the ladies at my daughter's daycare (is semi-expensive daycare going to be one of the first things to go?), family and friends who either bought a little more house than they could comfortably afford, have toddlers & college loans at the same time, work in the banking industry, have just retired, etc.

My husband just had to give his little sister a talk about not freaking out about her husband's 401k value dwindling. Buy low, sell high.