I’m sure by now you’ve heard of President Obama’s PAYGO approach to spending. This article on CNN this morning caught my eye. It’s the same article as yesterday but the title has changed. Critics Question ‘Pay-as-You-Go’ Approach; why exactly? Do they own or have stock in credit card companies? 
Don’t think for a second that I’m just being opinionated or pulling these ideas out of thin air. My hubby and I have had our fair share of financial troubles. We haven’t had a credit card since 2000; that’s almost 10 years!
When we did have credit cards, we were like so many other people in America. Buy it now with the card, pay for it by paying the minimum payment on our credit card. We lived that way for the first 8 years of our marriage. Then we woke up and realized that we were digging ourselves so far into debt that we’d probably never see the light of day again.
What was our wake-up call? We couldn’t get approved to rent an apartment. A basic, low-cost living, 980sqft $1,000 a month apartment was out of our reach because we’d shot our credit record. So there we were, living in a townhouse that was going to be sold within the next 8 months; hubby made too much to qualify for cheaper apartments and our credit record disqualified us for the apartments we could afford. One of the apartment managers said, “To be honest, your credit record would look better with a bankruptcy. With a 6 month bankruptcy, I could approve you.”
We talked to a lawyer and filed bankruptcy. It wasn’t the ideal, it wasn’t what we wanted to do. Our hands were tied to the time frame we had. We had effectively dug ourselves into a hole that had so many little tunnels in it we couldn’t get out in time to get an apartment to keep a roof over our kids’ heads.
During the credit rebuilding process, our lawyer recommended we get 1 credit card and keep it paid down. That’s what we did. The card company ended up canceling our account because we never kept a balance on it Since then we’ve been fans of the pay-as-you-go method!
What’s wrong with paying up front for things you “want”? We have 2 items keeping us in debt; vehicle and house. The two things we couldn’t necessarily do without until we saved to buy them outright. Does that mean our kids have to “want” for things until we save the money for it? YES! Does that mean they learn the value of a dollar? Yes. They understand these things and are ok with it. You know how a lot of teenagers look forward to having their own credit card; or borrowing mom and dad’s? My 15 year old daughter (who loves clothes, shoes, makeup and other girl things) asks when she can start her own bank account because she’s found a couple of banks that offer decent interest rates while her money sits there.
So again, I have to ask: What’s wrong with PAYGO? Our nation has relied on credit for far too long and look at the nice little recession and the issues like foreclosure and repossession that go along with it. I wonder how many people can honestly blame their credit cards for their financial woes? In all seriousness, our household’s financial situation is improving. We’re caught up on bills and payments and even paid off a small loan. We cut up our last credit card in 2000 and haven’t looked back.
My favorite part of that article I linked from CNN: “Paying for what you spend is basic common sense. Perhaps that’s why, here in Washington, it has been so elusive,” the president said Tuesday. I almost choked on coffee when I read that 
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I’m right on board with you on this one. That’s how it should be. If you can’t pay for it out of pocket, you can’t afford to have it. With the exception of a house and car, that’s the way it should be. The other exception to this is if you are in dire straits and need home or car repairs immediately (to replace a bigger ticket item like a broken fridge or water heater or something), then credit cards and/or loans are necessary. But if it’s just something you want, like a new TV, save up for it.
I see these people all the time going to those rent-to-own places and plopping down a hefty monthly payment because their credit is too bad to qualify for a credit card or loan elsewhere. The thing about that is, if it’s not a necessary item and just something you want to have, you could save the same amount of that monthly payment each month and end up buying it outright at a store within just a few short months. Instead, they fork out a chunk of money every month to own it in a year (or two or whatever the plan is). They could have saved that money and owned two or three of the same item in a year with they amount of money they pay to “rent” it.
Those people don’t take into consideration that they’re going to be paying at least double what the item is currently worth and ending their 2-year payments in negative equity.
The stores that offer rent-to-own on small things like that cash in on the impatience of those who use their services. They have an “I want it and I want it now” attitude that ultimately ends up with them in the poor house.
The blatant abuse of credit and the willingness of greedy credit card companies to give a credit card to anyone with a job is what caused our economy to fall to its knees and continue a downward spiral.
Credit crisis? No, common sense crisis. People need to take this economic recession and turn it into a learning experience for themselves and their children. Teach them that just because they want something “right now” doesn’t mean they should go into debt for it. My kids don’t have a Playstation 3 or a flat screen tv yet. Oh the horror! They don’t even have their own cell phone so they can text themselves silly!
And if a company is in danger of failing… LET IT FAIL! This bull of bailing out failing companies to avoid more disaster is only digging us in a deeper hole. Let them fail and then let other, younger, more ethically run companies grow into their place. The poorly managed, unethical companies DESERVE to fail and be replaced.
My son has a Playstation 3 (his Christmas present this past year) and we have a nice big flat screen tv (the “family” Christmas present this past year), but both I paid for out-of-pocket. In fact, I paid for all of Christmas (gifts and dinner), out-of-pocket.
We just had our house re-roofed, too. The insurance paid for the largest chunk of it (there was wind damage), but we still had a $1,000 deductible, plus an extra $200 for an upgraded shingle style that had a better warranty and wind resistance. We paid that $1,200 out-of-pocket.
I’m 100% with you on pay as you go. Right now, I really want a new stove, but the one I want is the new double-oven range style and runs anywhere from $1,500 to $2,000. I don’t NEED it right now– our stove still has at least a couple more good years in it– but I desperately want it. However, I refuse to go into debt for it. I’ll wait until I can buy it out-of-pocket and hopefully that will be before Christmas, but if not, oh well.
I think that whole attitude is the main reason we haven’t been hit as hard by the economy. We’ve been doing the pay-as-you-go thing for a while, plus Eric and I have both been lucky enough to not suffer a job loss.
I absolutely agree on the failing businesses. I thought it was bull when it happened and still think it’s bull. Poor management and greed got them into their mess, let it sink them so people can learn from it.
My kids want a PS3 but they’re perfectly content with their PS2 right now. We also have 5 up-to-date computers with flatscreen monitors and a bunch of goodies but like you said, all paid for.
It would be tight for us to fork out over $1,000 cash for something but doable. Patrick’s still loving his job an his 30-second commute to work LOL!
While your quote about common sense almost made me fall out of my chair laughing, the line that stuck out most to me was “Asked if Obama could halve the deficit — given the recent government spending — Sen. Kent Conrad said, ‘I don’t believe so. I don’t believe anybody could.’”
Apparently Sen. Conrad slept through the entire Clinton administration. Obama has adopted Clinton’s budget. As he said today in Green Bay (I think that’s where he was) he’s not afraid to steal other people’s ideas when they’re good.
Clinton was able to dig us out of a huge hole. We were sittin’ pretty until Georgy Boy entered office. So, to say that it’s impossible, KNOWING that Obama is using Clinton’s plan? That blew me away.