Wednesday, June 24, 2009

I kinda of like my $4 coffees....

I like this article and think there is alot of truth to it....except for the coffee part :)

That's so 2005: What were we thinking? By Liz Pulliam Weston
MSN Money

When you're living through them, some of the most bizarre fads can seem positively normal.
If you have any doubt, check out your parents' high school yearbook photos. (Yes, your dad really did think he was stylin' in that haircut -- and that shirt.)
With time comes perspective, but I didn't want to wait 20 or 30 years to determine what the Pet Rocks and Members Only jackets of our age would be. So I asked around, querying readers on the Your Money message board and my followers on Twitter to determine what financial trends will most embarrass us in years to come.

The results are my 20 nominations for the "What were we thinking?" award:
1. McMansions: Sales of oversized houses on undersized lots soared during the real-estate boom, but the glory days of these architectural abominations may be over thanks to changing demographics and rising energy bills. Retiring baby boomers and first-time homebuyers will be the growth market, and they'll want smaller homes, not huge, expensive-to-heat starter castles. (Read about the McMansion backlash.)
2. Granite countertops: They crack. They stain. They're expensive. And yet they became the must-have kitchen accessory, as ubiquitous and predictable as stainless-steel appliances (another major pain to clean, by the way).
Was it really worth spending Junior's college fund on something that looks better than it works?
3. Remodeling as an investment: Only in a world designed by Bernie Madoff, whose investors currently pray for a return of any fraction of their principal, could remodeling be considered an investment.
At the housing market's peak, the most popular remodeling projects returned about 80 cents on the dollar and only if you sold soon after completion. Yet millions of Americans drained their home equity to pay for upgrades, redos and tear-downs that ultimately reduced, rather than built, their net worth. (See which projects do make sense.)
4. House porn: Whole evenings on some cable channels were devoted to shows about fixing up and flipping homes for big bucks. Today, you can tell which shows were taped post-bust: At the end, after the big "reveal," the would-be sellers are always "waiting for the perfect offer" to come in.
5. Cash-out refinancing: I wrote numerous columns warning you about tapping your home equity to pay off credit card debt, buy cars or finance vacations -- columns that usually ran alongside lender advertisements encouraging you to do exactly that.
If you'd listened to me, you might have enough equity left now to refinance at some amazingly low rates. Sorry, just had to rub that in.
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6. Costco closets: Speaking of weird housing trends, there was a hot one for a while in building extra pantry space to accommodate bulk purchases from warehouse stores. So you'd save $12 on your paper towels, then store the monster package in a $12,000 specially designed closet.
Now that we've discovered real thrift -- buying less, rather than more -- maybe these closets can be converted to a room for the boarder that the McMansion owners need to make their payments. (If you truly need items in bulk, you're probably wondering which warehouse club is cheaper.)
7. Zero-down financing: Saving cash for a down payment indicates a borrower has at least rudimentary money management skills. Lenders forgot how important that was, but they've since remembered.
8. Option ARM mortgages: BusinessWeek rightly called these loans "nightmare mortgages" in September 2006, just as the real-estate bubble was about to burst. But that didn't prevent homebuyers in high-priced markets from snapping up these mortgages that allowed their balances to grow over time.
Many will reset to much higher payments at the five-year mark, which could worsen the foreclosure crisis.
9. Condos as investments: In 2005, I warned you that the run-up in condo prices was "the tech-stock bubble all over again." Yet way too many people got sucked into the condo boom, paying top dollar for properties that were, ultimately, ugly stepsisters of what the real-estate people actually want: single-family homes.
As in past real-estate recessions, condo prices have fallen faster and will take longer to recover. That's something to remember if you're considering swooping in on any "bargains."
10. Credit card debt: The explosion of easy credit, starting in the early 1990s, culminated with widespread offers of 0% balance transfers and low, supposedly "fixed" rates.
Now millions are learning that whatever credit card issuers gave, they're apt to take away, and that includes low rates and generous lines of credit.
11. Birkin bags: There are many, many poster children for consumer excess. Manolo Blahnik shoes. Gucci sunglasses. Herm├Ęs scarves. But a handbag that costs more than some cars will suffice nicely. ("Retail price: $18,000. Our price: $12,000.")
If you have this much money to blow, you should be donating it to your local food bank.
12. "The Secret": This mega-best-seller insisted you could think your way to wealth and a smaller waistline.
I'm not going to knock the value of visualization, because clearly imagining your goal is a crucial first step. But the idea that you could get what you want without any effort or discipline was a clear sign the bubble was about to burst.
13. Finance plans for plastic surgery: I actually laughed out loud the first time a company tried to pitch me its low-cost financing plan for cosmetic surgery procedures. Surely people wouldn't be so dumb as to risk their financial lives, as well as their physical lives, for unnecessary and elective procedures? Shows you what I know.
Now lenders as mainstream as Capital One have "health care finance" units, although the demand has drained away along with the economy.
14. Reality TV: Speaking of McMansions and plastic surgery, our national obsession with how the rich and vapid live is going to be tough to explain to future generations.
Whether it's dysfunctional rock stars or the real housewives of anywhere, it will be hard for our descendants to understand why we wasted hours watching the conspicuous consume.
15. Mega-SUVs: Their very names -- Sequoia, Yukon, Escalade, Expedition, Hummer -- are now synonymous with excess, but years from now we'll wonder how anyone justified these massive, gas-guzzling "screw yous" to the environment and to anyone who tried to park (or drive) next to them.
16. "Underwater" cars: I'm not talking about the vehicles that drowned during Hurricane Katrina. I'm talking about the many, many cars that drowned their owners in debt. Before the auto industry rolled over and died, it puffed up profits by encouraging people to overspend on cars -- which they did, with a vengeance.
Many thought replacing cars every three to five years was "normal," rather than a huge waste of money, but incomes weren't growing to keep up with rising car prices. So more than 80% of car loans stretched beyond four years, and one in four car buyers still owed money on their trade-ins. Now that people are hanging on to cars longer, perhaps they'll discover the joys of life without car payments. We can hope. (See "The real reason you're broke.")
17. $4, four-adjective coffee: However much you love your soy no-whip mocha frappawhatsit, you've got to admit how nuts it is to pay good money for ingredients that probably cost Starbucks 50 cents.
And that's before you even consider the calorie count. (See "Death of the 'latte factor'?")
18. Massive plasma TVs: Screens that dwarf the rooms they inhabit started as a status symbol of the very wealthy. But the desire for huge screens quickly worked its way down to folks who would pay for all that acreage many, many times over, thanks to stupidly high credit card interest rates.
19. Deregulation: Conflicts of interest and allegations of fraud led to the creation of a wall between commercial banks and investment banks during the Great Depression. In 1999, Congress demolished the wall by repealing the Glass-Steagall Act that had created it.
The idea was that we had long since learned our lesson, that we wouldn't let bad things happen again and that modern finance required banks to have more flexibility to manage risk. Oops. (See "An ugly, unrecognizable recession.")
20. Las Vegas: I actually have no hope whatsoever that this monument to excess will ever go away. Built on delusions of easy wealth, soaking up resources of every kind (electricity, water, paychecks, home equity), this city has reinvented itself so many times -- including, horrifically, as a family destination in the 1990s -- to ever count it out, despite its current troubles.
But a city based on the squandering of wealth really should be allowed to melt back into the desert from which it came.


Slane/Boyer Family said...

Had to laugh at 12!!