No Debt Plan

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At the risk of sounding heartless, I’ve got to vent about this article at CNN titled “Mom forced to live in car with dogs“.

An excerpt (emphasis mine):

A former loan processor, the 67-year-old mother of three grown children said she never thought she’d spend her golden years sleeping in her car in a parking lot.

“This is my bed, my dogs,” she said. “This is my life in this car right now.”

Harvey was forced into homelessness earlier this year after being laid off. She said that three-quarters of her income went to paying rent in Santa Barbara, where the median house in the scenic, oceanfront city costs more than $1 million. She lost her condo two months ago and had little savings as backup.

“It went to hell in a handbasket,” she said. “I didn’t think this would happen to me. It’s just something that I don’t think that people think is going to happen to them is what it amounts to. It happens very quickly, too.”

Okay. This housing bust has definitely been rough. I agree. It’s even hit the middle class that has been overextending itself (hooray negative savings rate).

But this story is purely devoted to pulling on your heartstrings for a woman who doesn’t really deserve it. That may be a bit harsh, I’ll admit that. I don’t know all of her circumstances and I do feel bad for her.

Again, she said 75% of her income went to paying rent. What? Seriously? That is more than 100% greater than what is recommended as the maximum (generally 30-36% is considered the maximum % of income to go to housing).

The story goes on to tell that she had no savings to help her when she lost her job. Well, duh! If 75% of your income is going to rent, how could you even afford gas, car insurance, or food?

CNN Money has been doing a lot of articles about the recession, slumping economy, and credit/housing crisis and how it is affecting average Americans. A lot of them are extremely overextended and used home equity to buy big toys or send their kids to college. The chickens have come home to roost.

Everyone out there should take the lessons being learned by these poor folks to heart. Don’t buy a home with 105% financing. Don’t pay for your kids’ education with a home equity loan. Don’t buy a house as an investment — buy it as a place to live. Spend less than you earn… don’t spend 75% of your income on housing. The list could go on and on.

I’m not trying to be harsh, but when you sign that 3-in-1 ARM that resets to 9% at the end of your loan, you can blame no one but yourself. You should understand what you are signing when you sign your life away.