Agreed. Don't want to take the thread too far off-topic, but my prediction is that probably the next big economic crisis, at least in the U.S., will be in student-loans. Millions of kids and young adults, today (at least the ones without well-heeled parents), are in hock, way over their heads, to the Government and other lending institutions, for money borrowed for tuition and college expenses. Many of them spent tens of thousands of dollars (and, yes, hard work) to get their degrees, only to find that the well-paying job they expected after graduation just isn't there...or no longer pays what they thought it would. The problem has been easing somewhat in recent months by the expanding economy, but it is still quite serious, and we are still only one step away from widespread defaults in the loan-repayments.

 

^
Hmm, i'm ashamed to say but a part of me was hoping to take advantage of that lol. Maybe i have to wait much longer than i am anticipating. Don't want to get into politics but el presidente did make some changes to Dodd Frank that may have some implications on the housing market.

 

Regrettably had to correct your post. Agreed that this is a potential landmine for the economy. But auto loans are in similarly dire straights. Either or both might be the catalyst of the next tumble.

 

This system always blow my mind in so many ways. Overdebt because you studied. You can't really understand how crazy it's for me to read this. It's like reading a forum of another planet.

 

 

Im happy with my 2 cars.

 

No problem....either way, it's a lot of money. I wouldn't want to be stuck with that kind of debt.

 

Thats a whole 'nother problem!

 

You already said, in a previous thread, that you would send your kids to Harvard Law or Medical School if that's what they wanted and they could get in. As bit points out, THAT will take some cash.

 

I'm not an expert by any means, but I think a huge problem are very low car lease rates. In fact these rates are so low that it doesn't make any financial sense to purchase used cars, unless we are talking about super expensive cars that depreciate a lot during the first couple of years. For regular cars, and even entry premium level cars, the lease rates are probably lower than rate of depreciation on a used model. It seems that everybody are driving brand new cars, I honestly have no idea where the hell are all the used off lease cars are going.

 

40% of Americans couldn't cover a $1,000 (some stats show $400) emergency. The average savings account is $16k, the median savings account is $4,300. Source: https://www.fool.com/retirement/2018...ehold-has.aspx

But not to worry, everyone has the latest iPhone (on monthly payment plan of course).

I'm in agreement with the other folks who have read about this potential bubble for the last few years and thought we would have seen it "burst" by now. I think part of what's happening is a shift in how people view debt differently these days - the "old school" thinking is avoid debt on cars, put a decent amount of cash down (or pay in full) and a short-term finance (3 years). Today's view is more about embracing debt and low interest rates and extend out the term length to leverage investment growth vs. liquidating cash and missing out on growing your principal. I'm good with that, but only for people who are actually in a position to do so.

My concern is I think a decent % of people are simply embracing these long term loans and are not actually saving/investing enough to grow the principal... often times there is no principal. We've gotten so accustomed to a world of revolving monthly payments (think of how many $9.99/month subscriptions you have) - ultimately there will be a consequence to the thought process on the higher ticket items.

 

....and big-screen TV LOL. They are usually the first thing scooped up on Black Friday.

 

That's very scary, I agree I see people complain about paycheck to paycheck yet have the latest $1000 phone. I have a $250 Motorola phone from Google Fi and I still think I paid too much. It's Android based does everything I need. But yes there's a serious problem with living way above means and people not checking on their spending habits. There are tons of options now apps and some banks do it that let you look at spending habits and they can display results in nice charts etc...I think people would be surprised at what they spend on stuff.

 

So now we're passing judgement on people based on how expensive their phones are, super LOL

 

No judgement, but I think it sometimes points to a macro-mentality that remains consistent across product categories for lots of people. When I see the stats of how little people have saved, add in their seeming inability to hold back on unnecessary purchases, add in 7 year car loans, etc. I see a perfect storm for things to get very ugly when bubbles burst.

Two days ago I heard a gas station cashier telling her co-worker about how excited she was to upgrade from her iPhone X (a year old) to the XS Max. In what scenario can a gas station cashier afford a $1,400 phone (see below...)? To me, it's all related and ties together into an ugly picture when things get bad.

Who cares that an iPhone XS Max is $1,400 when you can rent it for $55/month? Who cares when you have $10k negative equity in your current loan when we can just put you in a 7 or 8 year loan instead of 5 or 6 years and keep your payment the same? We're being trained to upgrade frequently. All of this is going to come full circle.