There’s a difference between credit and debt

I’ve been getting increasingly annoyed about the mainstream media’s coverage of housing and the economy. Someone coined the term “credit crunch” and it gets regurgitated in every single story that happens to mention the economy. The problem is the lack of credit isn’t the cause of our current economic woes, it is just merely a side effect of a larger issue at hand in our society. The real cause of this recession can be summed up in another cute, alliterative phrase: debt deluge.

At no other point in history have we been in more debt. We just keep piling it on. Loose mortgage practices over the past couple years made it easier for people, who normally wouldn’t qualify to take on more debt, to bury themselves up to their ears. Unsurprisingly, people can’t handle the payments on the debt that they’ve acquired. Instead of blaming homeowners, borrowers, lenders, brokers, banks, realtors and everyone else involved in pumping up the housing bubble, the media points a finger to the lack of credit.

At this point everyone is being dishonest to try and deflect blame and responsibility for the situation our economy finds itself in. Homeowners should have known better about jumping head first into a steaming pile of debt. Lenders knew giving inflated, risky mortgages to people, who only a couple years ago would have been laughed out of the bank, was wrong. The government turned a blind eye to their regulatory role since taxes kept rolling in. Realtors had no qualms about selling houses at prices customers couldn’t afford because they got their cut and washed their hands of the transaction. The media won’t admit their “house flipping” shows helped contribute to the mess.

Debt is the root of our problem and it will take some serious purging to heal the damage that has been inflicted. Jobs in financial services and construction are going to be hit hard. People are going to lose their homes and ruin their credit history. Home prices will adjust to a point dictated by increased supply and lower demand. Government has to adjust spending or increase taxes. The next time you hear a reporter or politican read “credit crunch” off the teleprompter just replace it with debt deluge.

How open should we be about our finances?

In my post about finishing my taxes I referenced how much our refund was going to be. Sarah asked why I included the number with the implication that information about our finances is personal and should be held back from public discussion. Ever since I graduated from college and started moving towards financial independence, personal finance has become an interest of mine. Growing up I never really knew much about our family’s finances, sometimes money was tight, but we always lived within our means. That’s the number one thing I’ve learned about money and is the key to saving for the future and being financially secure.

Personal finance is an important part of our lives, so why are we reluctant to talk openly about money? It might be that we still see money as a symbol of status. We might be ashamed of debts. We might not want to feel like we are bragging or putting ourselves above others. Whatever we feel though, it is most likely tied to emotions and as far as I can tell emotions and money don’t mix. In my life I have “unpersonalized” personal finance.

But how open should we be? I’m not suggesting we announce our income and current portfolio value when meeting someone, but when talking to friends and family I’d be open to asking for and offering advice. Getting advice and working out finance problems is incredibly important considering the opposition we face in our consumer spending driven society. I think we should be open enough to discuss our tax situation and tactics we use to reduce our tax liability. We should be open to discussing how we are saving for retirement. We should be open to talking about problematic debt and helping each other eliminate it.

What do you think, are finances open for discussion or private matters?

Quick Tax Refund

I filed electronically on March 1 and my state refund was deposited into my checking account this morning. 6 days isn’t bad, have to see how long it takes the IRS.

Taxes are done!

I started getting my taxes prepared and entered into TurboTax over the past month. Now that it is March I was pretty sure I had all my forms and went ahead and filed this morning. I got free e-filing through State Farm so I should have my return pretty quick. I’ve got almost $3000 coming back my way this year; that higher standard deduction for married filing jointly really helps. Anybody else getting their hard earned money back from Uncle Sam?

2007 TurboTax Deluxe free for State Farm Customers

Updated 1/21/09: See my new post for 2008 taxes

I started looking around for TurboTax on the cheap since good old tax time is coming soon. Turns out I’m not going to have to pay for tax software this year at all and neither do you if you have a State Farm policy. Just log into your State Farm account and there will be a fairly innocuous looking “FREE tax filing” link on the left. This sends you to the TurboTax website where you can select TurboTax Deluxe, create an account and fill out your federal and state returns online.

To top things off you get free e-file for both returns which normally costs $15 a pop. Not a bad deal. Just remember to go through State Farm’s website when you go to file and it won’t try to charge you. If you don’t have a very complicated return like me then this could be a good alternative to paying an accountant.