not to me. I think that most of these people have a perception problem and on a more critical note might think about the future but never plan for it. I live in an area where the houses have gone up astronomically (like everywhere else in San Diego) I see young couples who own their house (by young I mean fairly new to the workforce)and both drive nice cars usually mercedes, lexus or bmw. and all new furnishings.

My nephew came over and commented about how much money they must make to have all those things. My reply to him was if they are all paid for then yes you would be right. I then added that I find it more likely that they bought the house in the last few years (most had) and tapped the equity to buy their toys. Looks good on the surface but underneath I am thinking paycheck to paycheck. Anyhow, it’s interesting as that alot of these houses are for sale and some have been on the market since July.

The government and banks want you to buy a house, period. You keep money coming into the economy. Your house is where you live. It is only worth what someone will pay and you only can call it savings if you SELL IT for more than you paid for it. A real savings account is money you have put away into an account and can withdraw without any type of penalty. Can you get the equity from your home by just pulling the money out of a bank account interest free? Nope. A house is an asset that can be borrowed against and also, will likely be worth more than you paid for it IF you sell it. You better hope that it is worth more later, if you decide to tap it for a loan above what you already owe on the mortgage. It just boggles the mind that people think the house is savings. Money put into a bank account or under the mattress is savings for a rainy day. The equity in your home is just another bill if used before the home is sold. My two cents.

Saving is very hard to do. My wife and I stopped using credit two years ago. I mean NO loan for anything. It is different now. We were thinking about redoing the kitchen the other day. We talked and decided that we didn’t want to redo it enough to pull the money from savings. You think about things differently when the money is going to leave your hands, verses ‘giving yourself a loan’ with credit cards. We aren’t rich, but we are comfortable and working towards being rich. And that is worth much more to me than someone seeing me driving a BMW. Our finances are such- 15% from each of our checks goes into our 401Ks each payday. We have no loans (including the house) and a large sum in a money market account as our emergency fund (job loss, sickness, etc). We don’t charge anything, so we have to have the cash for it or we save for a big item such as a car. A friend told me the other day that he and his wife are trying to do the same thing, but finding it very hard to stop using credit. The ‘want it now’ mentality if powerfull.

PD, you hit the nail on the head. Looking at monthly payment amount only. I think someone posted here a while back how in Lowes the cost of a washer and dryer aren’t posted, just the monthly payment amount (figured by the minimum payment on your Lowe’s card I guess). When my wife and I decided some years back to pay everything off and stop using credit, it was a huge eye opener. It took us a while to get down to zero debt, but it has been worth it. What we know now is that we were constantly juggling payments. When we wanted something, the main questions we asked ourselves were 1. Can we fit the payment into our ‘budget’ (I quote that, because the fact we had a budget back then was a joke) and 2. what time of the month did we want the payment (middle or 1st of the month)?. And at some point, you get to a point where you can’t fit in another payment, you are slave to the lender, and you are years away from actually owning anything. Imagine on the other hand if the only bills you recieved in the mail were phone, electric, insurance and taxes. Imagine what you can do with the remainder of your paycheck. I have to tell you, it is nice.

When I was a kid, my Dad took me to a seminar a friend of his was giving that was basically “How to get rich.” I was too young to understand much of it, but part of it has stuck with me to this day. It went something like this:

“Are you poor? Sure, you’ve got a nice house, a couple of nice cars, but are you poor? Here’s how you tell. Next time you get a paycheck, don’t cash it. Hang on to it for a month. Would you be OK? Could you pay your bills? Because if you can’t manage without that paycheck for one month, then it doesn’t matter how big it is. You’re poor.”

I agree that Americans overconsume, and as a whole need to cut back and “trim the fat”. Credit card debt is almost always “bad debt” (as opposed to “good debt”, like student loans or 30-year fixed mortgages). Money spent paying off credit cards is like a 15-25% annual guaranteed investment, something that even the most bullish investor probably doesn’t think they could beat.

Gold_Dredger, here's the link to the story about the couple who had to sell their house after the wife ran up all the credit cards:  

http://thehousingbubbleblog.com/?p=1811

 I got the impression she had many credit cards and a husband who didn't check the mail very often (or answer the phone). It takes a lot of work to spend $80K when you’re unemployed.