Whose fault is affluenza?

“The middle class is in trouble because of ‘affluenza,’ ” said Thomas Naylor, a professor emeritus of economics at Duke and co-author of a book of the same name. Affluenza is “a painful, contagious, socially transmitted condition of overload, debt, anxiety and waste resulting from the dogged pursuit of more,” the book says.

Buying and spending because you have money that does not need to go toward a pressing need is one reason that affluenza has taken hold. Another is that with the rise of credit and debit card use over the past couple of decades, not having cash in hand to know exactly how much money you have made it too easy in some cases to buy unaffordable items. This does not mean that buying unnecessary items is bad, being unable to afford them is bad.

Media outlets have also persuaded people that they can have the good life. Having the good life and affording the good life are different concepts. As much as I love coffee, the only time I buy coffee daily is when I am vacation, even when I worked near coffeeshops and passed several daily. On television people buy coffee all the time and hang out in coffee shops. No one ever makes changes in their budget because of spending too much on coffee. This is a small area of spending in life. There are other areas that take a toll on your wallet. Buying a designer clothes and accessories because they are advertised in a magazine can be a splurge or it can be part of a lifestyle. If it is part of a lifestyle and has no effect on your budget you are either one of the rich and famous who may received the item for free as a walking advertisement or just rich and can afford to buy these things.

More, more, more. Though people are espousing saving money, it is often to be able to afford what is necessary for them.  Prices did decrease in certain areas of spending for most Americans due to the decrease in costs for certain items, though housing is must more expensive than it was ten or twenty years ago. Gasoline, though less expensive now, costs more as does public transportation for the non-drivers.

Spending on necessities has also taken a large chunk out of a family’s budget. Overspending and credit card abuse did occur for some people, but in other areas of a budget, the increase in necessities, without a decrease in desire for wants has affected middle class affluenza.

Mortgage accelerator programs are not bargains at all. My mortgage company always sends me information about their mortgage accelerator program which would allow me to save money over the lifetime of my loan.  Instead of paying monthly I would pay biweekly which would add an additional payment and a quarter each year for the lifetime of the loan. 

BUT, there is a catch, to sign up I have to pay $49 to enroll and a fee of $9 for each month I participate in the program. Over the course of a year, that’s $157 in fees, plus an increase in the amount of my mortgage. Sounds good to save money over the life of the loan, but a better way to do this is to send in an extra amount – however small and consider that amount your mortgage. 

Each month I send in a little over $50 extra. At the end of a year, without paying an additional $157, I have made about 13.5 payments to my mortgage. The benefit to a self-directed prepayment program is that I do not have to pay the same amount all the time, there are no additional fees and there is still a savings.

Figuring out how much more you want to add to your mortgage’s principal is a personal decision. You might not want to make any additional payment each month or at all but if you have a mortgage that does not penalize for prepayment you could prepay, just by making an additional payment over the course of a year.

 Multiply your mortgage payment by 13, then divide that number by 12. This will give you the new amount that you should pay if you want to pre-pay your mortgage. Round the dollar amount to an even number. Pay attention to the pricing for any fee-based mortgage accelerator programs. Even by just adding the yearly fee to your principal will make a difference in interest savings and the amount of equity that you build.

The CNN report comes at a time when new Commerce Department data was released indicating that Americans spent 0.2% more in February. This may seem like a sign that the economy is improving. It is, but personal income decreased by 0.1 % and income decreased by 0.2%. Real disposable income decreased by 0.4%. The news does not make you want to run right out and start spending. Spender’s remorse may not be a fallacy, but having less money to spend is very real.

Finally, there is a study that supports being frugal. Saving too much can make people resent saving. Moderation is key. Though that sounds great in theory, saving money, just like spending can be addictive. Compare this to a crash diet, dieting becomes a way of life, just as eating unhealthy can be a way of life for some as well. Being in the middle, of the two extremes is harder to manage because you are denying yourself many things all the time. First you are denying overspending and you are denying not spending anything. 

The middle ground would be to include the best of both worlds – saving, but buying what you can afford. Indulging within reason can be liberating because there is no wonder where the money is going to come from – you already have it.

Is foreclosure in your future? Even if it isn’t mortgage scam artists are preying on people’s sensitivities and asking for money to help resolve financial issues. 

Mortgage companies that are not your own would not call you about anything. That should be the first indicator that this is not a legitimate form of help. Also to have your mortgage reduced, you should not have to pay fees up front. Paying points to have a reduced rate is not the same as having someone ask for hundreds or thousands of dollars to have your mortgage adjusted.

Findaforeclosurecounselor.org helps people who are close to foreclosure get some help for free. This is a resource listed on Neighborworks America.

Just because you go through foreclosure counseling, there is no guarantee that you will avoid foreclosure, but you will not have to go further into debt trying to prevent losing your home.

Interested in refinancing now that the rates are dropping? If you purchased your home before the housing market soared and have a rate that is about 6% or so, you might not make any significant savings by refinancing. When you factor in the amount of time that you will spend paying your mortgage and associated fees, you may not make any significant gains with a lower interest rate. Also, your monthly payment may increase if you decrease the term with the additional fees. To save money over the course of your loan, making an additional payment over the course of a year will allow you to save money in interest.

Spending more? It is possible to spend more on some thing s and less on others if you have re-prioritized your spending. Maybe you spend more on public transportation and less on gas. You may spend more time with your family at home, but you might not order out, but cook instead. When you have extra money in your budget will you change your habits?

Consumers are still trimming their discretionary spending, because there is no stability in the economy. As the economy improves, people may decide that they want to loosen their purse strings and spend more money.

“Consumers are feeling more confident and their overall expectations for the health of the economy are beginning to improve,” said Shawn DuBravac, Consumer Electronics Association’s economist and director of research. “Americans continue to worry about their own job security but are feeling more confident that the economy will improve in the coming months.”

With a secure source of income, the purse strings could loosen. If you have money and think that you will continuously have a source of income, then you will definitely want to do some spending. Economists believe that an economic rebound requires some spending. Some spending is good, but I don’t think that our country needs to spend at the same levels that we once did. 

Edward Leamer, director of UCLA’s Anderson Forecast, wrote that Americans, who were spending like drunken sailors on everything from houses to jet skis as recently as 2007, reversed themselves when the economic news became dire late last year. Personal savings went from virtually nothing in 2007 and much of 2008 to about 5 percent in January. There’s nothing wrong with saving money, and it’s a good idea for Americans to “take some safety equipment along on our journey.”

Spending did get out of hand, and money was burning a hole in many pockets and pocketbooks. Unfortunately the burns that people suffered were because they spent too freely.

When I was a kid, I would look at the McDade’s and Service Merchandise catalogs daydreaming and making believe. Some things were not practical but were interesting to imagine owning. I had an allowance, but also saw the people around me thinking about purchases and saving up for large wants, while never neglecting the needs in our family. I made some dumb choices sometimes, but that was a part of growing up. Our nation is going through a maturation period. Instead of spending recklessly, there is a pullback, at least for those who are the most affected by this economic downturn – almost everyone.