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My Personal Credit Crisis
- jzachary 17y agoI'm pretty sure I'll ignore E. Andrews' economics columns from now on.
- rcoder 17y agoKnowledge of macroeconomics != personal spending discipline
- deleted 17y ago[deleted]
- jzachary 17y agoOk, but knowledge of sub-prime lending == personal spending discipline, or it should. He writes about sub-prime loans and other "financial innovations", yet he fell for them hook-line-sinker. If you know what's going on in the world, you should know how you fit and how to maneuver within it.
- look_lookatme 17y agoHe knows now.
- randallsquared 17y agoMonth after month, he was more aware than most how many people were gambling and (apparently) winning, and he thought that if they could do it, why not him? Turns out that it caught up with all of them, of course, but that must not have seemed immediately inevitable at the time.
- bwd 17y agoThis is pretty much what happened to the investment banks and GSEs too.
- nostrademons 17y agoThere is a very big difference between knowing something and being able to act on it. By reading this forum, you undoubtedly know a whole a lot about entrepreneurship. Are you rich yet?
- jzachary 17y agoI don't write articles on entrepreneurship and technology startups, either, if that is what you are trying to say. I don't purport to be an expert on entrepreneurship through articles from an authoritative sources like the NY Times. It's a matter of credibility when someone who supposedly understands how a system works falls victim to that system by his/her own actions or greed. If PG did a startup tomorrow, attracted funding, and then burned through it by buying Aeron chairs and Nerf toys, how much would you believe in his credibility as a writer then? I would be a bit more cautious.
- nostrademons 17y agoWould you believe Evan Williams when he writes about startups? He did his "10 rules for webstartups" (http://evhead.com/2005/11/ten-rules-for-web-startups.asp http://evhead.com/2005/11/ten-rules-for-web-startups.asp) and then broke all of them with Odeo, which, not surprisingly, failed.
- barrkel 17y agomacroeconomics is about as much a science as astrology.
- gaius 17y agoYet another smug boomer with an overinflated sense of entitlement.
- rcoder 17y ago> Yet another smug boomer with an overinflated sense of entitlement... ...who, to be fair, made a very public "mea culpa" about his failures in personal judgment when faced with the possibility of buying a house he couldn't really afford. I don't necessarily think this article was all that appropriate for HN, but I did think it was a compelling piece, because of the insight it offered into how even otherwise-rational people could make bad decisions about credit.
- krschultz 17y ago$220 a month for internet, TV, phone. Cancel that in a heartbeat. And how stupid can his wife be if she is still buying all this stuff? These are the people who should be foreclosed on and never get a loan again. Open that house up for someone responsible
- gaius 17y agoExactly. $700 at J Crew when they were already up to their necks in it!? We're all suffering because of people like this. Baby boomers have screwed everything up, at last they're sharing some of the pain.
- zacharypinter 17y agoSmall correction: "$220 cable/telephone/Internet bill for the past two months" Looks like $220 is not per month, but rather for two months. Still, I agree they should cut down on their monthly expenses.
- invisible 17y agoMy phone, TV, internet is roughly $170 per month for just me alone. Nothing super special: Digital cable+Internet ~ 120, cell phone ~ 50.
- deleted 17y ago
- mattculbreth 17y agoKudos to this dude for providing all of the details, almost all of which are embarrassing to him. That probably wasn't easy. He also names names on companies that "helped" him.
- jonknee 17y ago... He's trying to sell a book which makes it quite a bit easier.
- Notorious_PWN 17y agoHis book has to sell well because he's been ass-raped by the alimony-industrial complex. Although he made a lot of really dumb decisions and had some bad luck to exacerbate the problem, the man-hating court system is what fucked up his life.
- yummyfajitas 17y agoI didn't realize that "Patty" was a company.
- bena 17y agoIs this what they are teaching in economics? That $2777/mo can magically cover a $470,000 mortgage. No wonder we are in this mess. "At any other time in history, the idea of someone like me borrowing more than $400,000 would have seemed insane." Apparently at this time in history too, we just found a way to hide it for a while.
- HSO 17y agoActually, this is precisely what they are not teaching in economics: That people are weak, stupid, and make mistakes. Instead it teaches that they are informed, rational decision-makers who carefully weigh their options and choose the one that maximizes "expected utility". Schmoo! This is why we are in this mess!
- aneesh 17y ago> "But with her take-home income averaging only about $2,400 a month, we didn’t make enough to cover our bills because my take-home pay was going straight to the mortgage." What the heck are you buying if $2,400 per month can't cover your expenses after the mortgage payment is taken care of?
- sethg 17y ago$4,000 a month in alimony and child support. I'm glad my wife has promised that I'll only leave this marriage feet-first. ETA: whoops, I missed the part saying those were automatically deducted. Downmod me.
- jonknee 17y agoThat was taken out of his salary before he got it, the rest was going to the mortgage.
- aneesh 17y agoHis salary covered the child support/alimony, as well as the mortgage.
- granular 17y ago> I'm glad my wife has promised that ... I'm sorry to have to be the one to tell you this, but those promises fly out the window as soon as times get tough. No matter what you think she thinks of you, when the kids come and times get tough, she will look at you and weigh having you around vs. having automatic custody of the kids + child support + alimony.
- amalcon 17y agoLoan payments, most likely. Too much money in car loans, credit cards, and the like are traps that too many people fall into. I personally cannot fathom why anyone would willingly take out a loan to buy a car that was not their first (used cars are not that expensive if you're willing to save for a few years), or why anyone would use a credit card without knowing they have the money to pay it immediately, but I do know that people do this. They also had two kids. Kids are expensive; they genuinely require new clothing every year, lots of doctor visits, etc. Of course, if you're not too proud for it, you can get a lot of this stuff from friends and family with older children, but it's still expensive.
- sethg 17y agoI think the author's first mistake was not in taking out the subprime loan, but in entering a marriage without some kind of mutual understanding of how to manage the household finances. One of the first things my wife and I did, after getting married (possibly even before), was to set up a budget, including line items for how much money each of us could spend without being questioned by the other.
- gaius 17y agoHe also displayed a lack of financial acumen in his first marriage...
- unexpected 17y agothis brings up an interesting point. Would you make your wife sign a pre-nuptial agreement before getting married? I often see people who have gotten divorced sign a pre-nup, but people I've spoken with around my age group (20-25) seem to be adamantly opposed to a pre-nup.
- asciilifeform 17y agoJudges routinely invalidate pre-nups, especially if the marriage produced children. In the US, there is a curious legal fiction that child support rights "belong to the child" and thus cannot be signed away.
- Chocobean 17y agoI don't know about you, but as a young female of the 20-25 group, if my husband made me sign a pre-nup before the wedding, it will pretty well signal the end of the relationship. It will be interpreted as a sign of "if you don't trust me with everything, i can't trust you with anything." 20-somethings believe in "life long marriage".
- greml1n 17y agoI know three 20-somethings pairs that are still paying off their weddings after getting divorced.
- biohacker42 17y agoWell written personal account of financial trouble, but I don't think this is HN material.
- tjic 17y ago40 upvotes in 2 hours - I think HN has spoken.
- biohacker42 17y agoSo it has and I regret it. It was a long personal emotional article for a general audience. It wasn't about technology, entrepreneurship, science, or anything besides the personal and emotional journey into financial foolery. I think HN used to be more narrowly focused, but perhaps I'm just imagining things.
- deleted 17y ago[deleted]
- iron_ball 17y agoYou're right. On http://news.ycombinator.com/classic http://news.ycombinator.com/classic it's only 3rd.
- cake 17y agoI was expecting reactions such as yours. I think this article belongs to HN because it's about a smart expert in his field who failed hard because of irrational decisions he made : It questions expertise we acquire thanks to our education and experience. Can you be smart enough to avoid stupid decisions other people do despite being an expert and not them ? The answer seems to be that it's not an absolute truth. That's one lesson he underlines. I can relate to this (and a lot of people here too) because I'm becoming an expert (as in "focused") in web development. I find it deeper than you describe it, having several approaches possible. Finally it's very well written and entertaining too ;-)
- dataman85 17y agoAs someone not familiar with divorce laws and alimony, I was shocked to read that he has to pay $4k every month for child support. That makes a $120K salary almost a $50 - 60K salary after taking into account progressive taxation.
- unexpected 17y agoYes, i found this incredible. My question though was- why was his new wife not receiving any alimony? She, by all accounts had younger kids as well. Seems like he needed a better divorce attorney.
- tjic 17y ago> why was his new wife not receiving any alimony? You mean "child support". Alimony is a payment directly to the ex-spouse, for the ex-spouse's enjoyment / benefit.
- furyg3 17y agoeeeeh, "enjoyment / benefit" is sometimes true but not always. Sometimes in a relationship both parties agree that it is best if one party (usually the mother) puts aside her career in pursuit of raising the children. This party is at a disadvantage after a divorce, and in some cases it may be reasonable to compensate for it. Ideally this should be a tiered system when payments wind down over time (but usually isn't).
- randallsquared 17y agoIt could be that her ex-husband made so little that the added money wasn't relevant, and the author chose not to bring him into it. That seems reasonable to me.
- falien 17y agoBased on the way he described her spending habits for her children and household, that doesn't seem particularly plausible to me.
- derekj 17y agoWow. I live in the Midwest so housing is dirt cheap compared to other places, but half a million dollars for ANY house seems insane to me, let alone this "small" one he's talking about. I don't have any sympathy for him. I also don't understand how he could have "near perfect" credit score when he had thousands and thousands of dollars of debt with massive interest rates. Just goes to show that your income doesn't make a whole lot of difference if you can't control your spending. I pay all my bills and save about 10% of my income making $40k a year. And I really do have a near perfect credit score.
- lief79 17y agoThe same house and yard that my aunt can't sell in central Illinois for $50,000 would be worth a good 200,000 - 250,000 in the area I'm currently looking in (Philly suburbs) and more then the $400,000 or so that my fiancee's brother paid for his place about an hour South of NYC. The .5 acres of land alone would probably be worth more then $400,000 there. Credit scores will stay perfect as long as they are paid off. Greater debt with no faults creates better FICO numbers.
- earl 17y agoSeriously, you do understand the concept of different costs of living, right? Your astonishment at paying $0.5MM for a house is irrelevant; that's the going rate and probably cheaper than renting in that area.
- randallsquared 17y agoI live in an area very close to there (still in the DC metro) which has houses which go for 400K and up, and yet I pay just over $1200 in rent. Renting and buying are often out of sync with each other, for whatever reason (in east Alabama a few years ago, it was the other way around; you could easily buy for less than rent).
- earl 17y agoYou pay $1200 for rent for yourself; or yourself plus a significant other; or for yourself, significant other, and three children?
- Notorious_PWN 17y agoMy blood pressure went way up when I found out how brutally he is being raped by the alimony system. He'd be better off in a technical field where skills matter more than reputation; he could change his identity. Assets earned during the marriage are earned by the couple and should be equitably split, but child support should be no more than 1/2 the minimum cost of raising a child (of course, if the father's not a prick, he'll contribute much more; but the govt. should not require him to) and alimony should not exist.
- jibiki 17y ago> child support should be no more than 1/2 the minimum cost of raising a child Am I a horrible sexist if I disagree with this?
- gaius 17y agoI'm afraid so. How often do the courts grant the father custody? If the mother can't support herself and them, then they should go to the father, end of. But for some mysterious reason that almost never happens...
- Notorious_PWN 17y agoNot sexist, but you're wrong. Child support should represent the minimum acceptable contribution of the non-custodial parent (father, in the vast majority of cases) to the child's welfare. Should he contribute a lot more, in cash, gifts, and college support? Absolutely. I would. However, the government shouldn't require him to do so, and the spending should be at his discretion. Right now, that freedom is completely taken away. The custodial parent should not be getting a huge check and the freedom to spend the money however she wants. If I end up having a kid with a wife who divorces me to live it up with an illiterate biker, those CS payments damn better be going to the kid's college, not her beau's lottery-ticket budget. It's a bizarre inconsistency. Parents can stay married and financially neglect their children. They can make $300k combined per year and still refuse to pay for their kids' college. Yet, if they divorce, the one parent who rarely sees the kids (usually father) is forced not to pay up merely to the minimum level of decency, but far beyond that if he's "rich" like the article's author.
- dare2d4l 17y agoreminds me of this video: http://www.youtube.com/watch?v=Ubsd-tWYmZw http://www.youtube.com/watch?v=Ubsd-tWYmZw
- newblog 17y agoreminds me of this video: http://www.youtube.com/watch?v=Ubsd-tWYmZw http://www.youtube.com/watch?v=Ubsd-tWYmZw
- blhack 17y agoWow... I had never seen that before, and honestly thought it was a warning about predatory lending...the person on the phone "you can do this" sounds like a drug dealer "just one hit". ...wow.
- raphar 17y agoHow is it the couple didn't learn anything about finance and financial crisis while studying in Argentina???????? btw: I'm from Argentina.
- weegee 17y agoit just shocks me when normally intelligent people get into some sort of dream state and think they are entitled to something they clearly cannot afford. I make more than $2777 or whatever take-home pay this guy had after his alimony payments, and my wife and I live in a one bedroom condo we bought for $130k, and our mortgage is a little less than the same size apartment in the city we live in would cost. but this guy shot himself in the foot and bought a house that was clearly more than he could afford, and that is just basic math. if he had been honest with himself, and done the math, he wouldn't have gone broke. glad he is doing well with the book though.
- nazgulnarsil 17y agowhy do people get married and have kids when the statistics say that neither makes people happy?
- dangoldin 17y agoMy answer would be that statistics work for a population but not the individual case. I feel that getting married and having kids would make me happier - I'm sure others feel the same regardless of what statistics say.
- nazgulnarsil 17y agoof course. but that doesn't mean we should ignore it when a large number of people admit that they did X and it didn't make them any happier.
- cpr 17y agoWho says that happiness is the goal in life? Happiness is an occasional side-effect of living a good life, but it'll come and go.
- philwelch 17y agoBecause people are products of evolution.
- shard 17y ago- A sense of purpose - Fulfillment - Biological drive - Life goals - Companionship - Love - To make the people you care about happy Based on success statistics, startups probably don't make a majority of entrepreneurs happy either. But they still do it.
- indiejade 17y agoWe sent in an offer of $460,000 and one day later got our answer: the sellers accepted. The better way to think about the injustice of this story is to realize that his Realtor & Co. earned at least $27,600 (Six percent of the $460,000) for less than a day's worth of work. Bob called back the next morning. “Your credit scores are almost perfect,” he said happily. “Based on your income, you can qualify for a mortgage of about $500,000.” Translation as to what Bob was really thinking: "Based on your credit score, I can earn about $30,000 today, without blinking." Realtors are the evil behind the mortgage meltdown. If this article doesn't make it obvious, I don't know what does.
- Chocobean 17y agoThey do provide valid services though: driving you and your family to and from many showings, talking to the owner/owner's Realtor, take care of the legal mumble jumble, provide info on the house's previous owner records, previous sale pries, insight into school districts, commute hours, community by-laws..etc. House-hunting is certainly NOT less than a day's worth of work. If they end up not buying from him, all this time spent on working their profile earns him exactly $0. The goods that he sells are his time: time that he can't spend with another customer simultaneously. Bob was an evil realtor; evil [profession] are evil. That's all.
- MaysonL 17y agoBob wasn't his real estate agent, he was his mortgage broker. (He may well have made 30K off the deals, though, anyway).
- Empact 17y agoIf this bothers you (it does me), you should look at Redfin.com. They do realty for 1% each, rather than 3%, and can afford to because they do much of their work online.
- HSO 17y ago"for less than a day's worth of work" Look, if Google earns x cents on a click from you, does it earn it on "less than a second's work"? It does not, because someone had to take the risk to acquire the necessary skills and contacts/reputation over a long period of time, had to set up an office and legal forms, had to acquire a rolodex, etc etc. There is a lot of risk involved. THe fact that the transaction itself, if sufficiently isolated, takes place in a blink so much as doesn't matter! In fact, our system works such that people are not paid based on their (highly subjective) work effort but on result. Result in terms of what other people are willing to pay for your services. If you go down the slippery slope of "fairness" in pay based on effort, you will end up in pure, almost literal communism -- everything owned by the community, nothing for yourself, because there is no basis for judging effort from outside. Effort doesn't count, results do.
- aswanson 17y agoIn 1995 dollars: http://findarticles.com/p/articles/mi_m1355/is_n5_v89/ai_17829604/ http://findarticles.com/p/articles/mi_m1355/is_n5_v89/ai_178...
- Tichy 17y agoWhy did it never occur to them to just sell the house? That is what puzzles me most (among other things). It seems that having your own house is so important as a status symbol that all other concerns are minuscule in comparison? Also, what happens if the bank you borrowed the money from goes bankrupt? Is there a chance they will just get to keep the house, because nobody will ever come round to claim the money? If so, it wouldn't be so bad after all...
- nradov 17y agoWhen a bank (or other lender) goes bankrupt its creditors seize the assets, which include mortgages. So if you don't pay then the note holder will eventually foreclose. But occasionally the paperwork gets lost or screwed up and that delays the process. I've heard stories of deadbeats going a couple years without paying before finally being evicted.
- abalashov 17y agoMy guess is by the point that sort of thing would have been a desirable remedy in their minds, property values had declined enough (especially in an area where housing was particularly inflated) that selling wasn't an option without owing money.
- amitry 17y agoThis guy need Dave Ramsey! http://www.daveramsey.com/ http://www.daveramsey.com/
- nathanwdavis 17y agoWow, this article speaks more about the ruin caused by split marriages than anything else. Definitely motivation to stay in love and on the same page with my wife.
- jzachary 17y agoTurns out he didn't tell the part of the story about his wife's bankruptcies: http://kottke.org/09/05/economics-reporter-gets-caught-in-mortgage-bubble http://kottke.org/09/05/economics-reporter-gets-caught-in-mo....