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Personally, I wouldn't trade places with any of them, not even the ones who'll wind up keeping the bigger, fancier homes my husband and I decided we couldn't afford. I wouldn't want to live with the anxiety those troubled borrowers have faced ever since they got unaffordable mortgages or the uncertainty they're feeling as they wonder whether a workout will save their homes. Those folks made a hell of a gamble, and even with efforts to help on the rise, most of them are still going to lose.
Give me a home bought with a fat down payment and a 30-year fixed rate any day.
Forgiven but not forgotten
So how about the people who may be about to get big chunks of their credit card debts forgiven?Major credit card issuers are seeking permission to knock down troubled borrowers' debts by as much as 40%. Debtors would get preferential tax treatment as well; they wouldn't owe income tax on the forgiven debt until they'd paid off the remainder of their balances.
Credit card issuers are recognizing the obvious: that their free-lending ways have come back to bite them. Delinquencies are soaring, and issuers' charge-offs -- balances written off as bad debt -- are up nearly 50% compared with last year.
The issuers figure getting something out of these debtors is better than getting nothing if they stop paying or file for bankruptcy.
The number of people admitted to the issuers' proposed pilot program would be small -- about 50,000 -- although enrollments likely would rise if the plan worked as anticipated.
You might have a beef with this particular bailout if you faced a huge pile of debt and opted to pay it off rather than have it wiped out in bankruptcy.
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But once again, I'd rather be financially responsible and conservative than not. I'm not sorry that we've always limited our credit card charges to what we could pay in full every month.
Maybe we haven't bought as many toys as the folks who carried debt and are about to have some of it forgiven. But we also haven't spent a fortune in interest charges, which those people certainly have.
And I seriously doubt I'd have to pay higher interest rates or suffer in any way from this program, even if it became wildly successful. Those of us with good credit still would get the best rates, as I explained in "The real victims of deadbeats? Other deadbeats."
Investing blindly makes you a sucker
How about the last station on the have-I-been-a-sucker line: investing. Surely we were sold a bill of goods when we were told stocks are a good long-term investment. Haven't they gone essentially nowhere for a decade now?Yes, except that those who continue to invest, in good times and in bad, inevitably come out ahead. MSN Money columnist Jim Jubak explains it best in "When to start investing? Now."
The folks who blow it are the ones who take too much risk in the good times, then panic and bail out in the bad, locking in their losses.
The reader who asked whether he should stay or go is a case in point. So close to retirement, he should have been ratcheting back on his risk. Although he thought his portfolio was balanced, it clearly wasn't -- otherwise, it wouldn't have dropped 30% during the worst of this fall's gyrations, let alone 60%.
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Home-loan bailout planThe federal government is considering a plan that would help about 3 million homeowners avoid foreclosure.
His best move -- and yours, if you're still skittish -- is a visit with a fee-only financial planner. You can get referrals from Garrett Planning Network, which represents planners who charge by the hour, or the National Association of Personal Financial Advisors, whose members typically charge a percentage of the assets that they manage for you.
These planners, who are compensated by the fees you pay and not by commissions on investment products, will be straight with you about the risks and rewards of the stock market.
They'll tell you that over the long run (measured in decades, not days), stocks perform better than any other investment. But because there can be long stretches where stock performance is lousy, you also need exposure to bonds and cash to balance the risk.
Then these planners can look at your specific situation and give you specific advice. If you follow it, chances are you'll feel smart, in control and aware. That's the absolute opposite of a chump.
Published Nov. 10, 2008
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