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I’m Fed Up! (hypothetical part 2)

Bad fiscal policy got us here.  Cheap money, bad lenders, and no self control…

For example:  I’ll buy my $500,000 McMansion™ with no money down, 3 year ARM at 4% (hypothetical…or better yet, interest only mortgage…man who thought of that one), no points.  My wife and I make, oh, let’s say 100,000 a year, so the banks qualify us for this wonderful mortgage.  For equality’s sake, I’ll say my wife makes $65,000 and I make $35,000.  At the time of the purchase, we have no kids, so it’s me, the wife, and Fluffy, our pocketbook dog (this is hypothetical…I can’t stand those dogs…get them off your laps when you’re driving…but I digress).  And because we have no money down, we need to pay PMI (mortgage insurance).

But wait!  They can give me a loan for 80%, and another loan for the remaining 20%, circumventing PMI.  WOW, what a bargain!  It’s FREE* money, and everyone is doing it, and I need to keep up with the Joneses here.

So, my wife and I walk out of ABC Bank with our newly approved loans and get the home we required.  3600 square feet of pompous bliss.

But now we need to furnish this home.  That’s okay, I have 5 or six credit cards we can put it on.  And that sale over on 3rd and Maple has no interest/no payments for 1 whole year.  It’ll be a piece of cake.

So, we’re making ends meet, have a beautiful, expensively appointed, newly landscaped house.  I got a promotion, so that’s an additional $10,000 a year and my wife is top salesperson at her company, and she’s making $80,000 a year, plus a nice Bonus.  This is great!

A year goes by, and now she’s pregnant!  We’re so happy, so we spend a ton of money on a nursery for the little bambino.  I’ll go the home equity route here, as we’re paying our bills and saving some money.  And the house has appreciated $100,000 already in our market because we’re close to a large city and the economy is booming, so it makes perfect sense!  We need to retire our BMW 500 series (or whatever the latest in expensive automobiles are…for the record, I drive a 1998 Honda Civic and my wife drives a 2004 Honda Odyssey LX.  No Leather.  No DVD.  No GPS.) and get a new SUV.  I hear Linda down the street got a new LandRover Range Rover, so let’s look at that!

Can you see where this is going?  Cheap money brought us here, and continuing cheap money and bad fiscal policies will sink us.

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