LitaWrites (real_lawyer) wrote,

Money For Nothing

A few weeks ago, a reader commented on her/his theory that home equity borrowing increased when the tax deduction for credit card interest ceased.  I agree that this is a very valid piece of the borrowing puzzle, but there’s another part that needs to be explored. 

For the past five years, the vast majority of Americans have earned a smaller average income than the year before (in 2005 they earned less than in 2000), and have seen the cost of living and fuel skyrocket while employer-provided health care and/or retirement benefits for most were curtailed or eliminated.

I have been as guilty as the next person of judging many people for supplementing their income out of their home equity, thinking they were doing so to greedily live above their means.  But what if they looked at the money in their home as the only true savings they had, and drew on it just to make ends meet?

Per the NY Times:  “Total income listed on tax returns grew every year after World War II, with a single one-year exception, until 2001, making the five-year period of lower average incomes and four years of lower total incomes a new experience for the majority of Americans born since 1945.”  So if your salary was stagnant while expenses expanded, isn’t equity tapping merely an attempt to maintain the status quo?

I’m just sayin’.
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