As result of recession, Gen Y is adopting frugality seen in Great Depression. Will Gen Y focus less on extravagances and more on success? Pairing of entrepreneurial spirit and frugality could lead to long-term success.
Every year, various amounts embodied in the Internal Revenue Code are adjusted to reflect the increase in consumer prices, or inflation, as measured by the Consumer Price Index (CPI). Compiled by the Bureau of Labor Statistics (http://www.bls.gov/CPI/), the index reflects the increase in individuals’ cost of living over time and is used by various government agencies to ensure that their programs accurately reflect current economic conditions. In the case of the Internal Revenue Service, tax rates, deductions, and various thresholds are adjusted annually for inflation, while the Social Security Administration (SSA) uses CPI to adjust benefit amounts paid to recipients. As CPI for 2009 will likely show a drop in overall consumer prices (deflation), many amounts tied to CPI will either remain unchanged or decrease in 2010.
In a sign of the true state of the financial industry, The Wall Street Journal last week reported on the higher standards many credit card issuers, particularly American Express, are subjecting their cardholders to. No longer is a high FICO (credit) score sufficient. Credit card companies now want to know where you live and what you do for a living, in response to the housing crisis that is affecting certain areas harder than others. Housing markets in Nevada, California, and Florida are struggling, while North Carolina is growing. Because of this, identical applicants in Nevada and North Carolina are likely to receive quite different terms.
Michael Shortt is a small-business owner in Georgia who recently experienced this firsthand. American Express reduced the limits on his business card drastically, all because Mr. Shortt did not feel comfortable discussing the details of his business with small-business credit and data agency Dun & Bradstreet Corporation. As a result, the limit on one card was cut from $6,000 to $1,000. On another, Amex dropped the limit from $42,000 to $36,000, and then down to $4,300. Mr. Shortt was dumbfounded at the company’s actions, considering he regularly pays his bills in full and has accumulated nearly 800,000 rewards points. Amex’ only comment on the matter was this: “We are being more targeted in managing risk prudently within appropriate customer segments,” according to The Wall Street Journal.
While this particular article focuses on business credit, the consumer side is no different. Financing for everything from mortgage refinances to student loans is more difficult to find and when found, the standards are much higher and less flexible.
Source: “Card Issuers Get Personal To Check Credit,” The Wall Street Journal, June 19, 2008