NEW YORK, July 14 (Reuters) - U.S. government officials are weighing a plan that would let borrowers who have fallen behind on their mortgage payments avoid eviction by renting their homes instead, sources familiar with the administration’s thinking said on Tuesday.

Under one idea being discussed, delinquent homeowners would surrender ownership of their homes but would continue to live in the property for several years, the sources told Reuters.

Officials are also considering whether the government should make mortgage payments on behalf of borrowers who cannot keep up with their home loans, tapping an unused portion of a $50 billion housing aid kitty.

As part of this plan, jobless borrowers might receive a housing stipend along with regular unemployment benefits, the sources said. (Reporting by Patrick Rucker; Editing by Diane Craft)

This is taking government housing to a whole new level. It also raises a whole bunch of questions:

• What would be the implications of such a plan?

• Does the government continue to pay the mortgage?

• What happens after several years of the former homeowner paying rent? Do they get to buy the house back? For what price?

• What if they can’t afford the rent?

• Where does it end?

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I am trying to find sites that will provide average spending habits — such as how much an average person spends on food per week or how much a family spends on entertainment, that sort of thing. I am hoping to see where my habits line up with someone of similar means in the same part of the country.

I’m not sure of how to obtain regional information, but I know where to find national figures for comparison. Last week, a site called Visual Economics posted a chart showing where the average U.S. consumer spends her money. Here’s the chart in question, which has been making the rounds of the internet:

Click to open at full size in a new window.

Because I’m a skeptic by nature, I tracked down the source material used to create this chart. The data is drawn from the U.S. Department of Labor Statistics Consumer Expenditure Survey for 2007. Most writers seem to be missing this point (probably because the chart itself has a date of April 2009), but it’s an important one. This chart represents consumer behavior before the market meltdown — not after. (Here’s the source data [297k PDF].)

Some of the interesting bits from this survey:

• The average “consumer unit” surveyed had 2.5 people, of which 1.3 were wage-earners. This consumer unit earned $63,091 and had 1.9 vehicles. Exactly two-thirds owned their homes.
• This average consumer unit spent $49,648 in 2007.
• Average food spending was $6133, of which $3465 was spent on meals at home. Based on this data, one can conclude that the average consumer unit spends roughly $300 per month on meals prepared at home and roughly $225 per month on meals away from home.
• Average spending for housing was $16,920 for the year, which was way up from the $15,167 average for 2005. That’s an 11.6% increase in housing costs over just two years! Can you say “housing bubble”?
• I was surprised by the transportation costs. The average consumer unit spent $8758 on transportation, or about $725 per month. Holy cats! That’s insane. The average household could save big bucks quickly by optimizing their transportation costs.

Several readers asked for my opinion about this chart, including Sarah M., who wrote via Twitter: “I’d love to see your thoughts comparing the average annual consumer’s spending breakdown to what it should be!”

I don’t think it’s possible to say what the average consumer’s spending should be. There are too many variables. What works for me may not work for you. Each year, the average American spends $1881 on “apparel and services”, for example, but only $118 on books. My spending for these categories is nearly the opposite. In 2007, I spent $702.73 on books and $425.94 on clothing.

I actually think the source data [297k PDF] could be a great basis for a budget. I always have trouble deciding which categories to track in Quicken. If I opted to use the same category structure that the government uses when tracking consumer spending, I could easily compare my habits with the “average” American. (Too bad the government doesn’t track spending on comic books!)

Also, I’m puzzled as to why taxes aren’t included in this information at all. The chart doesn’t include taxes because the government survey doesn’t include taxes. If the average consumer unit earns $63,091 but spends $49,648, there are $13,443 unaccounted for. The personal saving rate in 2007 was less than 1%, so I’m guessing that most of the unspecified money goes to taxes.

Finally, I should note that last year we took a glimpse at the spending of the average American as revealed by The New York Times and the Consumer Price Index.

In my recent reader survey, there were many requests for more content aimed at non-U.S. readers. It’s unlikely I’ll devote entire articles to foreign issues, but when possible — such as today — I’ll try to find resources to help you do your own research. Here are similar surveys in other countries:

• Statistics Canada: Spending Patterns in Canada
• Australian Bureau of Statistics: Household Expenditure Survey, Australia
• U.K. National Statistics: Family Spending, Expenditure and Food Survey

How do your spending habits compare to those of the “average” American? I’m especially curious to hear how much GRS readers spend on books. The average of $118 per year doesn’t buy a lot of reading material. On the other hand, maybe people are using their public libraries! (One can dream, right?)

—
Related Articles at Get Rich Slowly:

• Manage Your Finances Like a Professional Gambler: Small Things Add Up
• A Glimpse at the Spending of the Average American
• Survey: How Much Do You Spend on Food?
• links for 2007-03-10
• Long-Distance Phone Tax Repealed

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I’m still looking for a second news source to back this up, but the circumstantial evidence is strong. We got a notice to our “tips” e-mail address about a loophole in the recently-passed Credit CARD Act of 2009, namely:

The law requires credit card companies to give 45 days notice of a rate increase, but only if the card has a fixed rate. The law also requires rates to stay the same for one year after a new account is open, but only for fixed rates.

And since credit card issuers are proactively punishing customers as a result of new legislation which hasn’t taken effect yet, they’ve also decided to start changing fixed-rate cards to variable-rate cards. Simply switching the rate type will enable the banks to raise rates whenever they want, again.

With a variable rate, rates generally rise as interest rates rise, and fall in a declining-rate environment. With rates already near a bottom and expected to rise, most consumers probably won’t see their rates fall further.

Not all customers are being affected, but Bank of America, Chase and Discover have all announced this change for some of their customers.

With some of the banks, you can opt out of the change, which of course comes with a requirement to close the account. The last time our readers encountered this widespread kind of change, they had a surprising amount of luck getting their original terms back by calling and talking to the right people, in the right way. Hopefully many of you can manage the same thing this time. Let us know in the comments.

Fixed-Rate Credit Cards May Vanish , Jane J. Kim, Wall Street Journal, July 13, 2009

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Variable Rate Loophole in the Credit CARD Act

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I’ve been a baseball fan my entire life, and my favorite (non-Cub) player for many years has been David Ortiz, the designated hitter for the Boston Red Sox. Prior to their World Series win in 2004, the Red Sox were my American League club of choice, simply because, as a Cubs fan, I empathized with the long, long history of painful losing moments that Red Sox fans witnessed. Ortiz’s playful attitude and amazing performance in the 2004 American League Championship Series cemented the guy in my heart.

Another big reason I’ve always been able to identify with Ortiz is his background. How could a white guy from the rural Midwest identify with someone who grew up in the Dominican Republic? We both grew up poor. We both were blessed with some great opportunities in our lives and we pushed ourselves to make the leap to do something we dreamed of. We both keep big parts of the way we grew up in our hearts.

That’s why I loved that quote from Ortiz that starts this article. When I first read it, I printed it out and posted it on my desk at work. At the time, it made me think of the value of keeping in touch with your roots.

I love going back to my hometown. Wandering around the pasture behind my in-law’s house, eating fried catfish my father cooks, and going to the hometown festival each September are wonderful. Time and time again, I see some of the good lessons I learned pop through. I see it in my actions, my values, and my personal choices, and whenever I go back there, it still feels in some ways like it fits like a glove.

As time went on, that quote began to change for me. I went through my financial meltdown and started to come out clean on the other side, and one day I looked at that quote again.

“They pick me [to be tested for steroids] every time. I don’t know why. I don’t know if it’s because I’m a big guy, or what, but all I know is all they are going to find is a lot of rice and beans.”
- David Ortiz in The Boston Globe, March 11, 2005

Here was Ortiz, earning millions of dollars a year, and he was feasting on a diet of rice and beans. Ortiz could afford any food he wanted, but a sack of rice and a bunch of beans were good enough to fill his belly.

For me, that quote became a symbol of the idea that you don’t need to spend money just because you have it. Instead, focus on what you actually value in your life. I don’t need to go out to an expensive restaurant when a big old plate of beans and rice at my dinner table with my family all around me will do the trick.

I carried this throughout my life. I severely cut spending in every area that I didn’t feel was vital to my life. I focused instead on my key values - my family, my writing career, and learning and growing as a person.

I didn’t need a shiny BMW in the driveway, even if I could afford it.

I didn’t need to go golfing at a great course every weekend - instead, I went when it was really fun, with my father-in-law and my wife at a local nine-hole golf course.

I didn’t need to buy new books every week - instead, I started using the library and PaperBackSwap.

I didn’t need to do all these things to enjoy my life, and by scaling back in those areas, I found that I had plenty of room to focus on the things that really did matter to me.

Life goes on. I make a big career switch and become a writer. Then, suddenly, in late fall 2008, I have something of a health scare. I got a virus that left me feeling tired all the time and suddenly I really thought about my own mortality more than I thought.

And then I saw the quote again.

“They pick me [to be tested for steroids] every time. I don’t know why. I don’t know if it’s because I’m a big guy, or what, but all I know is all they are going to find is a lot of rice and beans.”
- David Ortiz in The Boston Globe, March 11, 2005

Ortiz plays professional baseball - he’s in pretty good shape. He goes out there every day, takes batting practice, stretches out, gets his sweat up and his metabolism going, and he plays the national pastime.

The fuel he uses to do this is nothing special - just staple foods without lots of additives. Rice and beans and exercise.

The recipe was simple for me. Just cut back on the fatty foods - the cheeses and the soda - and replace them with healthier options - water and, yes, rice and beans. It’s a simple choice that’s also an investment - it improves my health now and it extends my lifetime and period of quality life later.

The next step: add some exercise. I don’t have to go out there and kill myself, but I do need to go out there and move. Just go take a walk three to five times a week. Get the fluids moving in your body. Stretch your muscles. Raise your heart rate a little.

The end result? I’ve lost about forty pounds in 2009 and I feel quite good. I have more energy than before and some days I feel completely on top of the world. My values, my career, my money, and my health seem to all be falling in line.

Sometimes, you find the inspiration you need from the most unexpected places.

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Click on graph for larger image in new window.

The Census Bureau reported:

Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,368.1 billion, down 1.0 percent (±0.1%) from April 2009 and down 8.0 percent (±0.4%) from May 2008.

The above graph shows the 3 month change (annualized) in manufacturers’ and trade inventories. The inventory correction was slow to start in this recession, but inventories are now declining sharply.

However, even with the sharp decline in inventories, the inventory to sales ratio has only declined to 1.42 in May - since sales have fallen sharply too.

There has been a race between declining sales and declining inventory. Even as sales start to stabilize (appears to be happening), inventory levels are still too high compared to the lower sales levels, and further inventory reductions are probably coming.

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