If you keep up with financial news at all, you will know of the high-risk mortgage defaults rocking the United States. We’re inclined to blame the banks, but I think the buck has to stop far lower down the chain. What were people thinking? It doesn’t take a genius to know that taking the highest possible mortgage someone will give you, and the highest possible payment you can afford, isn’t a great idea. What if you lose your job? What if you break your leg and can’t work for six weeks? Anything can happen. Do you really want that kind of instability?
Millions of people felt it was worth it, though, and I don’t think this attitude is confined to south of the border. According to Statistics Canada, the average consumer debtload in Canada is $30,000 per every man, woman, and baby, and that doesn’t include mortgages. Most couples spend 10% more than they make each year. We are buying stuff before we have the money, because we assume that money will somehow magically drop from the sky and pay our credit card bills one day. And if it doesn’t, then not to worry! Next time the mortgage is up for renewal, we’ll just roll our credit card debt into our mortgage, and presto, the balance is down to zero again! What we don’t realize is that if that is our strategy we’re never getting ahead. We’re just digging a deeper and deeper hole.
I think the drive to do this comes from our consumer driven society, where we measure our pleasure based on how many toys we have. Think about how much of our fun and leisure actually comes from things: we watch TV, we make friends on the internet, we spread out in our large houses, we buy ready-made gourmet meals. Our fun comes from money.
Back in the 1930s, fun, I think, came more from relationships. You sat out on your verandah and talked to people. You socialized. You didn’t need stuff. Today we don’t know what to do without it. And if we all deserve to be happy, and it’s stuff that makes us happy, then we all deserve nice stuff, don’t we?
Just look at the size of our homes. In 1950, the average house was 983 square feet. In 1990, it had increased to 1500 square feet. And today, in Canada, it’s over 2000. At the same time, our families have shrunk and we entertain far less frequently. We have bigger homes that we don’t share. Few of us could imagine living in those post-war square houses from the 1950s, but many families grew up in them and did just fine, because society didn’t believe to the same extent that it was stuff that defined you. Today we do, so the stuff better be good.
That’s why we don’t like using words like “afford”. We like using words like “want”, and “need”, and “wouldn’t that be nice?”. The kids really need a plasma TV. We really need a fancier car. Wouldn’t it be nice to go to Jamaica this year? It would be nice if I could eat nothing but chocolate truffles and not gain weight, too, but the world just doesn’t work that way.
And maybe if we realized what really made people happy we’d be less inclined to get into this kind of debtload nightmare in the first place.
I know money management is a balancing act. You want to have fun when the kids are still at home, but it’s an expensive stage of life. Still, if you never spend anything, then you don’t enjoy the time you do have with them as much. But we also can’t be irresponsible and put our families at risk. And when we start having money worries, marriages break up. We start resenting the extra costs of having kids. We get ulcers. We feel lousy, and it’s contagious. Everyone around us starts feeling lousy, too.
No family will ever be harmonious and no one will ever feel at peace with a credit card bill that never gets paid. The new year is here, and with it comes the perfect time to grow up and face the bankbook. It’s the best way to be happy in the end.
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