Why are many Americans very irresponsible with their money?
Those of you who used to participate in yahoo's previous "Comments" feature following news articles on their site (the "Answers" is the new forum), may recall many posts I made going back about 2 years ago. In those posts, I warned people about the growing debt problems in the US; the use of the "paper equity" in people's homes as if it was an ATM. In addition, the US has enormous unsecured debt in the form of credit cards, as well as car loans, etc. Add further to that the massive government debt and trade deficits, well it just isn't a pretty picture. Further, the US Social Security System is an absolute mess, which will require some very painful measures to rectify. I saw all this coming to pass over 2 years ago, and sold my home in CA, paid off all my debts and configured my lifestyle to prepare for what I saw as a significant economic dislocation developing. That economic dislocation appears to be upon us. Why did so many people take on debt they had no business doing?
Answers:
It started with the American dream. Everybody must OWN a car and a house. This means we have to get into debt. Nobody can pay cash right away fro the car and the house. They never said " Rent could be more suitable for your case" or they invented more reliable means of public transportation in most of the states. So, you have to buy the car, you have to get the loan, you have to pay interest.. and after the car is paid off, it is too old, so let's get a new car with new loan.. and this image developed to car+house+computer then ipod, then iphone followed by the $$$ flat screen which you will buy on credit card.. it is a mess my friend.. economical mess has to do with some of the 60's and 70's society values. In USA we are used to be in debt in some way and it is OK. In other countries debt is very minimal or even doesn't exist.
cos its worthless!
Real economics and financial awareness are not taught in most of our schools, so everyone believes whatever is portrayed by the media.
Bottom line is because no one believes that the worst could happen to them until it does. For the most part, the last twenty years has been a golden era (especially for those at the top of the socio-economic ladder) and no one understands that at some point the party will end and the band must be paid.
As many studies are proving about all forms of behavior (not just economic behavior), most people have a very poor understanding of actual risk. They will engage in extremely risky behavior (not realizing the risk) while they will be afraid of things that are almost certain not to happen.
George W Bush may get them blown up tomorrow so why not have a little fun before it happens.
The american dream had always been about owning things .. particularly a home. Generations ago, if you worked hard, you could usually get ahead. College guaranteed you a higher paying job, but you could also make a good living without it, in a blue collar job.
Now, going to college is like going to high school used to be .. it's just assumed everybody has a college education. So kids get out of school, have no job, and are already deeply in debt with a student loan. And unfortunately, these new grads assume they're going to start making big bucks (after all, they have a degree!) so they spend money they don't have. All those high paying manufacturing jobs are long gone, so you have everyone scrambling for the "professional" jobs.
Of course, it's not just younger people that are irresponsible. Plenty of older people have fallen into the trap of keeping up with the Jones'. And some people get into trouble because they don't think about what would happen if they lost a job or suffered a major illness. Some people get into debt because the cost of living is so high. Not everyone has shopping addictions. Some people are just struggling to get by on low wages, and if your kids need school clothes, or the brakes on your car just went, sometimes they just have to say "charge it." They're not ignorant, sometimes there's no other way.
I'm always amazed how common it is now for people in their 20's to be buying homes. When I was younger, I rented, and saved. When I bought my home, I didn't listen to what the bank told us we could afford. I bought something almost half the price. I didn't feel compelled to compete with my friends and siblings who, even though they didn't even have children, bought huge homes for "entertaining". There's just me and my husband. We have a 1,200 sq. ft. home in a nice neighborhood. Had no desire to live in the upscale neighborhoods. We buy new cars, not used, but we keep them for 8-10 years. I only chose cars that are fuel efficient and reliable. A car or house should not be a status symbol.
We've been in our house about 16 years now. It's an older home, and always needs some work, but I would never consider a home equity loan. Shortly after we bought it, it needed to be painted, and the windows were bad. We took out a 5 year personal loan, and had it sided, replaced all the windows with energy efficient ones, and had the roof done. We didn't take out any other loans or credit until that loan was paid off.
I'm 53. When I was in high school, I was told Social Security would not be there for me. I resent paying into it my whole life, knowing that it won't help me, but I guess you have no choice. I have some retirement savings, ira, etc., but I'm actually more concerned with living comfortably now, and keeping my debt as low as possible.
I'm glad you sold your home and paid off your debts. But you sound a bit self righteous about it. If you were always living within your means, you wouldn't have had to do that, so stop being so hard on other people. You're no wizzard of finance, making earth shattering predictions. It's always been smarter to live within your means. If you were doing that, why did you have to sell your house?
There will always be idiots who aren't financially responsible. There will always be banks and governments who are anxious to take advantage of them. (who ever thought an adjustable rate mortgage was a good idea?!) Society as a whole is sliding downward - both morally and financially. Economics and values of all kinds need to be taught in school and in the home.
The answers post by the user, for information only, FreeLawAnswer.com does not guarantee the right.
Answer question:
More Law Questions and Answers: