We must all live within our means

Paul Barada

I never really considered that commenting on a world-wide economic crisis would be a topic for a column titled, “Rush County in Perspective,” but to the extent that the impact of home foreclosures and rampant credit card debt are realities here, as much as anywhere, the topic has relevance. One of the nice things about living in a small community is your local banker probably isn’t going to encourage you to buy a house he or she knows you can’t afford. Our local bankers have too much common sense for that and, in most cases, they know who can and who can’t afford to buy what. Not everybody, however, deals exclusively with local bankers, although they probably should – for their own good. There are all sorts of other lending institutions out there who made home loans to people they knew would probably never be able to keep up with the mortgage payments, but guess what. They didn’t care! They also pushed variable rate mortgages, peddling the notion that interest rates would probably go down, without encouraging the borrower to consider what would happen if interest rates went in the other direction!

Another aspect of the problem, to which I’ve alluded before, is the notion of an “entitlement” society. Always popular with the liberal left, far too many people have bought into the notion that they’re entitled to a whole cornucopia of things: their own home, “free” health insurance, “free” education, high-paying no-skill jobs, and the “right” to have all the consumer goods their credit cards will allow them to purchase.

The other half of the problem has been the easy acquisition of credit. Credit cards are as easy to get as the common cold. Millions of people have spent themselves into millions of dollars of debt that it seems unlikely that they’ll ever be able to repay with the exorbitant interest rates they’re being charged. Every kind of “come on” imaginable has been used to encourage people to sign up for more credit, the most common of which is the promise of a low interest rate for the first six months or so. Miss a payment, though, and see what happens to that low interest rate. That 5 percent or 6 percent, or even 0 percent rate that induced people to sign up for the credit card will magically skyrocket to 20 percent or 22 percent - and there’s nothing they can do about it! Once they have their hooks in you, getting unhooked is almost impossible.

What it all amounts to is that we, as a consuming society have been suckered into living way beyond our means. Not only are people living in houses they can’t afford, but they’ve spent themselves into credit card debt they’ll never be able to pay off. How many people do you know who make the minimum payment on their credit cards each month? More than one, I’ll bet. Making the minimum payment means they’ll never be able to pay the balance on that credit card down to zero. The only way to make a credit card work is paying the balance in full when the statement arrives each month and, even more basically, living within one’s means. Credit cards have made it way too easy for way too many people to spend themselves into overwhelming debt. Add to that the housing crisis, and it’s going to take a long time for the economy to recover and for people to learn the difficult lesson about how to sensibly manage their money.

In days gone by, lots of people used to buy things they needed, not just wanted, “on time.” Anyone over the age of 50 can remember when you could buy that new refrigerator or new stove “on time.” But the transaction was between the merchant and the buyer. There were no credit card companies standing between the merchant and the buyer. Interest rates were reasonable, if interest was being changed at all, and buyer and seller knew what was expected. And if the buyer fell too far behind, the merchant would simply come and take the refrigerator or stove back.

Over the last 30 years or so, however, with the emergence of credit card companies, instead of buying one badly needed product, we’ve come to believe that we can have it all! Not necessarily things we need, but all the things that mass advertising has told us we want and, with that simple little credit card, can have tomorrow – if not sooner – without giving much thought to the day when the bill would come due. All the housing crisis has done is expand the list of things we want, to include houses we can’t afford.

The real danger is that we’re quickly becoming, if not already, a debtor society. And when the bill finally does become due, I fear, thousands, if not millions of families are going to find themselves in dire financial straights. If you doubt the magnitude of the problem, start paying attention to the ads that seem to be offering an easy way out for people drowning in credit card debt which, of course, isn’t their fault at all! Just call the Ajax Credit Counselors and, (for a fee, of course), they’ll help you get out of debt in the wink of an eye! (Of course they will!)

The time has come for us as consumers to start living within our means, and if that means saving for that fabulous high definition flat screen TV until it can be paid for with cash, we’ll have taken the first step toward financial responsibility – and discovered that we only have to pay for that TV once, not two or three times by financing the purchase with a credit card. The time has come to get rid of every credit card we own – but one – and paying off the balance on that one card down to zero as quickly as possible before ever using it again.

That’s —30— for this week.



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