Pete McMartin, a regular columnist of the Vancouver Sun, has a thought-provoking commentary today. What with the recent economic disaster in the United States, we Canadians have also been touched by fear that our own economy might collapse. So far, so good.
But...
How many Canadians have huge mortgages, lines of credit, and credit-card debt due to home renovations, new cars, flat-screen TVs and all the up-to-the-minute toys and gadgets for themselves and their children?
Apparently, 25% of Canadians save no money at all and 20% of RRSP holders are cashing them in to pay for daily living expenses. (for my USA friends, RRSPs are registered retirement savings plans)
In an Ipsos-Reid poll done in May, it shows that 78% of those polled don't have enough money to cover emergency expenses for three months. What happens to these people if they suddenly lose their job or are faced with a serious illness or injury? It appears that 65% of these people consider their line of credit to be their emergency backup.
So as Pete McMartin puts it, "we've become a society of spendthrifts..."
But why?
One theory is that we have let our greed get the better of us. Financial institutions and marketing companies use that greed to get us to borrow more, spend more, and live the high life on money we don't have.
A personal example: I wanted to do a few renovations on my house. I need about $35,000 so went to my bank to see what they could do for me. Not only did they approve the $35,000 but also gave me a credit line up to $100,000. How many of you would be able to resist that?
We Canadians are a lot like our neighbours to the south. We, also, are willing to allow ourselves to be caught up in the throes of greed and a desire to keep up with the Joneses.
So when we hear about the greed on Wall Street (or in Toronto), are they "really" and totally to blame for the ruination of the economy?
I like how Pete states it at the end of his column: "Wall Street and all its permutations may have financed our glass houses - with their granite kitchen countertops and flat-screen TVs and new cars in the garage - but we willingly lived in them." Your thoughts?
9 comments:
Yes, we want, want, want! We have to stop and start living within our means, all of us! I'm just praying that we all get it together in America!
He is absolutely right. We all need to take responsibility for our own borrowing. No one forced us to sign for the loan...
A few years ago I made the decision to cut up my credit cards and not buy on credit anymore. If I can't pay cash for something, I don't buy it. Occasionally I go without, but I have absolutely no debt. It's amazing how freeing that is.
The problem is, advertisers create the markets. We all need the latest gadgets, cars, TVs, computers, cell phones, iPODS, new fashions every season, etc., because the advertisers tell us we need these things, and glassy-eyed, we go out and buy them. And everything is built with planned obsolescence, so we have to buy new things because everything wears out so quickly.
It is funny that I should read this today (via The Bold Soul) as I've been thinking about this very subject. Three years ago I went bankrupt in the UK, after years of spiraling debts driven by high living costs, banks pushing their money on me and of course my own desire for instant gratification and reluctance to live within my means. Greed I think is the wrong word though, I believe it's rather a case of trying to fill our empty souls with external things rather than from within.
I have been watching our politician's reactions to the Wall Street crisis in amazement as they blame everyone (especially each other) but not the people who overstretch themselves financially in the first place because they want all these things NOW, whether they can afford them or not.
These days I am trying to be much more sensible with my money but I have to admit that this is not always easy and I still find it difficult to take a long term view of my financial situation. But at least, like Jo, I pay for most things in cash nowadays, and if I don't have enough then I won't buy it.
I like the cartoon ... and also agree with what you have to say.
Some years ago every other letter that was delivered by the postman was an invitation to have yet another credit card or informing me that I was eligible for a huge loan .
Countries can not run their economy on credit - sooner or later something will go bust - and it has ..
I need/want to renovate my house, I knew I had to when we bought, its in the right area.We are doing one room at a time. We save but we also spend. Our mortgage is quite high, on top of insurances, gas/elec, water, council tax, phone, car. Can't think of anything else!!!! except food. I do not have a credit card, Husband does.He needs one for his travels. Pay it off every month. Live off husbands wages and mine goes into savings.
I get loads of mail, telling me I can have credit up to obscene amounts.
Spendthrifts? Maybe.
Nice people? Without doubt.
It is the same here in Oz. People get credit too easily, & don't or wont realise it must be paid for on a day of reckoning.
We are very careful with our credit card, & pay the full amount owing every month, so no debt. Young ones don't seem to see it that way. I do think financial institutions should have a moral obligation to try to inform the borrower of pitfalls. At the end of the day it is all about personal responsibility.
Another economy we use, is garage sales & op shops. There are plenty of 'luxury' items out there, going for a song.
The economy has even affected those of us who don't use credit. I received a 500 stock several years ago instead of teacher benefits at a parochial school in Long Beach where I taught just one year. I have just let it grow and it doesn't do really well but it had amassed about 40 dollars more than originally. I got my report this month and I had not only lost that interest but it plummeted down to 30 dollars less than original value! I should have cashed it in a long time ago. . .
I don't use credit cards. . . never wanted one. Oh--well Macy's gave me one one time so I could get a bigger discount on the item I was paying for. . . and I went upstairs and paid it off before I left the store. lol
Yes, I want to get a new digital camera and upgrade my computer and and and but that is what I am saving for.
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