The New Depression Recession: In a Hurry to Reach Financial Ruin?

If you remember back in the 80's, the country group Alabama came out with a song. The opening lines of that song were, "I'm in a hurry to get things done, I rush and rush until life's no fun. All I really gotta do is live and die, but I'm in a hurry and don't know why."

Did any of us ever figure out why we were in a such a hurry? Was it so that in 2009 we could witness the possible financial ruin of our nation (maybe even the world)?

In early adult-hood most families or couples moved into an apartment or a rental home. They would work, save their money and build up their assets before they even considered a major purchase like a home. The average age that a couple purchased their first home was generally in their early thirties. They had worked hard and earned it. Fast forward to today and what a difference we see. Many of us are in the 40+ age group and by this time we have bought, sold or even lost at least two homes already. Why? because we were in a hurry to get things done. We wanted to skip the part where we worked hard, saved our money and were able to actually afford a home. Of course mortgage and lending companies made it easy for us to sink our "assets" with subprime loans. Credit card companies made it easy for us to go into more debt than we could afford in two lifetimes much less the one lifetime we're given.

I read a (poorly written) article. One paragraph proclaims:

A good benefit of a subprime mortgage is that you don't

have to take the time to raise your credit score. This can

take years of payments and credit building and many people

just don't have the time for all of that.

I think it's self-explanatory- we didn't want to take the time to the earn the money. Skipping that part may not have been such a good idea.

The over 40 age group has been irresponsible, but not as irresponsible as the generations behind us. How many people in their early 20's do you pass riding around in flashy new cars? Meanwhile you're driving around in your standard, not so stylish, old standby. Can they afford that flashy new car? Chances are that car cost more than your first home purchase. Your parents could have purchased almost 3 homes for the price of that car. It's very doubtful they can really afford that car, but with lending policies as lax as they've become it's possible for everyone to live beyond their means.

Twenty years ago you needed a down payment to purchase anything. These days you can get away without one. It used to show a sign of responsibility by saving money over several years to make a down payment. Banks wouldn't look at you twice if you didn't have a down payment in hand when you applied for a home loan. People did not moan and groan about it either. They knew what it took to build credit. The younger generation, for whatever reason, decided they didn't want to wait, or build credit- they wanted it now and creditors were more than happy to appease them.

I believe this irresponsible attitude towards money and saving (or lack of) has led to our economic decline. If an income is $50k a year, and you live a $200k a year lifestyle, someone has to foot the bill and eventually it will catch up to someone. We can't blame the buyers any more than we can blame the lenders. But, the lenders have been educated in money situations, we trusted them to make solid financial decisions and that should have included denying more loans than they did. Who were they afraid they'd make mad? Were they afraid they'd hurt someone's feelings by not giving them a loan? So what if they did? They wouldn't need a $700 billion dollar bail-out now if they had been more selective with their approval terms. They were, in fact, supposed to be smarter than us. The subprime loan made it possible for people with poor credit to get all the money they needed to live more lavishly than they could afford. I'm not a banker and my financial knowledge is limited, but even I know this isn't good business. Why didn't the educated abide by this?

Another major factor to this economic decline has been image. We wanted to impress our neighbors. Neighbors who, by the way lived in neighborhoods we couldn't afford. It was too embarrassing to live in a meager apartment or a small house. We had to prove we were somebody and have people think we could live in style. In keeping up with the Jones' we dug a steady hole. How impressed are our neighbors now? How important is it that we felt we had to impress them in the first place? It doesn't seem to matter now. Our neighbors, whether they admit it or not, are probably feeling the same losses we are because they can't afford their lifestyle any more than the rest of us.

In the post-era of The Great Depression, people began to hoarde money and knew the value of a dollar. They knew it would take saving money for major purchases. Unfortunately, many of those people are now gone and can't re-tell their stories of struggle and survival. Somewhere along the way we lost sight of the things they taught us. We forgot their hardships and began to squander away our money because we wanted to live life to the fullest in the here and now. It's very likely possible that we will also have to relive some of their hardships due to our own irresponsibility. It may not be to the degree that those before us suffered, but in this day and age when people begin to lose their $125k home and it's replaced with a $50k home, they will indeed feel like they are suffering tremendous loss.

Many home buyers of today skipped the $50k home, the $75k home and went straight to the $125k-$250k home. They did not work their way up into a nicer home. They will feel hit the hardest. The bright side, if there is one, is that maybe people will get to simpler times and begin to enjoy the simple pleasures in life again. We may even learn how to make a human connection again. We will learn the value of a dollar (which at this point is extremely low), we will learn that we should be rewarded after hard work, not before. We will learn that the system of checks and balances was set up for a purpose. We strayed from that and now we get to reap the rewards of trying to impress our neighbors and spending more money than we had.

There are also another group of people. They didn't want a fancy house, they just wanted a nice, comfortable home. They did not buy above their means, but due to lay-offs or other unforeseen problems in the job market, they're suffering as well. Many of them did things the right way, saved some money and made educated decisions. But since the economy does work together as a whole, they also have been punished.