We are responsible for the mess we are in

These days, Canadian and American news papers and financial forums/discussion groups are full of stories where people describe that they are in financial mess. Whether a person earns $30,000, $60,000, $100,000 or more, he/she is in financial trouble with zero savings and lots of debt. These people blame everyone but themselves for the situation they are in. Well, current economic downturn might have compounded their problems, however, I feel that these people are themselves to be blamed for the financial mess they are in. In my opinion, the basic reason for the north American people's problem is that they live beyond their means. They don't understand the difference between the desire (want) and need. They want to have everything -- a new car every three years, a new TV, luxury vacation at least once a year, eating out in restaurants every week, moving to a bigger house every couple of years, and so on. Somehow, they feel that their living standard must continue to improve and they must continue to acquire new luxuries. If they don't have money they will take expensive loans on credit cards, and then more loans, and so on, until everyone stops giving then loan.

In Canada and USA, most people want to have everything of their own -- their is no concept of sharing. For instance, most people living in the suburbs of Toronto want to have their own swimming outdoor pool, if they have space to build one. These people spend thousands of dollars to build and maintain these swimming pools that they can use only two-three months in summer, but would not like to use a nice indoor heated public summing pool for $2 per use. Similarly, each of their child must have a separate bedroom, separate computer, separate iPod, separate bike, separate sports equipment, and so on.

New car, new house, new clothes, and so on is fine if we have extra money. But, why should I get tempted to buy a new car when I see a new model, if my existing car is running fine. I think most people follow this typical behaviour because other are doing like that. I remember that my son, when he was in Grade 1 or 2 once drew Nike logo on his shoes, may be just to feel better that he too had Nike shoes. When I was in Grade 6, I created a homemade booklet to collect stamps because other students in my class used to collect stamps. This copycat behaviour may be acceptable in the early period of the life, but if continues in the adult life, it leads to problem. Why should I copy what others are doing? Why should I buy a new car because others are replacing their car every three years? I should do it only if I have ready cash and my current car is giving me trouble. In case, my car is running fine and I have a lots of extra cash and I want to get a new car, that may be acceptable but acquiring a new car on loan when the current one is fine is sure no-no.

I decided to write this blog after reading the story of Ana Tacan on the Internet. The family bought earning about $60,000 a year bought a house for $135,000 in 2001. And then continued to increase their expenses by taking loan agains the house and ultimately lost the house. You can read the full story by clicking here.

Fortunately, the first generation immigrants from Asia are financially better organised that an average north American. These people are a little conservative, do not generally acquire credit card debt, and try to payoff their home mortgage as soon as possible. However, the second generation immigrants almost follow the footsteps of average American!