If you’re in deep debt, who do you blame? The credit card company? Your school (for not teaching you proper personal finance)? Your parents? Yourself? Well I had a good conversation on IM with Ana from DebtFREE-Revolution.com about her recent article about Kids and Credit Cards, and I have my own opinions based on experience and observations.
Current Mortgage Crisis
I won’t spend much time on this topic, but in my opinion, the major blame for the mortgage crisis can be assigned directly to the consumers, myself included. We signed up for an interest-only loan AND 100% financing when we bought our house. After rethinking my position some more from those original articles, the main reason we chose those options wasn’t for future planning at all; it was because we wanted more than we could afford. We made a gamble on our future and luckily it’s paying off so far (at least in equity).
Additionally, I can directly blame ourselves for not understanding the terms of our loans. We were in a rush to buy because 1) the market was still hot and 2) we only had a couple months before our rental lease expired. Do you think I had any idea what the LIBOR index was when I signed a loan for $311,000? Heck no! But I didn’t bother doing any more math than what the mortgage broker was doing for us. So I accept full blame for my shortsightedness, laziness and ignorance.
But you might ask “Why don’t you blame the mortgage broker for not educating you more?”. Good question, and I’ll answer that in a slightly roundabout way…
Who is RESPONSIBLE vs ACCOUNTABLE?
I’m going to take a hard stance here and place some blame on my parents. No wait, before you think I’m bashing them or belittling them, hear me out first.
Up until you turn 18 (in the U.S.), your parents are your legal guardians, protectors and (unofficial) educators. Even though YOU are accountable for your actions throughout your life, your parents are responsible for preparing you for “the real world”. Don’t try to blame the schools for not teaching you personal finance. It’s not their job to make you a responsible adult! It’s your parents, through their actions and words, that are supposed to teach you everything you need to know to be an adult.
Schools didn’t always exist. Schools were created when people wanted to learn more than they could from their own parents, or for richer parents who didn’t want to take the time to educate their own children. A school and its teachers are not meant to be your parents, no matter how much some parents wish them to be. They are merely supplementary education, including kindergarten and grammar school. Do you, as a parent, think you can wait to teach your child to count until they’re 5 or 6 and heading off to school for the first time?
Actions vs Words
So if its your parents who are responsible for making you a real man or woman before 18, then how do you learn from them if you’re not sitting in daily classes with them? Simple, through their words and actions. However, I will emphasize one MAJOR thing here:
KIDS LEARN FROM THEIR PARENTS ACTIONS, NOT WORDS!
Sure, some lectures or comments can slip through the cracks and enlighten a child, but first and foremost your kids learn from how you live your life. My parents smoke, but they scolded me when I tried smoking. How am I supposed to think smoking is wrong when my parents do it? Luckily I don’t have addictive tendencies so I didn’t get hooked, but the main point here is that the “Do as I say, not as I do” attitude NEVER works.
And when I saw my parents leasing a new vehicle every 4 years, what did that teach me? That it’s good to have a shiny new car in the driveway and the payments were meaningless. Why do you think I went through cars like candy in my first 5 years out of college? I never learned the value of keeping a car long-term, or buying used.
My parents are now working to improve their finances by paying down debt a little faster than they accrue it, and they’ve had the same SUV since 1998, so they too can learn, but the message here is that I saw how they treated their finances and just accepted their acts as truths. They kept telling me “Mike, money burns a hole in your pocket. You spend it as soon as you get it!”, but I never saw them putting money in their savings account. If they did save money, then it would be very valuable to have shown me a real-life example of savings in action. Words meant nothing to me when I had money in my pocket and toy store in my eye.
But I did say one other important thing above; that YOU are accountable for your actions at all times. Our creator made us with free will (whether you believe in God or not, you can’t deny free will, even with fate). We also have that gut feeling about what is right and wrong (aka our conscience). Just because our parents didn’t warn us that jumping off a bridge is bad doesn’t mean that it’s ok. Ultimately YOU must understand the consequences by thinking it through, whether your 5 or 50. You should always take your personal experiences as well as education from others, and mix it all in with pure ingrained common sense to select the appropriate action, and that’s something you can do at any age.
So Now You’re an Adult
Ok, so I placed most of the blame on parents for not educating their kids properly about personal finance, but now you’re an adult so who do you blame for your daily mistakes? Well, you can only blame your parents for your foundations, but you can always rebuild your foundation or make new additions. Marketers are trained in persuasion, so should you blame them for making you spend? Should you blame the credit card companies for giving you a card with a high limit? Do you blame your friends for peer pressure? (The answer is no because it’s only pressure. Your friends aren’t making your decisions.)
Based on my own mortgage example, I knew that I should have done more research, but I was lazy and too trusting. I should have done sufficient research to fully understand the risks and details of all options, including just not buying a house at all, but I didn’t do any research. I can blame my parents for not training me on performing due diligence on all financial transactions, but here’s another key idea:
ONCE I KNOW THE PROPER WAY TO DO SOMETHING, I CAN NO LONGER BLAME ANYONE ELSE FOR MY MISTAKES!
The first time I bought something and then had buyer’s remorse (probably around 6 years old), I instantly knew I should have done more research. I can only blame my parents for not helping me understand the feeling I had (why I had it) and how to perform the proper analysis for my next purchase (or any decision). But after that initial realization, the onus was on me to do it right the next time. It’s called learning from our mistakes.
Doing Things Right
And so now you’re an adult, in debt, and continually making poor decisions…so what do you do and who do you blame? Well how about this: stop trying to blame anyone, including yourself. Just get over it, learn from your mistake (and others’) and move on. Don’t dwell on all those things you did wrong and wish you did some other way. Regret doesn’t fix your credit card debt, your car loan, your foreclosed home, your marriage problems, or any other problem in your life. Blame is for sissies.
Break out of that cycle of debt by learning the proper way to budget and research, and then growing your knowledge with continual education. Be wary of marketers selling you on something new and shiny, and also beware of trying to “keep up with the Jones” because you need to continuously instill and practice financial discipline and stability to get ahead in your life. Keep learning from your own mistakes, because you’ll never be perfect, as well as others’ mistakes, because they aren’t either.