Satisfaction from hard work, not high debt

Dear Readers,

For Thanksgiving last year, my family and I went on a cruise to Ensenada. I am sure many of you are familiar with drinking Dos Equis on the patio of Papas and Beer and traveling to the blow hole. But one thing I never hear talked about is the fact that so many homes along the hillside are only partially built.

This is because, according to my well-versed friend, homes not too long ago were built only with cash on hand. Mexicans didn’t have a financial system that would loan out hundreds of thousands of dollars to be paid back over time.

People would build on the land one room at a time, building only whatever they could afford.

Fortunately, the United States government saw the advantage of build now, pay later and profit off interest.

Now, Americans “own” homes. Well, you get your mortgage and a deed of trust but the bank still owns your home until you pay it off. But you still get to call it your own.

This buy now, pay later and profit off interest worked so well that the credit card industry formed and capitalized on society’s desire to have now and pay later.

So, here we are today. A society that owes so much more than we actually own, and we keep spending.

First, this foreclosure crisis is a reality Americans have never faced before.

Although there are still more people who have not defaulted on their mortgage than people who have, the foreclosure crisis is real. Millions of dollars of debt are either being written off as a foreclosure, or homeowners are being forgiven tens of thousands of dollars of debt because of hokey lending practices.

For a period of time between 2003 to around 2005, when the housing market peaked, all people would have to do was walk into a loan office, say they made a certain amount, put no money down, and poof! They own a home!

But with a catch: balloon payments in three years. People didn’t get the raises they thought they would, and the housing bubble basically burst. Home values started to decline and homeowners couldn’t refinance because there was no equity in their homes. And some homes were and are still worth less than their original purchase price.

All right, so now we can’t escape the reality of the foreclosure crisis, but credit cards work the same way.

Credit card debt doesn’t just go away, and the problem starts with the minimum payment.

When my credit card bill gets up to $500, my minimum payment is only $15. It would take me almost three years to pay off that bill, not including interest.

And for some reason, that is all many people think is OK to pay. But interest, late fees and overage charges pile up, and that new plasma screen and the pair of nice but unnecessary shoes cost five times what you would have actually paid if they were paid in full.

Do we really need to finance even the little pleasures in life we don’t really need?

And I keep hearing we are in a recession and well on our way to a depression, but when I go to the mall it is jam-packed with people carrying multiple shopping bags under their arm!

Am I reading the same news they are? I’m confused.

Have we strayed so far from taking pride in what we actually own and the key phrase, have paid off, we can’t help spending money we don’t have?

What happened to living within our means and being happy with what is actually, in all true meaning of the word, ours?

We have to stop spending so much on things we don’t need. We need to take a good look at what we can really afford before we topple over in debt.

Although Mexicans continue to come to the land of the free and the home of the brave, and most importantly the land of opportunity, something has changed drastically.

Although both the Mexican and American governments have their flaws, what are Americans checks and balances? Maybe using money we actually have to purchase what we need and want isn’t such a bad idea.

We need to be careful. We have to be accountable for our own actions.

What is the worst that could happen? All of our unpaid debt is just forgiven and we live our lives happily ever after?

I don’t think so.

We need to stop now and start focusing on what our true reality is — what we can afford and that it is OK to take pride in whatever we have (and don’t have).

Sincerely,
Michael Sullivan
Your editor