Greed

One aspect of our currently shitty economy that really bothers me is the mortgage crisis. I hate the greed of the banks to approve huge mortgages without even check people's income. I hate the greed of the people who needed homes that were obviously out of their price range. Sure, a lot of people got hurt when the home value decreased or when when they got laid off. They could have planned better, but it was largely unexpected. Others couldn't pay when the variable interest rate went up. They should have better understood the deal, but they couldn't have known exactly how high the rate would end up being. But others admit that they couldn't pay the mortgage to begin with. What were those people thinking? The only explanation to me is greed and materialism. They wanted a nice house and were too blinded by that desire to think it through.

Today, I read this story in The Washington Post. Apparently, the biggest home built by the TV show "Extreme Makeover: Home Edition" is being foreclosed on. How could that happen? The family didn't have to pay a mortgage. They were given money to pay the property taxes. They were even given money to put their kids through college. They should have been happy and financially stable. Why then the foreclosure? Well, apparently, they used this gift home as collateral on a $450,000 loan that they now can’t pay. Pure Greed.

Now, I must admit that I’m a quite the consumer myself. I’m often buying stuff I don’t need. I’m trying to be better about that, but it’s how I was raised. With stuff. However, I was also raised not to go into debt. I use credit cards, but I pay them off monthly. My car is currently paid off, which is why I don’t intend to buy another for a while. Sure, I used to have a mortgage. (It was pure luck that I sold before the market crashed.) But I had bought a home that was no bigger than what I needed (an 800 sq. ft. condo) with a mortgage payment that left plenty of extra income for other expenses as well as discretionary spending. I always “pay myself first” by having retirement and other savings pulled out of my bank account before I even see it. I have lots of clothes, but few are designer (unless bought used or on serious sale). I have a modest car.

I’m not a good representative for minimalism. (Something that, largely for environmental reasons I’m working to change.) But I can be an example of living within my means. And I'm proud of that.

Too many people look at debt as a fact of life. I like to look at debt as a last resort for something important that I couldn't otherwise have right now: an education, a home. And even then, just because I can get a loan doesn't mean I should take it. If you are going to sign up for a 30 year mortgage you should start by making a rough financial 30 year plan. You say you can't think that far ahead? Then you shouldn't be taken on debt beyond time periods you can imagine.

People say renting is throwing money away, but those people must not be looking at the truth in lending page of their mortgage document. Interest payments are throwing money away too. At least with renting I can walk away with 60 days notice.