It seems the Boomers kept taking so much equity out of their homes they’re finding it hard to retire. An article on the subject has this to say about the phenomenon:
Rising debt levels also reflect a psychological shift among Americans, financial advisors and economists say.
“People who lived through the Great Depression came out of that period with a great aversion to debt,” said Lori Trawinski, director of banking and finance with AARP’s Public Policy Institute. “As a culture we have loosened our opinion of debt.”
Loosened our opinion? How about completely giving in to it? Whether it’s the national debt, the annual budget deficits or our own personal spending habits, everyone seems to have just accepted that ever-more-massive numbers are a fact of life on this side of the ledger.
And in doing so, we are building our own literal living debtor’s prisons.
Even the spectacle of hundreds of thousands of Americans losing their homes in the recent economic downturn hasn’t caused a fundamental shift in thinking about debt yet. People still whip out the credit card to buy the latest iPhone, or take out tens of thousands of non-dischargeable debt to pursue increasingly questionable degrees that may or may not contribute to landing a job.
We didn’t get here overnight. Those who’ve been paying attention have been talking about the exponential growth in debt, and how one day there would be a reckoning.
Regular readers know that I’ve spent years teaching my Musketeers that “debt = slavery.” They understand the concept that taking on debt gives someone else a higher priority on your life and earnings that you yourself have. They’ve seen that in the last 20+ years their parents have bought only two new cars (and one used one–paid in cash–when having two vehicles became necessary). And now, as the oldest Musketeer is in his first semester of college (at a relatively inexpensive but highly praised community college) it’s still cash on the barrel. He worked for nearly a year after graduating home school. Between what he saved to add to what his mother and I put away, his AA degree is banked. We’re almost to that point with the Middle Musketeer, who graduates this year, and still have several years before the Youngest has college in his sights. We’ve explained that our goal was to have the first two years provided for each of them, but that if they want a full Bachelor’s Degree they’re going to have to play a larger role in getting there. That said, we’ve discouraged them from taking on any debt for school, which seems to have become a means of enslaving the last couple generations of graduates. Because of that, I have no intention of cosigning for any “student” loans. I would rather they alternate work and school, even if living at home longer, in order to graduate debt-free, than to get on the cookie-cutter mill of four or five years of school followed by a decade or more of loan payments.
I realize many people have entered a cycle of debt just to meet basic necessities. I also understand, as the article above points out, that attitudes in this area have changed substantially and thus peer pressure can be crushing. The Oldest Musketeer was one of only two in his high school graduation ceremony that didn’t have a declared college plan. But he’s also now one of of maybe two that doesn’t have a bank saddling him for a long ride even as he studies. I think that’s a good tradeoff, no matter how many eyebrows might be raised at first.
Take “the path less traveled” — and less leveraged. It’ll make all the difference…
“Be not one of those who give pledges,
who put up security for debts.
If you have nothing with which to pay,
why should your bed be taken from under you?”