04/19/08 — It wasn’t magic: Earlier generations knew how to control their spending

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It wasn’t magic: Earlier generations knew how to control their spending

In the midst of the talk about credit crunches and a mortgage industry plagued with subprime borrowers, there is some insight into the struggles that American families are facing that seems clear to those who grew up in the Great Depression and scrimped and saved to buy their first house and car.

They hear the news about overstretched lenders and borrowers with few assets and lots of liabilities and they wonder — how did it get this bad?

One of the realities of the new economic struggles facing many American families is that part of the reason credit markets are so stretched and so many people are so close to serious financial problems is that spending habits are very different these days.

The truth is, some of those who are losing their homes to foreclosures, or who are buried under debt that just gets deeper and deeper, is that they simply are not denying themselves.

These days, if you want a new car or a big screen TV, you simply put it on credit — even if you know that your budget might not be able to carry it.

And if the children need a fancy new video game, you don’t think about it twice, the money will come from somewhere.

While there is a need to ride herd on those who prey on people who do not understand the credit system, there is also a need to explain credit and its pitfalls to those who end up having to use bankruptcy to get out of debt. And, unfortunately, there are more and more people just like that.

Credit crunches happen because people are too consumed by debt. They are exacerbated when families who are already struggling don’t learn to curb expenses and save for items they want rather than putting off the bills until tomorrow.

You don’t get ahead that way.

No presidential candidate’s economic policies or governor’s tax cuts are going to make a difference if people do not start learning the lessons those in the Great Depression generation have already mastered — if you can’t afford it, don’t buy it, and if you don’t need it, think about saying no once in a while.

The same principles are applicable when you talk about Social Security.

The original plan for Social Security was to provide a living for retirees who would live for a number of years after they stopped working.

Today, with lifespans skyrocketing and fewer and fewer people to pay the bills, Social Security is indeed in a pickle.

But think ahead.

Can you imagine what will happen when this generation of savers are not the recipients anymore?

More debt means less savings. Less savings means less available for retirement.

Get the picture?

America does not need a candidate with a magic wand to solve its economic concerns. While there are ways to make this country more prosperous and to provide more opportunities for all Americans, that alone will not make families better able to handle roadbumps and day-to-day expenses.

But any economic stimulus will mean nothing if Americans do not learn the secrets that have been the key to manageable family expenses and comfortable retirements for so many past generations — save, budget and think ahead to the future.

Published in Editorials on April 19, 2008 11:30 PM