Money Obedience

For most of the 20th century Americans stored their savings literally in their homes. Home ownership is the way most Americans accumulate wealth, and likely the largest divide between America’s have and have-nots can be seen when looking at those who own homes and those who do not. Home ownership is key to reaching financial goals. For example, many Americans borrow against the equity in their homes to finance their children’s higher educations, and in that way they help the next generation get a financial leg-up. With the rate of foreclosures now at such an extreme high, perhaps the wealth gap between homeowners and renters will be even greater after the economic dust settles than it was before. That is, those who held onto their homes in times like this might really turn out to be ahead of the game. Looked at from a sociological and historical perspective, maybe holding onto one’s home throughout this crisis is not such a bad idea. That is, if you can manage it!

I overheard two women talking on the uptown bus yesterday. One says to the other “It’s all those people who don’t know how to manage money why we’re in this mess. They spent and spent, bought houses they knew they couldn’t afford, and still can’t stop spending. They can’t begin managing debt – they never tried. Now look where we are.” The other says, “No, not everyone knew this would happen. And not everyone overextended themselves. Some people really thought they would be okay. And some people were okay and now are losing their jobs.” The first said, “Yes, but they should’ve seen this coming.”

As far as I know, the experts didn’t even see this coming. So how could the average Joe or Jane? My own experience tells me that lots of people who couldn’t imagine themselves in trouble are in trouble now. Look at me! My husband made way more than I do, and had 13 years at his firm. I am just now a few months into my second year on a new job. His job is lost, and now mine is the household staple. How could we see that coming? He was making money for the firm when he was let go! Also, we bought our house at a big fat discount (according to the market value of similar homes in our area at the time), and we put a heckuva lot of cash down so we could have a 30-year mortgage that we thought we might even be able to pay off in 15 years. If anything, one might say that we acted very conservatively given that markets (of both the stock and housing kind) were booming. Again, how could we see financial trouble coming? But we may very well run into trouble within a year, too.

Still, I’ll tell you, no matter what woman number two said to woman number one, she would not be convinced that those in financial trouble are to blame for their own condition. I suppose that there are many who think like that – that everyone in trouble deserves it. We like to think of our society as a meritocracy – that the have-nots and haves all get what they deserve. It would certainly make life easier to figure out if it was true. But reality is that the world just doesn’t operate so predictably. At times like these, average Joe or Jane has to figure out what to do next to stay afloat, or to just get by. We are doing the same.