You can take this to the bankPosted: March 16, 2013 | |
I was brought up that it was rude to talk about money. How much someone made, what something cost—it was right up there with religion on the list of things tacky people talked about. No doubt that’s why it took me years to figure money out, to feel comfortable dealing with financial issues.
I consider myself selectively cheap. I have a full time job and own what is fast becoming a full time business, but I refuse to hire housekeeping help. Been there, done that, it’s not the money, it’s that no one can come close to my expectations of clean. I read the grocery flyers religiously every Thursday and clip coupons with such dedication, it’s as if a dollar off sour cream is going to make the difference between having a roof over my head or not. I hoard sale toilet paper and dry pasta. On the other hand, I think we just picked the second most expensive carpeting in the store for our bedrooms. And I’m been romancing a certain classic Michael Kors tote in a way that borders on the obsessive.
Yes, I could afford it. And since it doubles as a business bag, I can probably even write it off. But the fun part is in the wanting, not necessarily the getting. I don’t need everything I want—and need it now. I’d rather spend time thinking about something nice than spend the money to get it.
Maybe that’s why I cringe when I read the news articles about how collectively, Canadians are in debt—personal debt that doesn’t include mortgages—at a rate of 163% of their income. Basically for every dollar they make, they owe $1.63. I feel a bit blessed – for most of my adult working life, I’ve made enough to cover the necessities and have some left over for the niceties. I remember being shocked when I realized that I actually had a reasonable net worth and that somehow, over the years, my love and I had become comfortably middle class.
But I know how people get in over their heads so easily.
Forget 22% compound interest credit cards and “Don’t pay a cent until Hailey’s Comet passes” deals at the local furniture chain—those are the obvious pitfalls. No, it’s the trusted authority figures, those blue suits at the banks that you don’t see coming.
Last year, when my love and I were debating renovating versus moving (renovating won—for now), we did the responsible thing and got pre-approved. We don’t have any personal debt beyond a zero interest car loan—no credit card balances, no line of credit—and if we were to sell our current home tomorrow, we’d walk away with about half the value in our pockets. We both have decent jobs, some investments, some savings; I’m good for a small public service pension. We’re the people banks love. Perhaps too much. Because it took every ounce of self-control for the two of us not to fall into a heap on the floor of the loans manager’s office, giggling uncontrollably and gasping for breath when she suggested with a totally straight face that we were good for a mortgage of a couple grand shy of a half a million dollars. We waited until we got into the car to let loose.
This is not bragging. Yes, I’m proud of how we’ve ended up, it took hard work and smarts and the fact that my love has the money management skills of a Wall Street tycoon. No, this is about the sheer nuttiness that happens in mortgage and loan departments. It’s the avoidance of reality that seems to hang in the air in bankers’ offices. Mathematically, we could have made the payment that such a gargantuan loan required provided neither of us ever got sick or lost her job or the interest rate didn’t increase so much as a fraction. And provided we were willing sacrifice luxuries like the occasional movie. Or a new pair of pants. For 25 years. On paper, in theory, it was affordable. Barely. In practice, it would have been more stress than either of us would want to deal with to end up with far more house than we needed.
One would have thought that a bank would recognize this.
Thing is, this wasn’t our first rodeo. We’ve bought houses before, had loans and mortgages. We know better than to believe a report spit out of the bank’s computer. But there are many people out there who would. After all, they’re banks. They’re money experts. If they don’t know what you can afford, who does?
It’s not just mortgages—my love and I spent the better part of last Saturday morning sitting in the office of my bank’s small business specialist signing papers and setting up seed’s business account. After all the questions—and there are a lot of them when you set up a business account—had been answered, my love’s POA authenticated, the special silver business debit card handed over, and phone and online banking services set up—I was asked three times if there was anything else the bank could do for me. Was I sure that was all I needed? Wink, wink. Nudge nudge.
The poor guy seemed at a genuine loss of what to say when I didn’t ask for a company credit account or small biz loan. And just a little hurt.
Too, a few years ago, I applied for a personal line of credit when I realized I had none in only my own name and if anything happened to my love, I’d have to work up an individual rating all over again. I asked for $10,000. Seemed reasonable. Excessive even, considering I had no plans to use it. The bank apologized, saying they couldn’t approve that amount. I’d have to take $15,000.
I’m not absolving anyone who is in debt of all blame. The banks and credit card companies can make the offer, but no one is forced to take it. Ultimately, everyone has a personal responsibility to know what they can afford and recognize when they’re living beyond their means. Even if that means taking what some loans officer says you’re good for with a grain of salt.
That’s where the problem lies. Believing the abstraction of the math and not the reality of the income. Because it feels good to think you can afford more than you can. At least for a little while.
But money management skills have to be taught. And for a lot of families, it’s still a taboo subject. Maybe we could shave an hour a week off volleyball or soccer time in the school system to teach kids about handling money. Perhaps a financial component could be part of the math program?
Let’s face it, few of them are going to be a professional athlete or end up solving equations for CERN.
But they’re all going to need a bank account.