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Three Reasons You’re In Terrible Shape Financially

29 August 2010 2 Comments

It’s truly astonishing how terrible the financial state of so many people is these days.  Really, it’s incredible and depressing.  While everyone’s situation is different, there are three major reasons that have contributed to this being a major widespread disaster.

Reason #1 – No Discipline

American’s have really moved away from discipline.  Maybe it is a result of a booming standard of living or ease in our lives, but discipline is definitely a thing of the past.

What has replaced it is a sense of flippancy regarding our finances.

Instead of taking our finances seriously, especially in the area of spending, we are very flippant.  For example, if we’re out and about, and simply “feel” like something, we’ll go spend the money and get it.  This is true for a $4 latte from Starbucks or a smoothie or a new gadget.  We don’t really consider what we’re doing to any degree of seriousness.

It takes discipline to truly weigh each financial decision or spending decision during our lives.  Because things have been easy, we haven’t had to be so disciplined.  Well, this is definitely changing as people are cutting back in droves.  This is probably a good thing.

Reason #2 – Public Policy

The economic policies that have been legislated encourage spending and not saving.  This is very dumb, but there’s a reason for it.  Our great leaders, many of them who have never run companies and some who haven’t even worked a job in the private sector (ahem, Ben Bernanke), have long determined that you need to be encouraged to spend your money because it will benefit the economy and make us all the more prosperous.  Yes, we know how that has worked out.

Need some examples?  There’s none bigger than the fact that we are able to deduct our mortgage interest from our taxes, but have to pay taxes on interest earned from our savings.  Incentivized to borrow money and disincentivized to save it.

Even today, all the policies being implemented to fix our economy are all about encouraging us to loosen our wallets and part with some of our money.  Spending is the answer they think (incorrectly).

Reason #3 – Consumerism

This is a combination and related to the previous two reasons, but consumerism has really destroyed much of the financial health of this country.  We’re obsessed with things.

Many of us upgrade our giant television screens on an annual basis.  Or drive a new car for two years before buying a new one.  Or throw out a pair of shoes that is slightly used.  Or cashes out our home equity to buy a boat.  Or borrows money to buy things we can’t afford.

Interestingly, I think the consumerism culture peaked a few years ago.  While we won’t know for sure for many years, I think we will slowly (very slowly) begin moving away from consumerism over time.  I think a shift is happening where Americans are slowing down the debt and being more content with what they have.  Again, this is barely just beginning and we went so far into the consumerism black hole that we’re still barely breathing, but I think the start of the shift back towards normalcy has begun.  We’ll see.


  • andrewbpaterson said:

    Mr. Author, why do YOU think you haven't become a slave to any of these points? (assuming you're not…)

    WRT #2, here is Canada, we can't deduct mortgage interest. We have to methodically implement something called the Smith Manoeuvre to reap that benefit, and it's not a direct deduction of mortgage interest.
    WRT #3, The Story of Stuff is a 20 minute long movie which talks about consumerism at great length, reasons for it coming about, and what it's doing to society, the economy, the environment, and more…

    Smith: http://www.smithman.net/
    The Story of Stuff: http://www.storyofstuff.com/