blog @ xanatos.ca

Life’s Goal

I ran across this very interesting (but harsh) article the other day. It goes over some points about the dire U.S. financial situation, and spends a lot of time blaming the baby boomer generation for all the trouble.

During the current Bush administration, Americans’ savings rate actually went below zero, while household debt as a percentage of GDP soared above 130%, a doubling in 25 years. These figures prove that the apparent prosperity of the last 25 years was an illusion. Beginning in 1982, Baby Boomers chose to take the easy road. Saving, investing and living within your means were cast aside as “Old School”. Boomers were handed a better future through the blood, sweat and tears of the “Greatest Generation”. Through their hubris, they’ve squandered that better future, the future of their children and imperiled our entire capitalist system.

I agree with most of what this article has to say about the disastrous level of consumer debt in our society. But I think it's wrong to blame only the boomer generation for the situation. While the boomers are certainly part of the problem, I'm pretty sure that the children of the boomers--my own generation--are just as bad. Actually, we're probably worse.

My generation tends to live in houses we can't afford, drive cars we can't afford, and generally overspend on everything. Why? Because we all want the same comfortable lives that our parents have, but most of us don't want to spend 20 or 30 years saving up for it. After all, that'd mean we'd have to live within our means for decades.

Why do that, when we can just go massively into debt and have it all now? And who cares if having it all now could mean having nothing later on?

The problem with borrowing, of course, is that one day you won't be able to borrow any more, no matter how badly you need to. By then, your high interest payments and large debts will make it impossible to save any money for the future, and that will pretty much guarantee that you'll be poor when you're old.

Obviously none of us want to be poor when we're old, but I suspect that many of us make that choice long before we're in our forties.

Another way to look at this is to understand that accumulating wealth is one of the most important life-long projects that you can undertake. And you should get started early.

You don't need to be fabulously rich by the time you retire, but surely you'll want to be more than just debt-free. You'll want to be comfortable and secure, and you'll want to completely own your home. It's also best if you can "live off the interest" from your wealth, rather than slowly spending it away and hoping that you die before it runs out.

I know it sounds kind of shallow when I say that your future happiness depends on accumulating wealth now--but it does. Just ask any elderly person:

• is it harder for you to get hired now that it used to be?
• can you find the energy to keep working forty hour weeks, or learn a new career, or get a promotion?
• is it harder now to "make do" when you can't afford the things you need?
• would your life be better if you could hire a maid or a nurse to help you?
• what if you have to ask your kids for money that you'll never be able to pay back?

The simple reality is this: it's no fun to be broke when you're young, but it's absolutely awfulto be broke when you're old. At least the baby boomers seem to understand this.

I'm not sure if I can say the same about my own generation.