A couple I know recently welcomed their first child. The husband, an engineer by profession, was the sole breadwinner. He lost his job in this economic downturn and has been unemployed for the last few months. So? There are probably hundreds of thousands of people in a similar situation i.e., single income families, with a baby to boot, searching for light at the end of the tunnel. Yes but not many would have the small matter of a 350K+ mortgage and car payment on a shiny new Honda toy to take care of! I do not know about other debts they carry. The wife is in no position to work (with a baby to look after) and the husband is on the lookout for a job in his field, while taking heart from the fact that he has a job in customer service at the local supermarket (no offense to customer service people – I’m just highlighting the fact that he has taken a severe pay cut).
Forget about emergency funds; they may or may not have had one. They will ride it out and things may hopefully be rosy again. What irks me most is the fact that couples (single and dual income) stretch every dollar to lead a great life in the eyes of their neighbours. No, I’m not going to rant about people who keep up with the Smiths and Joneses. But, would it not be better to wait a couple of years before jumping into such expensive mortgage commitments? Would it hurt to drive a late model car for a few years and then go for a new one, once the wife gets to work again?
Obviously, it is easy for me to go on a spiel with the benefit of hindsight. The talk of emergency funds, living within your means, etc. seems to have spread like wild fire, thanks to the efforts of personal finance blogs and TV and radio shows. When the economy gets back up on its feet (yes, the stock market is running a 100-metre dash but the economy is picking up at a slower pace), however long that may take, people would do well to remember the lessons learned during the time of doldrums. As raging as the next bull market may get and as low as the unemployment rate may go, the basics still shouldn’t change. Building up an emergency fund, delaying gratification, staying out of credit card debt, making wise investment choices by keeping expenses low, etc. are time-tested methods. There is enough material available about these topics on the web that one can feed off for free!
Change is permanent but greed and gullibility seem to be constants too. I hope people don’t treat these experiences as some chapter from a school chemistry textbook that holds no value to the majority of the population in their post-school life. Will I be made to eat crow in a decade or so, when the economy is doing well and people are still living great lives by avoiding consumer debt, pursuing passion, etc.? I’d gladly do so but that’s going to happen only if people start to fear unnecessary debt (the nonmortgage, non-educational kind) and resist living to please the world!
Clark is a twenty-something Saskatchewan resident employed in the manufacturing sector. He repaid around $20,000 in student loans and has been working to build his investment portfolio as a DIY investor (not trader) while nurturing plans to retire early. He loves reading (and using the lessons learned) about personal finance, technology and minimalism, when the mood strikes – which happens everyday!