DOLLARS AND SENSE

LESSONS FROM THE MORTGAGE CRISIS

by Joe Plemon 

The mortgage crisis was created by greedy lenders making high interest, high risk mortgage loans to marginal borrowers who should have known better.   No one should have been surprised when these borrowers defaulted in droves, but somehow we were and a crisis ensued.

            What can we learn from the mortgage crisis to prevent a crisis in our own lives?  Read on.

·         Qualifying for a loan does not justify borrowing the money.  In fact, now is a good time to mentally redefine debt.  It is bondage, not privilege.  It is your task master, not your friend.  Avoid it instead of embracing it.

·         Don’t follow the crowd.  Both lenders and borrowers got caught up in this debacle as the sub-prime loans became more and more common.  Base your financial decisions on your personal goals and your unique circumstances.  Manage your money with a plan that works for you.

·         Steer clear from “get rich quick” schemes.  Learn from these banks who are now closing their doors.  Plan long term and be patient.  Getting rich slow is always better then trying the short cut.  The turtle always beats the hare in the race. 

·         You can’t borrow your way out of debt.  Congress seems to believe that the only way to fix a crisis is to go deeper into debt.  They can issue Treasury Bonds and print more money.  You can’t.  Cut your lifestyle, live on less than you make and pay your way out of debt.

·         Make integrity the benchmark of your financial decision making.  One definition of character is the ability to delay pleasure in order to win for the long term.  Lack of character by both lenders and borrowers was instrumental in producing this mortgage crisis.  Depth of character, on the other hand,  will give you the moral compass to avoid personal crisis and develop financial peace in your life.