Why the Difficulty of Getting Into Debt in the ’90s Was a Gift.

#4 — Asking for money to spend on things you couldn’t afford was embarrassing.

When I was growing up in the 1980s, talking about money was a taboo subject. Asking someone how much they made was up there with sex, religion, and home life. There were questions you didn’t ask and things you didn’t tell anyone, not even your best friends.

Instead, the adults would shake hands and ask, “so, what do you do?” and at once, their eyes would glaze over as they searched the recesses of their minds for a time when they may have heard how much income the stranger’s line of work generated. They decided that it had to be more than what they themselves made if they couldn't remember.

People always assumed that the other guy made more, which always led to envy and discontentment.

The attitude toward money was, ‘it's ok to spend all of it because I’ll just make more.’ My parent’s generation is now in their seventies, most ‘without a pot to piss in,’ as they used to say, so they have had to continue working past retirement age.

Dubbed the “Decade of Greed,” the 1980s were seen by many as one long consumption binge. — Richard McKenzie

This is the generation that was raised by post-dirty thirties, post-war parents. My grandmother was well acquainted with extreme poverty. She used to make single sheets from doubles that had worn through in the centre since the outside edges were still good. She could have bought new sheets, but poverty taught her to avoid waste. She was a master at repurposing. She and Grandpa didn’t own many possessions, and the stuff they did have was well cared for.

Unfortunately, living below your means was lost in the transition between our grandparents and our parents. The late 1960’s and early 1970’s saw abundance and a booming Canadian economy that slowed down in the ’70s and ’80s because of inflation.

Yet our parents had far more consumer goods than their parents, and we have even more than both generations.

If the 1970s was the Me Decade, the 1980s was the Money Decade — Peter Coy

Fast forward thirty-plus years, and my husband and I are now the sandwich generation. We are in between ageing parents and young adult children. We had to figure out the money thing ourselves. We both learned to save from our grandparents and thus have a hard time letting go of items that no longer serve a purpose in our lives now that the children are grown. The overstuffed storage room in the basement is evidence.

We have some money in retirement, a little in savings, and we have figured out how to no longer live paycheck to paycheck. Sounds good, right? It isn’t, though. Our generation became the kings and queens of debt.

In the late 1990s, as inflation decreased, debt became acceptable.

Worrying that the 1990s would be the decade in which the bills of the 1980s would come due, a Time magazine reporter declared, “The past decade brought growth, avarice, and an anything-goes attitude,” and then glibly summarized the 1980s with five words: “Get rich, borrow, spend, enjoy.” — McKenzie

Our grandparents’ motto was to do without now because you never know what the future may bring.

Our parents’ motto was that the future is bright, so spend, spend, spend. They had new furniture, decent cars, overstuffed closets, and all the status symbol trinkets and collectables anyone could want.

Contentment was replaced with coveting, and the generation raised in oversized houses bursting at the seams with goods learned that stuff brought happiness. Living with abundance was normal and highly sought after.

We thought that we needed everything that our parents had taken years to accumulate because we believed that having those things was a sign of making it in the world as an adult.

Debt was the means to getting those things quickly.

Enter the small loan in the 1990s

Need a car? Go to the bank for a loan. Need new furniture? Put it on the payment plan. Need money to pay an unexpected bill? Ask work for an advance.

Borrowing money was painful, though. It required a certain amount of fortitude on the part of the borrower. It looked a lot different than today’s pre-approved credit card applications that arrive in the mailbox.

Allow me to tell you about the joys of borrowing money in the 1990s.

Face to face contact with the lender

In the nineties, to qualify for a loan, we had to go into the office of a lender together and explain why we needed the money, prove our means of income, and promise that we would pay the amount in full within an allotted time. Payments had to be made in person as well. There was no online banking.

The lenders could (and would say) no.

Part of getting a loan showed that you could make the payments and buy food, lights, water, and shelter. If the amount was more than you could handle, the bank denied the loan.

Payment amounts were set in stone.

When you had a loan, you had to pay the set amount each month regardless of emergencies or unexpected bills. If that meant going without food, so be it. The loan came first. If you couldn’t pay, the lender had the right to take the items you had put up as collateral.

Asking for money for things you couldn’t afford was embarrassing.

Sitting in front of a loan officer to ask for money was not fun. Along with the physical response of knots in your stomach, borrowing damaged your pride since the debt was not a normal part of life the way it is now. Then there was the worry that you would wreck the item before you got a chance to pay for it in full.

Making borrowing so difficult was a gift because it made you really think about whether you truly needed the item for which you were borrowing.

There are plenty of people who will argue against that idea, especially people and institutions that tout consumerism as necessary for a thriving economy (a.k.a, those who gain from mindless overspending).

The issue of debt is complex, but here is the reality:

Debt robs from your future.

Here’s an example of how:

*Please note that the following is a rough calculation using online debt and interest calculators. I am not an accountant or investment expert.

Let’s say that you financed a $50,000 vehicle with a bank loan.

The interest rate is 8%, with a monthly payment of $600. It will take you 10 years to pay off the $50K plus the interest charges of $22,800 for a total cost of $72,800.

You will therefore be giving away $22,800 of your hard-earned money to the lender.

The $50K car ends up costing $72.8K but greatly decreases in value by the time you pay it off. You can never recoup this money.

Now, let's look at what would happen if you put off buying a car until you had enough to buy one with cash.

If you saved $600/month for one year, you would have $7,200, enough for a decent car that would get you from point A to point B for a few years.

Let's say you continued saving the $600/month for the remaining 9 years in a moderate 3% compound interest savings account.

At the end of 9 years, you will have approximately $74,300 in that account!

Roll that thought around in your head for a bit.

How does it feel? You have paid out $600/month for 10 years in both scenarios, yet only one truly benefits you. How is that $50,000 debt looking now?

Here’s the bottom line

If the pandemic lockdowns taught us anything, it is that the future is unpredictable. Our grandparents were right when they told us to save for a rainy day. Many people went into the pandemic with no idea how to get by in the next few months. Others have merely had to cut back a little to make their emergency savings stretch farther; for them, diligence, hard work, and sacrifice is paying off.

Times of crisis have a way of forcing us to reflect on our personal beliefs. Don’t waste this moment in time. Instead, chose to learn everything you can about money, being debt-free, and the importance of saving so that you are ready for your best possible future.

What is your belief about debt? Is debt a normal part of life or a masterful thief stealing from your future?

Writing about life lessons learned from nature, adventures, and mistakes. https://lifeinwritingca.wordpress.com

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