What Happened to Personal Responsibility?
 

I was chatting with an aquaintance today, when she brought up the fact that her car was likely going to be repossessed. Through the course of the conversation, she basically said that she was unable to make her payments because she took out some loans from the payday loan places. She is of sound opinion that it isn't her fault her car is being repossessed, but the "greedy bastards" at the loan place.

Although I've held this opinion for a long time, this brought it back to the surface.

Why don't people take resposibility for their personal (poor) choices - especially when it comes to finances?

In light of the housing market, credit crisis, etc, I don't see why everyone is so quick to blame banks and credit cards for coming up with the products that they did - the only reason they are successful is because the consumers continue to utilize them.

It isn't as though folks couldn't understand what they were getting in to - they need to sign documentation that discloses all the fees, interest rates, etc right up front. The consumers decide to sign the paperwork and take on the terms, noone is forcing anyone to do so. Although circumstances are rare, there may be times where that payday loan or 1 year ARM mortgage is the best choice for the consumer - but that's up to the consumer to decide, not the bank offering the product. In fact, can you imagine the uproar that would be caused if someone was denied something someone else had based soley on the fact that they didn't "need" it?

I know a lot of people are of the mindset that the companies practice predatory lending and mislead borrowers, but the reality is this: You (the consumer) signed up for it. If someone told me that if I sign the dotted line that I'll owe them $10,000 and I chose to sign it of my own free will - who is to blame? Is that even predatory? If, given that I chose to sign it, I pick up arms to fight the very freedoms that allowed me to sign it in the first place?

Because plenty of people are lazy and irresponsible. Really isn't much more to it than that.

It is always easiest to blame others than admit to your own mistakes.

Taking personal responsibility isn't the American way. At least not anymore. It is frustrating though that there are many people that truly don't care when they make poor financial choices. I don't think these people realize their poor decisions affect more than just themselves. Or if they do realize who their actions affect they just don't care. After all in their minds it is just a big bad corporation that can take the hit. I could go on about this but it pisses me off too much so I'll stop.
Although I do think that some corporations do act unethically and take advantage of people that are too stupid to think correctly.

It is always and has always been easiest to blame others. Nothing has happened to personal responsibility. It is as it has always been. That and most events have multiple causes depending on your level of analysis.

What Happened to Personal Responsibility? I don't know but it's not my fault.

I had to learn about finances by myself. I mean I had some helpful tidbits from my parents and grandparents, but nothing from school or anything. I had to figure out budgeting, debt, taxes, investments, etc. by myself. I intend to teach my posterity from my experience so that they're prepared.

Some economists/psychologists call it "discounting the future". The further away in time a cost (or a benefit) exists, the more we discount it's value. Somewhere I have some references...

Not to point you out laconic, but it seems this is also a pretty prevalent attitude.

I don't understand why this mentality is applicable - it isn't as though the disclosures are written in legalese or in some mystifying language - they are quite up front and easy to understand. This is How much you are borrowing. This is your interest rate. This is how much you'll pay back in total.

Not rocket science - and if these people are really that dumb, you can't really expect them to be successful in anything they do in life - they shouldn't be surprised they are failing that miserably in personal finance.

There's a lot of simplification in this thread.

Yes, the people who got the risky loans were personally irresponsible. That I and the rest of you have to bail them out now does indeed piss me off.

But there's also the personal responsibility of not tricking morons into doing things that will hurt them. There's the personal responsibility of not pretending that the housing market will continue to rise indefinitely, and of not pretending that when the housing market does stop rising, that those predatory loans won't come due with the borrower being unable to pay, and therefore your bank won't be taking in the money it should. In short, everyone involved in those damned loans, from the idiot who borrowed the money to the idiot who lent the money to the idiots in government who relaxed the rules enough to allow the first two idiots to be idiots, bears responsibility. There's plenty of blame to go around. To place it all on the shoulders of any one idiot is to cheat the other idiots out of the scorn they so richly deserve.

Personal responsibility has been on the decline for decades. It's not like this latest financial crisis is the start of it.

Ever notice those stupid warning labels on products? "Do not drive vehicle with sunshade in place. Do not spray hose into electrical outlet. Do not eat the silicon packet in the stereo box. Do not watch DVD's while driving" and so on. Every time you see one of those labels (Caution! Hot beverages are hot!) I bet you think to yourself "Damn. You'd have to be a real idiot to do this." Well. You're only half right. Every time you see a warning label ("Do not use orally after using rectally) an idiot actually did that, and then sued the company.

We've all heard of the guy who set the cruise control on his motor home and went to the galley to make himself a cup of coffee, wrecking the vehicle. But did you know that Mr. Merv Grazinski was awarded 1.75 million plus a new motorhome by the jury when he sued Winnebago?

Why should we have personal responsibility when our culture has established that doing stupid things means you get money? It's financially more sound to do something idiotic and sue than it is to be smart and responsible.

Until we turn that attitude around, there's no incentive for personal responsibility, and in fact there is incentive to purposely avoid it, and therefore, to put it bluntly, society is screwed.

I think much of it is social. Sorry, but I think simply calling people "dumb" is glossing the issue over.

There is a certain level of expectation depending on the circles in which you reside. For example, we are expected to have things such as television, Internet, phone, clothes less than a season old, a car (or two), and a number of other things, many of them being electronics. Also, we are expected to be able to participate in a certain number of things. For example, we go to the movies, go out for dinner, go on vacation, go on a weekend road trip.

We are expected to eat certain foods.

We are expected to buy certain DVDs, CDs (or mp3s), books, household accessories, etc.

We are expected a certain level of this depending on with whom we interact.

To not do this is to be left out.

Imagine not having television, phone, movies, Internet, newer clothes, certain foods (e.g. meat and dairy). Imagine not ever going out to dinner, to the movies, to a concert, or away on a vacation.

I can.

Most can't.

Sure it would be the responsible thing to do to only participate in things you can afford without using credit. But the lure is so strong. The desire for societal inclusion is hardwired into our brains.

We are irresponsible because we are afraid. The social risk is greater than the financial risk. Simply put.

Spending most of your time just staying at home and reading the classics from the library most of the time because you can't afford anything else isn't desirable to many people. We live in a consumer society, with an ever-shortening product lifecycle. This isn't just products; it's also services. Think about it. What was life like just 10 years ago? Think about the things you shopped for. Has anything changed?

BG, you forgot one:
We're expected to be in debt.

Shit, thanks. :)

Good one.

I can't name a single person I know who doesn't carry a debt.

Thanks. To be honest, that really does seem to be at the heart of everything: it's okay to be deep in debt. It's okay to spend $1 today and pay back $2 tomorrow. It's a despicable paradox. Things shouldn't cost more than people have. If I make $80,000 a year (the upper part of middle class), why should I pay $30,000 for an average car? Because I can afford the car in 3 years? That's insane.

The debt system, but more importantly widespread acceptance of the debt system, is the biggest economic con job in history. It's fucking brilliant.

People who borrowed 400,000$ using NINJA balloon loans, paying less per month than they where in rent for a larger, better house, with the loan guaranteed only against the price of the house ... where doing something smart.

If the house price went up, they got to keep the money.

If the house price went down, they could walk away from it after having spent less on the interest payments than they would have on rent.

The people who made those loans? They screwed up.

Now, the problem is, the banks where so desperate for yield (any yield) that they where willing to lend to anyone, even if the default rates where expected to be high. These are products that are not designed to be repaid: they are designed to get the person to pay high interest rates, with increasing principle, until the person goes bankrupt. With a high enough rate, you can make this profitable -- more importantly, you can make it look profitable to your shareholders even easier than you can make it profitable.

Should that kind of lending be encouraged? Ie, you lend money to someone at a 50% annual rate, where you work out that they can afford at most 20% of your starting loan value per year, and that they'll go bankrupt in about 5 years and, with an expected reduction the amount they owe you down to 20% of the total value with a 20% per year over 5 year repayment plan...

This loan starts at 1000$.
After 1 year: +200$ paid, +500$ interest: 1300$ balance.
After 2 years: +200$ paid, +650$ interest: 1750$ balance.
After 3 years: +200$ paid, +875$ interest: 2425$ balance.
After 4 years: +200$ paid, +1212.5$ interest: 3437.5$ balance
After 5 years: +200$ paid, +1718.75 interest: 4956.25 balance

Borrower goes bankrupt. Debt reduced by a factor of 5 down to ... about 1000$. Person owes you 200$ per year for 5 years and then the debt is cleared.

They paid you 200$ per year over 10 years -- but they also went bankrupt.

That works out to an effective 15% interest rate you actually got from the deal. Pretty sweet return! And all you had to do was find someone with bad credit to sign a loan guaranteed to drive them to bankruptcy.

What is better is that in the short term, you can make it look like the loan is even better than 15%! Pretend that the chance of it going upside down is even less...

Do you see anything wrong with this kind of business model? Where you make a loan to someone with the expectation that they cannot repay you, and the nominal interest rate simply exists in order to boost the amount of debt they will owe you when they eventually go bankrupt, so your share of the amount collected at that point is higher?

I agree. I've had come to the point where I've had to voluntarily reposess a car. When i was married, we ended up making a stupid decision of getting a Honda Passport (which later we found out is engineered by Hyundai so it had low value). After my ex had traded in his truck when we got it, we still had negative equity in the Honda. When we got divorced, we still had over 9,000 left to pay on it though it was only worth about 3,500. So I made a sound choice of voluntarily having it reposessed and committing to monthly payments to the bank attorney who took over the loan. That happened in early 2005. I just got it paid off in Sept of this year. But I took that responsibility and slap on my credit report. But it's still better than having it involuntarily reposessed.
Now I do my research and I make thorough decisions before committing to anything financially. In fact- because of this economy, I've been laid off, am going back to school, but doing everything in my (and my boyfriend's) means to cut back spending. We've already managed a way to save an extra $300/month by searching for new auto insurance, taking off extra options on our cell phone services, etc. A little goes a long way. I have a feeling that so many college students and young adults (in their 20's) will screw or have screwed themselves over- not only because of the economy, but because they don't know how to budget or save. And they don't think of the 'what ifs'- like their car breaking down, the economy going to craps like it is now, medical expenses, etc.

P.S. I never believed in owning a credit card just because- but recently I got a low-credit limit credit card for EMERGENCIES only. I am always one to think when wanting to buy something- If I have the money, I can get it. If I don't have the money, I can't get it.

Yo!

I have nothing to contribute to this discussion, aside from the fact that I am someone Baraka_Guru knows (albeit not very well) who carries no debt whatsoever.

I probably have more to contribute, but for now I just wanted to add that ktsp and I are two more people who carry no debt whatsoever. Let me just say that it is probably one of the best things you can do to start a marriage out on the right foot, if at all possible (I realize that not everyone can do this, but if there is any way of doing it, DO IT!)

Yes, of course it's also important to go to counseling, make sure you're emotionally/physically compatible, can manage a household together, etc. But to have both parties free of debt, financially independent, and with similiar spending habits (in our case, we're both rather scrooge-ish... and that's a good thing) on your wedding day... you wouldn't believe how much this contributes to the stability of the relationship, as a whole. I count ourselves to be very lucky, and we hope to remain financially responsible for ourselves and our marriage for as long as possible. It goes a long, long way.

On that note, today is our 2 year wedding anniversary! :icare: :D

EDIT: NoSoup, let me also add that when I hear stories about people like the one you describe in the OP, I want to smack them. Strangely, I hear stories like that FAR more often in the US than I do in Iceland. Mostly, I would say, because Icelandic culture does not have as strong of a "gimme more" entitlement that seems to run so strongly in American culture these days--and there is no "suing" culture in Iceland, whatsoever, which says a lot. If bad things happen to you in Iceland, it is generally assumed that you probably deserved them. :lol:

Not all, but many of the Baby Boomer's offspring have been raised this way. The parents wanting to be their kids' best friend. The parents allowing their kids to ask for and require everything they see. Allowing their kids to feed off of their parents when they're well into adulthood. These kids grow into adults who haven't been taught a thing about personal responsibility.

We all have choices, yes. But it's not easy for some who haven't been exposed to responsibility and it may take a long time for this to be unlearned. I think the current financial situation just may slap some in the face.

Holy crap, do I stand corrected.

I'm glad to hear it. :)

Happy anniversary abaya. Isn't marriage fun?

We carry debt, as nearly every person does in DC. The average home price continues to be $300k as most folks hold on to their properties hoping the market will come back.

It won't. At least not soon. We lead the country in foreclosures.

We're fine, not over our heads, and D is an expert in financial forensics, so it's not like we don't know what's going on.

The thing most responsible for fiduciary irresponsibility is the Statement of Income.

Doesn't matter if you work part time at Wal Mart, put together a statement of income that your angel dolls are earning you $200k, and you have a mansion.

I must say, I think it really did help to have an immigrant as a parent (especially a Thai mother--talk about looking for bargains EVERYWHERE, she was the queen of bartering), as well an American stepdad who has always been incredibly self-reliant, do-everything-himself (including building our entire house), buy-everything-used type of guy. I spent so many Saturdays cruising garage sales with my dad, I just thought it was a blast!... didn't know that people generally bought "new" things until I was well into teenhood. Granted, I'm an only child, so I probably got more stuff than I would have with a brother or sister to share things with. But most things I got were used, or if new, only VERY special items for VERY special occasions.

I think it's important to teach a sense of "specialness" for material items when kids are young, so they don't start to believe that they can get anything, anytime (even if the parents can afford it, which mine did--but they never let that on, nor did they spend vast amounts of money on themselves, either). The rule is to save as much as possible, and spend on special occasions, not the other way around. The biggest "splurge" expenses in our family were for travel experiences, not buying things--and that has remained one of my strongest values, incidentally. But by god, hell no I would not be traveling ANYWHERE if I were in debt... that debt has got to be the priority, if one is in it.

Maybe she realized she was making a Faustian deal, taking out those super high-interest payday loans, but she felt she had little to no choice in the matter. Maybe she had hoped things would get better for her, and that in the meantime, the payday loans were just to tide her over. But things did not get better for her; if anything, they got worse; and now it's time for her to pay for her risky (albeit desparate) dealings. And now she's bitter about it all. She's angry about being in this situation despite her best efforts, and she resents having been all but forced to take out those payday loans.

Regardless, this woman will be held personally responsible for her dealings. If she hasn't been making her car payments, it will be possessed. She can expect no government bailout, here.

Wouldn't it have been in her best efforts to look carefully at what she could afford, and to buy a used car well within her income range? One that could be paid off all in one go? I sold a very decent used car of mine last year for under $2000. I also bought a less-decent used car (in Iceland) last year for about the same amount, and it's still running fine with some maintenance here and there. Still WAY cheaper than making payments on a newer car! We're not defaulting on friggin' luxury car loans like the rest of the high-living (but now low-earning) Icelanders are, because we didn't care if we were driving around a beat-up 1997 Golf instead of a spiffy new 2008 Land Rover. To me, that's using one's best efforts, not getting over one's heads into loans that one cannot possibly pay off.

And yet many smart, educated, and otherwise successful people are just as guilty of this; only, their recklessness and irresponsibility is manifested in a different way, and with far greater and far more reaching consequences.

Evidently, based on recent national (if not global) events, CEO's and other people in upper business management can be lazy and irresponsible, too. Only, they have a different kind of laziness and irresponsibility – that is, it manifests differently –compared to your typical deadbeat. But it all leads to the same thing: financial ruin. And while most of the latter are forced to suffer for sins (as they should be), many of the former are crafty and powerful enough to provide "golden parachutes" for themselves, thus escaping much of the fallout of their sins.

Whatever. As we have seen, the former can lead to ruin on a national (if not global) scale, and thus are far more dangerous and destructive than the latter to those people who do live earnest and responsible lives.

It's the me, me, me attitude in reverse. Everybody not only wants their piece of pie, they want the next guys also. This attitude of self indulgence, entitlement and general fuck you mindset is everywhere we look. In magazines, reality tv, talk radio, everywhere.

Singular, self centered opinions rule the day. Does anyone remember when people used to tell you there was a certain sale on this or that item upcoming or currently happening, then saying they are going to check it out. No more. People now keep quiet until they have benefitted then say, hey, did you know about the sale at so and so. You should go. Me first, fuck everyone else. I am getting mine, then I will share what I know with you.

But when blame is to had for the me, me, me crowd? It becomes you, you, you.

I carry no significant debts (barring a debt that I would pay off within the month -- utilities on CC). Neither does my SO.

Both of us have well above zero savings.

I was looking forward to the housing collapse to buy me some dirt-cheap housing. Sadly, the governments seem to have decided to give money not to people in general, but to the people who specifically screwed up and bought houses presuming that prices could never fall, which will slow down the price correction.

The house that is in foreclosure, that the mortgage company wants to kick the people out of? That's the house I want to buy, dirt cheap, with a decent percentage-wise down payment, and documentation of income, etc, then pay off as soon as possible.

I'm well aware that this kind of behavior doesn't generate the debt that is required to generate the cash that is required to keep the world liquid. (Cash is a promise you will be repayed later, by someone, somewhere, with goods or services from someone else: as such, it requires that there be someone out there who has an obligation to repay a debt, and thus wants the cash to repay it, and will give you goods or services in exchange.)

Speaking of taking responsibilty for this mess that we're all in...

Someone Actually Apologized! | The Big Money

Hi everybody, Common Sense here. I just wanted to remind everyone out there the most valuable lesson in all of finances: live below your means.

Okay, you can all go about doing what you're doing, and I'll see you again after Christmas for that new diet. :thumbsup:

If everyone lives below their means, then there is nobody to consume the excess goods you produce, and there is excess production and hence excess employment. This collapses the value of labor.

Just, ya know, saying.

that's why war is so lovely for capitalism.

I'd rather have slow growth because people are financially stable than out of control growth because people are spending money they could never hope to pay back.

There will always be someone who tries to live above their means. There will always be someone ready and willing to take advantage of that person. The trick is keeping this exploitation of fools at the right level so that you avoid a collapse in the value of labor, but also avoid an overspending/borrowing related meltdown.

Slow growth? Read economic contraction.

Now, if there is somebody consuming the excess production -- companies building investments, governments borrowing against the future -- then you can continue to pass out "universal debt tokens" (aka, money) to be accumulated by individuals.

But the basic idea, that money can be used to exchange for goods and services later, requires that somebody out there feels obliged to give goods and services for money.
Living above your means -- going into debt -- can be a smart strategy. Take someone who just graduated from medical school, or is about to go into medical school.

Their future income is a huge asset, while their current assets are either small or negative.

By borrowing against that future income, they can boost their ability to do things right now (be it go to school, or feed their family, or set up a practice) that is, quite simply, more important to them than the consumption they don't get to engage in later.

Living above your means is not the same as going into debt. In the example you give, going into debt is often a good idea. To me, "living above your means" means taking on debt for the purpose of living luxuriously, as opposed to fulfilling an obligation or investing in your future.

And the person who has an expected future income as a Doctor, but is currently in extreme debt, deciding to go further into debt to buy a nice home?

Or the person that convinces a loan officer to lend them money that they cannot certainly pay back, and being perfectly willing to go into bankruptcy if things don't go the right way? (and meanwhile gets to live more comphy)

Which is unacceptable?

Generation X.

Then Generation Y (mine). Read: Whhhhhhyyyyyyy?!!?!?!

Right now, contraction would very likely prevent more bubbles from bursting. Surly a slow, considered, calm slow down is better for everyone than a sudden, frightening crash.
You act like the idea is to shut down the economy. It's not. It's a simple slow down. Goods and services will always be necessary and used, but when they're used to a point that people don't have the money today or even 10 years from now to pay it back, it's just artificially inflating an industry.

great post!! This ties along with what I was going to say, which is that our society is very ego driven and the ego doesn't like to take responsibility... and the ego LOVES to spend, spend, spend and accummulate STUFF to define "Who You Are", except that it is a false sense of self, and never satiated. People will always want and need more. There is too much that the ego expects, so the ego is never satisfied... That will cloud judgment and responsibility.

I don't remember saying that living above your means was unacceptable, just foolish. In your first example, taking on more debt is foolish because there's no guarantee of future earnings; a lot of things can happen which would interfere with a doctor's career. Of course the line between a foolish risk and an acceptable risk is blurred, but there are situations where it's better to wait until you've paid off existing debt before spending on luxury. In your second example, I'd consider it foolish to invite certain eventual bankruptcy for an immediate but temporary increase in standard of living, though I concede that some people may find this a reasonable tradeoff.

The problem I have with people living above their means is the affect it has on the economy as a whole when it gets out of hand (as has happened recently). The overspenders' foolishness is hurting others who have done nothing irresponsible.


Isn't it just as easy to feed the ego by being different from the herd? You can stand out by saying "look at me! I'm a special little snowflake because I don't have debt like the rest of you!" The same base desire to feed the ego can be sated by acting responsibly. Or is this just an attempt to fit in/keep up?

if you assume that there really is only one set of possible motivations behind EVERYTHING, then the choice becomes which way of directing that one set of possible motivations does the least damage. this desire to do the least damage--to oneself, to others, to one's surrounding--can be an expression of that one possible set of motivations---you feel balanced, but only because you see others as unbalanced, you treat other people and your environment as museum pieces. and the interest in a more sustainable life can be an expression of narcissism just as much as compulsive consumption can--but if in the aggregate, the former points toward an alternate way of living and that alternate way of living makes more sense than its opposite, then fine.

or you could say that the idea there's only one possible set of motivations is a fairy tale that folks use to rationalize all choices so they don't have to think about all choices, something which is mean easier because the particular one-size-fits-all motivation structure above is that assumed by the conservative defenders of capitalism uber alles. so you don't even have to think about that.

or you could say that adopting the idea that there is one set of motivations "feeds the ego by being different from the herd? You can stand out by saying "look at me! I'm a special little snowflake!" The same base desire to feed the ego can be sated by acting responsibly'" is 'just an attempt to fit in/keep up.'

or you could say that the claim that "you could say that adopting the idea that there is one set of motivations 'feeds the ego by being different from the herd? You can stand out by saying "look at me! I'm a special little snowflake!" The same base desire to feed the ego can be sated by acting responsibly'" is 'just an attempt to fit in/keep up.'