Debt, Housing, Personal Finance, Saving Money

Pride vs. Shame in Financial Matters

I read an article on this week about how people are not paying on their homes and voluntarily entering foreclosure so that they can save money. The gist of the piece is that these people have simply decided to stop paying on the home and use the money for doing more fun things in life. To quote the article, “Foreclosure has allowed them to stabilize the family business. Go to Outback occasionally for a steak. Take their gas-guzzling airboat out for the weekend. Visit the Hard Rock Casino.”

I understand that there may be times when you have to stop paying on the mortgage. But that should be only after all other avenues of saving money and decreasing expenses have been exhausted. In other words, before you stop paying on the mortgage, you ought to have stopped eating out, sold the airboat, and stopped going on vacation to (and wasting money at) the casino. But the people in the article aren’t doing that. Knowing that foreclosure proceedings will likely drag on for years and they’ll be able to stay in the house for a while, they’re simply deciding to stop paying on the home that is dragging them down and use the money for other things. Never mind that their credit will be trashed going forward; they’ll worry about that later.

The thing that bugs me the most about this piece is the smugness exhibited by the people profiled. They aren’t sorry or ashamed about what they’re doing. Some of them feel like the banks created this mess and they are sticking it to the bank by not paying. Some feel that since the house is worth so much less than they owe, they shouldn’t have to pay. Others just feel that the money can be used for other things, so why not? They are unapologetic and unconcerned. The attitude seems to say, “I’m doing a smart thing by not paying on this house. I’m saving money, still living the high life, and making ends meet without having to endure any hardships. I’m a financial genius.”

Which got me thinking: There are things in personal finance that you can be proud of, and things you should be ashamed of. To be successful long term, you need to understand the difference. You can be proud when you save money through legitimate means. For example, when you use coupons within the terms of the offers and you cut $50 off your grocery bill, that’s something to be proud of. When you doctor Internet coupons, slip expired coupons by the cashier, or don’t comply with the terms of the offer, you should be ashamed.

When you earn extra income from a part-time job or freelancing and you pay the proper taxes on that income, you can be proud. When you take cash under the table and cheat the tax man, you should be ashamed. If you legitimately need government assistance and you are granted that assistance, there’s no shame in that. There is shame, however, in gaming the system and acting needier than you are just to get a free handout. Almost any area of personal finance has a dark side. You can commit fraud or engage in unethical behavior in almost any transaction. But you shouldn’t be proud or smug about having done so.

Saving money in unethical or illegal ways will catch up to you eventually. The people who aren’t paying on their houses won’t have a good financial future, no matter how smart they seem right now. Once their credit is trashed, where will they live? I’ll be a long time before they can get another mortgage (if ever) and most landlords won’t rent to someone with bad credit. They won’t be able to get a car with a loan. They’d better be saving all of those mortgage payments because they’re going to need a whole lot of cash to get through life. Even small things like coupon fraud can catch up to you eventually, in ways you may not realize. If you get caught, you may be banned from the store. Even if you’re not caught, coupon fraud results in higher prices at the store, stricter coupon policies, and even the refusal to accept any coupons. That will cost you eventually. Big fraud schemes like insider trading, and the recent Wall Street shenanigans will land you in jail.

People who are successful save and make money in ways that they can be proud of. They may not get rich fast and they may have to endure some hardships in order to get ahead, but once they achieve success, they don’t have to fear that someone can take it away from them. They may not have the money to go to Outback or run their powerboat today, but neither do they have the nagging fear of financial ruin or jail hanging over their heads. So those of you who are acting all smug about your efforts to outwit the system should watch out. That smugness will likely come back and bite you later.

13 thoughts on “Pride vs. Shame in Financial Matters

  1. It is shameful the lack of personal responsibilty a certain percentage of individuals have in this country.

  2. In our society, few people accept responsibility for their actions. It’s not just financial…I recently made an appointment and when I showed up, the receptionist told me it was the next day. Normally I would think I screwed up, but since that would have been my wedding anniversary, I rather doubt if I would have scheduled an appointment that would leave my mouth numb for the rest of the day unless it was an emergency, which is was not. She made a mistake, but instead of owning up to it, she informed me she wasn’t wrong. Now, I don’t trust her when making appointments.

    As for the financial aspect, there seems to be a shame in admitting one can’t afford something. I don’t get it either. If you don’t have the money for going out or buying a new shirt, admit it. Pay your bills, after all, you created them. I agree with the article…folks need to be responsible!

  3. A co-worker is doing a short sale. So, she just stopped paying on the mortgage. She is not smug just following the advice of her lawyer. She was told and I have read that banks won’t talk short sale unless you stop paying the mortgage. She says she is saving the mortgage to have 1st months rent and the deposit for a rental. She seems to be under the delusion that in a year or 2 she will be able to buy another house. She’ll just use the excuse of a forced sale due to divorce and a bad market.

  4. Unfortunately I seem to be the only one in my family who agrees with you. My brother, who makes enough money to pay his mortgage, is planning to abandon his house and let it go into foreclosure because he’s $100K under water and wants to move to another location (purely for personal convenience, not need). I am disgusted not only by his behavior, but by my parents condoning this action. My father especially has always taught us to honor our commitments, but even he thinks this is okay. I am shocked and appalled, but after expressing my thoughts twice on this matter I have concluded that there is nothing that will change their minds. I just shake my head in disgust and realize that there is no personal responsibility any more.

  5. I worry that the banks will lower their “credit standards” for borrowing so these people doing this can get (and spend) money again. They should be penalized for walking away. Where there is a will, there is a way to complete your obligations.

  6. If you’re going to foreclose, especially due to hardship, you should stop paying the mortgage and start putting that money towards cash reserves. Since you are going to have trashed credit, you may need that cash to pay extra (first,last months rent) so that landlords will be more likely to rent to you.

    However, there are people out there who are gambling, who thought residential real estate would net them some kind of 200% return guaranteed. They lost that gamble and now want to back out of their loans. I don’t know, I know businesses will do this, cut their losses and run, but it feels different with residential to me. Perhaps it’s the fact that some people are acting smug about it perhaps it’s the fact that they look out loans to fund their gamble. I don’t know, I just feel that you’ve asked for and taken someone else’s money to fund your gamble so now you have a greater obligation to meet your bills.

    I don’t know. It’s not like they’re talking about personal loans from family members but it’s still something that eventually affects us all.

  7. I can totally agree with this. I had to deal with my debts by using the UK equivalent of chapter 13 bankruptcy. This was due to a massive decrease in my income and a fair amount of financial stupidity on my part. I sure was ashamed. I’m back on my feet now and trying to do the right thing.

  8. I’m mortified by how many people take advantage of “government programs” food stamps, medicaid and on and on all the while working under the table to afford vechicles, vacations, jewelry etc. And yes, I know people in my town that have opted to stop paying their mortgages, insurance and property taxes while they rent out the property and collect the money to finance THEIR indulgences. THAT should be a crime punishable by law.

  9. But it’s also not fair that a mortgage is a business transaction for the banks, but a moral obligation for the borrowers. And trust me, predatory lending is alive and well. In late 2008, when the crisis was well underway, my husband and I moved and bought a house. By the bank’s reckoning, we qualified for more than twice the mortgage that an independent financial planner worked out with us as a good mortgage size for our income.
    We were savvy enough (and had the money for the fees) to go to an independent professional to figure out a good mortgage size. But why should it be just our job to make sure that we don’t borrow too much, not the mortgage bank’s job to make sure they don’t lend us too much? THEY are the financial professionals and it is sad that you can’t trust them in the least.
    In summary, I don’t like the behaviors described in that article but it seems like the risk of losing money is the only thing that will get the banks back into responsible behavior.

  10. I agree with you. There are too many people that walk away from their obligations. That does not make it fair for those that fulfill their obligations. It is true in life that a few people that don’t live up to what is right spoil it for the majority!

    We all have to suffer for their acts.

  11. I can’t even wrap my brain around the thought although I saw a co-worker do this. Knowing she was planning on filing for bankruptcy she maxed all her credit cards out completely, got herself all new clothes for the summer, took a few trips to Niagare Falls to gamble and then filed. Wasn’t much longer after that she was using her sister’s credit card and racking up charges on that. At one point she was the one collecting for a gift for the boss. When it was time to give the gift she had used the cash on herself. Some people never will learn and don’t feel the need to learn and somehow they survive although I don’t know how!

  12. I like the comment, “they are your bills, you created them”. I totally laughed at Anette’s comment, though. Seriously, you think because you were not smart enough or did not educate yourself enough about YOUR MONEY, it’s the bank’s fault for giving you a mortgage that is in their favor? They are in the business of making money, this is America after all.

    Educate yourself, get a hold of your finances (you’re the one spending your money) and don’t blame other people for your stupidity. Take responsibility for your actions as this blog suggests. That’s what’s wrong in America, no one wants to accept accountability, but blame someone else….YOU SIGNED THE DOTTED LINE – DEAL WITH IT.

Leave a Reply

Your email address will not be published. Required fields are marked *