Is it Immoral or Just Stupid to Live Beyond Your Means?
I was having a conversation over the weekend about the epidemic of people who have jobs and a steady income that are walking away from their homes because they are paying more into it than it’s currently worth. Most of us agreed that, even if the numbers make sense, walking away from your home when you can still pay the mortgage is not “the right thing” to do.
Whether any of us would do it if we were in the same circumstance, that’s a different story.
But it got me thinking about money and morality. There are a lot of people out there that don’t have a budget and don’t have any idea of how much money they’re burning or where it’s all going. But they live pretty decent lives—some probably a lot fancier than my own.
And that pisses me off.
But is it wrong or is it just irresponsible?
For it to be immoral, it would have to be inherently wrong, which I always relate to encroaching upon another person’s life.
Think of Tom: he has a huge credit card balance and never intends to pay it off. All he does is pay the minimum on his card every month and the balance keeps getting bigger with every video game and trip to California that he buys with it.
He lives a nice life: goes out to eat every night, buys plenty of clothing and new DVDs every weekend, and his job is pretty steady. He gets to live more lavishly than me and just pays the minimum on his card to keep the lifestyle afloat. But does this affect me negatively somehow?
Well, it could. It’s what economists call a negative externality. Tom’s “lavish” lifestyle contributes to ridiculously high credit-card rates that eventually need to be modified by lawmakers to help people like Tom out of the hole they’ve dug themselves into.
Which means credit card companies have to rethink how they do business. New credit-card rules to help people like Tom mean most cards will probably come with an annual fee and the bonus rewards will come down drastically. And that affects me. It’s a negative externality because Tom’s actions are negatively affecting me even though I had nothing to do with it.
All I was doing was living within my means and racking up massive credit cards points at no cost to me.
If you look at it that way, Tom’s behavior could be seen as immoral.
On the other hand, it’s a free country and he should be able to act as irresponsibly as he can as long as he doesn’t directly mess with my business.
Right? That’s why smoking in public and driving an SUV that gets 10 miles to the gallon is OK. Although—think about it—smoking in bars is no longer allowed in many states and SUVs now tout their mileage in commercials. So does Tom have the right to act irresponsibly like this?
I think the answer to that questions would’ve been “yes” a few years ago. But now that we’ve seen what massive damage this kind of behavior can bring, it might be time to revisit the question.
Is it better to try to fix problems like these after the fact (which is what we’re doing now) or try to restrict immoral financial behavior to keep from digging ourselves into these holes to begin with? And if the answer is the latter, how do we do it effectively without having people scream out that they’re civil liberties are being accosted?
February 10th, 2010 at 8:37 am
You raise a question that is being asked globally at all levels right now. Should the EU bail out Greece, or let them default on the gigantic debt they have run up? Should the banks and car companies have been bailed out with taxpayer dollars?
The rationale for all of these bailouts is that letting these entities fail would bring down our financial system. If we had addressed these concerns before global leverage reached red alert levels, we would not be in this pickle.
So yes, I think we need to restrict immoral financial behaviour. And yes, I think that behaviour negatively impacts others, especially those who are living less than lavish lifestyles to save money in accounts that pay 1% interest (thanks to the bailouts) or in the stock market, which has come off its moorings (thanks to the financial crisis).
February 10th, 2010 at 2:52 pm
I liken this to an article about vaccines I read in Wired a few months ago.
The rationale is that if parents avoid getting their children vaccinated, even though they think it’s their decision alone, their kids becomes a danger to other kids because they are more susceptible to carry a disease.
Same goes for the person who runs up a huge credit card bill and only pays the minimum. It might not affect us right now, but if they continue that behavior, we’re going to pay for it eventually.
Nice post.
February 14th, 2010 at 3:58 am
Many people justify their selfishness and hedonism as “not hurting anybody” and “none of your business” with minimal understanding of an important social point: we live in a tightly interdependent society and that we all collectively affect one another within this society. One person or two people doing something bad would cause negligible harm to society, but the price of multiple people making similar mistakes will be costly. Now let’s apply this to a whole nation of people that are not given a relevant financial education and we have a whole nation of financially immature citizens spending themselves into slavery. My point is that this situation of selfishness and ignorance is harmful to all of us.
The solution is to get society educated (in pretty much everything including finance) and get people more empathetic to their greater community. While this is possible, I really don’t know how to make this happen. So instead of waiting for Utopia to come, I think it’s better to improve ourselves, help those that want to help themselves and keep a close and “impartial” eye on everyone else.
I say let the foolish and ignorant fail, and let us prepare for bad times that may never materialize. In the end, we will reap what we sow.
February 15th, 2010 at 12:13 pm
“that’s why smoking in public and driving an SUV that gets 10 miles to the gallon is OK. Although—think about it—smoking in bars is no longer allowed in many states and SUVs now tout their mileage in commercials”
I don’t believe that just because the State decides to make something illegal doesn’t make it immoral. If a state out there doesn’t allow abortions does it make it immoral? Or alternatively, if you are on the other side of the *coin* (had to lol) does it make it moral to get the abortion IF the state allows it.
February 15th, 2010 at 2:59 pm
@Evan: Good point about the difference between immorality and illegality. I by no means believe that what the law says is a guide to what is and isn’t immoral.
But laws do seem to foretell what the general population believes to be immoral. Take prohibition, marijuana, and now smoking. As laws change, the general consensus of the population seems to veer in that direction.
The point is, should there be laws against being irresponsible or is that part of our freedom? Where do you draw the line when someone else’s “freedom” starts to affect my life negatively?
February 17th, 2010 at 8:18 am
@Nut
The peoples’ freedom to harm themselves will negatively affect your life in a non-direct manner (in most situations). The only way to truly fix the social problems caused by the ignorant is through education, a desire for self-improvement as well as a desire for social solidarity. Creating laws will not fix the foundational issues of ignorance, selfishness and apathy.
Short of that Utopian fix, we should do what we can to understand the current situation and the leading history so that we can prepare for a worst case scenario that may or may not occur. We can also direct our attention towards people that desire to help themselves.
March 1st, 2010 at 4:46 am
[...] Nut at The Writer’s Coin asks Is It Immoral or Just Stupid to Live Beyond Your Means? I think this is a really important debate for the times we’re living in right [...]
March 3rd, 2010 at 10:29 pm
I think we do need to put in a category for those that find themselves in tough circumstances. Especially medical issues. Or facing the choice between homelessness and credit card debt.
I agree that many folks live way beyond their means. Why do we get caught up in that? But we have to make sure we make room with compassion for those that face really tough choices and fall into debt.
July 1st, 2011 at 4:32 pm
If the only downside to other people running up large credit card debts is that you eventually might lose some of the perks you get with your card and maybe even have to pay a fee that’s pretty small beer compared to infringing the freedom of others to use credit if they want (or need) to. Please remember that it’s the interest paid by customers who don’t pay off their full balance that subsidizes these perks.
Putting it another way, if it’s mainly those with higher incomes who can afford to clear their card balance in full every month and those living a bit closer to the line who don’t (or can’t), then this is yet another example of the worse off subsidizing the better off…
July 4th, 2011 at 8:33 pm
Timo: great point about one group of people subsidizing another. But the question is simple: which group do you want to be in? If you can’t afford to be in the group that pays off your card in full, then you can’t afford your current lifestyle. Which means you’re kind of screwed, so credit card companies are providing you a service (or float). So that’s all you can really ask for. People that pay off in full and get points don’t need credit cards (for the most part), so card companies have to entice us to use their cards somehow.