Living within our means

The scary economic times we are living through make me think about our finances more than usual these days. Each time I panic, I run through a mental checklist – jobs, expenditure, savings – are we doing something wrong? Is there some way we can be more prudent? I think not. We were pretty conservative in our lifestyle much before all this happened anyway. But what about the people around me?

Most folks I know here live in five bedroom houses and own two or more cars including the mandatory gas-guzzling SUV. The homes are usually mortgaged, the cars are often leased. The husband and I live in a one bedroom loft apartment and drive a second-hand Honda sedan. Everything we own is fully paid for. One of our friends with four kids spent thousands of dollars at a swanky Disney resort last year. He was worrying over paying for his kids’ education when we spoke with him last. We have no kids yet but we preferred to stay in a decent hotel outside Disney at half the price when we visited Florida last year.

I often read articles on personal finance that advise Americans to consolidate credit card debt and urge them to pay off a little more than the minimum balance every month. A credit card is a mere convenience to us, a better option than carrying around paper money. We pay all our bills at the end of the month, without giving a moment’s thought to the deferred payment or minimum balance options. They might as well not exist, that’s how much they figure in our scheme of things.

It’s common practice here, I am told, to borrow money against one’s home equity, ‘unlocking’ the wealth ‘tied up’ in the home. The borrowed money is supposed to be used for important expenses like paying for college education but sometimes more frivolous indulgences pop up as well, I’ve heard.

Just before we came to America, the husband and I invested our savings in a modest two-bedroom home in India. The bank was surprised with the loan amount we applied for. ‘We’ll give you five times that’, they offered. ‘No, thank you, this is all we need and can afford right now’, we countered. Besides, why do two people need a bigger house anyway? We’ll get a bigger and better home when we need one and can afford to pay for it, we figured.

There are several more examples, but I’m sure you get the picture. So are the husband and I both saints? No! This is simply the way we were brought up to think. I don’t mean to be sanctimonious and go on about how wise I am. Fact is, I am no different from most people I know back home in India.

When I opened my first bank account in the US, the bank executive offered us a savings plan that would automatically transfer the cents left off from my transactions to the savings account. ‘This way, you’ll have some savings at the end of the month’, the guy very sincerely told us. ‘Thanks, but no thanks!’, we told him, struggling to control our smiles. One of the things the husband and I fought over the most when we landed here were my penny-pinching habits. I didn’t need to save cents while I watched and fretted over every dollar I parted with!

This is a complete shift in culture and perspective we are talking about here. Like two people who see the same glass as half full and half empty, one of us looks at a paid-for home and rushes to unlock and spend the wealth in it while the other sees an outstanding home loan as debt and strives to repay it. It’s difficult to say who’s right and who’s wrong when confronted with such a clash of cultures. After all the glass IS both half full and half empty. Economists, who obviously understand these things better than I do, tell us it’s American consumers who fuel the world’s economy. And most folks would think I am a worrier who doesn’t know how to enjoy life.

Perhaps they are right. It all depends on one’s perspective, I guess, but I feel happier choosing the more prudent option for myself. And I don’t think I’m missing out on life’s pleasures at all! Is living in a two-bedroom condo all that bad? Both the husband and I lived in one-bedroom homes all through our childhood. We were four of us in my family while his had over ten people living in the same 500 square feet of space at one point of time. Despite that, or perhaps because of it, all our memories from this period are of laughter and games and sharing and warmth and togetherness.

Perhaps neither of us can imagine going back to living that way again, but we definitely can imagine bringing up our kids (when we have them!) in our cozy two-bedroom home in Pune, we are deliriously happy in our tiny condo right now, and we sure had loads of fun during our trip to Cape Cod last summer! Sure, I go berserk each time I see a glossy travel ad or one of those gorgeous remodeled homes on HGTV. I’d love to indulge in a five-star spa or decorate my home like that someday, but I’ll do it when I can afford to pay for it. And not have to worry about the kids’ education fund a few months later!

What about you? Do you think we are forgotting the art of living simply and within our means? Do we need a jolt like this recession to remind us of the simple and fun things in life?

Disclaimer: I am not an economist or a financial expert. This post is a collection of my thoughts and impressions from the news articles I read and the people I speak with. I mean absolutely no disrespect to anybody.