Weekend Reading – Comparisons bring you down, tyranny of fees and more #money stuff

re: “Rob Carrick believes higher interest rates will help fix our financial literacy issue. I think he’s partly right. I believe good decisions come down to good behaviours. So, until something nasty happens with the housing market (for one example) to trigger a behavioural shift, people will continue to spend away on their homes largely living beyond their means.”

I disagree. People were just as illiterate when interest rates were high as they are when interest rates are low. When rates were 18% people were illiterate (lack of access to information?) but they saved simply because interest rates were high. Currently interest rates are low and people are still illiterate (access to too much information?) but they spend because they aren’t getting any return on savings.

When something nasty happens, of course it will trigger a behavioural shift but unless that something nasty is permanent, then neither will be the behavioural shift. I’d say the Financial Crisis of 2008 was a rather nasty something…and look at where we are…at all-time high debt-to-income levels. People have short memories and are marvellously adaptive, especially when it comes to preserving our personal homeostasis (both mental and physical). Thus, we are far more likely to continue to do whatever it is we’re already doing (and seek out ways of enablement) until we absolutely can’t continue. But even then, as we all know from trying to drop a bad habit and form a healthy habit…it mostly fails (all habits are permanently etched into the brain; they don’t die, they just remain dormant).

Creating a new behaviour takes incredible focus, energy, and time — most people will not commit to that cause. A prohibitive environment (aka higher interest rates) will simply constrict current behaviour. People might stop spending because they no longer have the money, or it’s more valuable to save; what they aren’t going to do, as a whole, is all of a sudden decide to become financially literate (e.g. people consumed alcohol before, during, and after Prohibition). And once the ‘something nasty’ becomes less nasty, people will return to living to the highest and freest standard allowed.

It’s akin to saying that since we now enjoy the highest ever standard of living in history everyone will choose the most healthy option. Hate to burst the bubble, but almost all humans don’t operate like that (e.g. obesity and diabetes sweeping the globe). He is correct in saying “we have the level of financial savvy we deserve”, as I’ve said, easy debt makes people stupid and lazy — who cares about learning how to make money when money is so easy to get! And when the price of money is so low, the value soon follows (i.e. it’s more valuable to have a car than cash).

Apart from that, there is literature which reveals that a good majority of working Canadians, of all ages, are indeed saving, and saving much more than the usual 4% stat.

re: FIRECracker — don’t compare…
But compare is *EXACTLY* what she (and her partner) did in order to achieve heightened media popularity within Canada and gain traction for her blog — she compared her journey to that of of house owners and then very loudly proclaimed her (their) journey as being far superior (is ‘house shaming’ the new ‘fat shaming’?). Yet another PF blogger littering the information highway with endless garbage. And yes, I’m comparing her content to those who actually provide/create value.