I thought I was smart. I thought that when I bought a house I would pay about three times our annual income. That used to be the rule, right?
When the real estate agent showed us the only four-bedroom houses (we have five children) available in that price range (this was Las Vegas in 2004) I wanted to cry. We ended up paying over five times our annual income and had to get an interest-only ARM to do it. I didn't sleep well for two years until the pay-off penalty expired and we could refinance. Why did we have to do this? Because everyone else was doing it. The banks were loaning too much money to anyone who came along, and so since people could pay that much for a home they did it.
Well, having survived that adventure, I thought I'd just keep being smart and stay out of any more trouble. We had a fixed rate mortgage and a good steady income, so I went about saving a little money when I could, never buying anything on credit, keeping my pantry well stocked, turning the thermostat to 62 in winter and 86 in summer, and avoiding unnecessary use of my gasoline powered vehicle.
Now, as a direct result of the economic recession, my husband, who works for a state college, is being laid off due to budget cuts. Yes, I'm glad I did all those smart things because we're better prepared to be laid off. On the other hand, I can't help but think that we wouldn't be laid off right now if everyone else hadn't borrowed more money than they could pay back!
From now on, it's not good enough for me to be smart. I have to convince other people to be smart too.