Lessons from Greece for Canada’s Youth

30-something Canadians are confused about the current low interest rate environment.  According to a recent survey by Manulife Canada, Canadians in their 30s believe the current rates are the normal borrowing costs.

I guess someone  has to tell them the cheap money party will end. And I don’t mind if its me.

When it comes to borrowing money this isn’t normal. In fact, its as from normal as you can get. Interest rates are just above historic lows. Never in our lives has money been this cheap to borrow.

The scary part, and experts agree, this mentality is setting up younger people for a life of financial difficulties. I would like to go a step further and say financial failure.

The attitude young people have today is the same sovereign nations had 10 years. That the money will never end.

Let’s take Greece for an example. Its in the headlines again for all the wrong reasons. The debt-laden country says it won’t be able to pay its October bills. It’s seeking help, meaning more money from its fellow European Union members for the third time in less than 18 months.

If Greece gets this third round of bailout money it will add to the first installment of a $140-billion it received in May 2010 and the second worth $155 billion it received in July 2011. More debt to service debt.

As individuals there are some lessons we can learn from Greece.

Don’t use borrowed money to pay your debts
Greece has taken loans out to pay its creditors and for its public services. The instances of this are becoming more frequent, with this latest bailout request coming only 3 months after the last one.

You should never use borrowed money to pay off debt, not for your mortgage, or your bills or your credit card statements.  This downward spiral only leads to more debt and bigger payments and more borrowing to keep you afloat.

Live within your means
One of Greece’s major problems has been its inability to collect full taxes from its citizens. Consecutive Governments have continued to take on more debt to pay for expensive events like the 2004 Olympics. Many experts believe the $15 billion debt that Greece took on from the games was the start of Greek’s debt problems. Doesn’t seem like that much money now, but debt always starts somewhere. The major problem is Greece continued to run its country as if it was flush with cash.

In our day-to-day lives, we should not be using our credit cards when we don’t have any money in the bank to pay our statements. If you loose your job, or an emergency expensive creeps up, adjust your life accordingly. Don’t continue on as if everything is status quo. If you are struggling to pay your month-to-month bills, then changes have to happen at home. If you are driving two cars, switch to one. If you’re living in a bigger house than what you need, downsize.  Learn to live comfortably in the money you make, otherwise you will always be playing catch up.

Don’t misrepresent yourself to get into a prestigious organization
When Greece entered the European Union in June 2000,  it did so on false representation. It based its economic status on the year prior and under-reported some of the budgetary statistics. In short it made itself look wealthier that it was.

If your friends are buying expensive cars and taking luxury trips it does not mean you have to as well. On the contrary if your finances don’t allow it, you shouldn’t.  Don’t buy into a lifestyle if you can’t afford it.

Pay your fair share of the household expenses
Greece belongs to the European Union, its like a family of sorts that helps each other in times of trouble. The problem is Greece has only been asking for handouts. Since Greece lives in the EU house other countries reluctantly have to comply, because its collapse would mean the household would become dysfunctional.

Everyone who lives in a home together has to pitch in. Take responsibility for running the house. Sometimes through money, sometimes through labour, but it has to happen for the whole household to work. If one spouse looses their job they can still pick up the slack by bringing costs down at home while they look for another opportunity.

Swallow your pride and take realistic steps when debt becomes unmanageable
Greece has taken drastic measure to cut its spending, by bringing in extreme austerity measures that have cut public services and laid off government workers. The steps have been so extreme that days of protests followed when they were first announced. Even so, Greece still faces problems servicing its debt. Greece needs to start selling property or land to get its finances back on track.

If you have done everything you can to get your finances in order and cut out all the extras in your life, but it still hasn’t worked, sometimes you have to step way from your ego and sell your house, or take a second job. Consider debt consolidation and do anything to get back on track.

What’s an ordinary Canadian to do?
There’s broad lessons we can learn from a country with problems nearly a decade in the making. That’s the tricky part with debt,  it doesn’t happen overnight, it piles up over time and then takes you over. Recognize the signs early, curb your spending accordingly or you could spend many years looking for someone else to bail you out of your problems. Make an effort to become financially literate, its a bit of a buzz word right now, but for good reason. If Greece had taken these steps years ago it might not be in the situation it finds itself today.

Writer for RateSupermarket.ca

Related Topics

Economic News / Saving for Education

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