Think Again:

Growing up, I remember the lessons I learned by observing my parents and the principles they followed handling the family’s finances: Work hard and honestly, have enough on hand for rainy days, don’t spend more than you earn, save for the future and invest wisely.

I remember how credit cards were used as a convenient way to pay for purchases for which we already had the money, but never as a way to finance purchases against future income. Credit cards were always paid off at the end of each month, in full.

As a result, I’ve paid off my credit cards every month throughout my life, mindful of the financial trap. I’m sure the banks didn’t view me as their ideal customer because they never made money on me in the form of outrageous interest rates.

In more recent years, banks preyed upon consumers, especially lower-income families, by making it very easy to qualify for the cards and coming up with gimmicks, such as temporary artificially low or zero interest rates. All this in the hope that a consumer would rack up debt that would then kick in to higher interest rates when they were unable to pay, which is a situation many fell into because they outspent their ability to pay.

Doesn’t this sound like the mortgage and real estate meltdown? In both cases, while the banking industry has a great deal of blame, consumers bear an equal amount of the responsibility for getting themselves into the situation.

The same principles are at play on the public level when we look at expenditures by local, state and federal governments. For example, the federal government has racked up a record $11 trillion in debt, and it’s growing with each “economic stimulus” plan announced by the White House.

In California, we are heading toward a roughly $20-billion deficit, and we can’t seem to get agreement on a balanced budget. The result is that California now has the lowest state credit rating in the nation. This situation is partially due to the fact that we’ve locked lawmakers into certain spending from voter initiatives and federal mandates.

To bring this home, we are feeling the squeeze at the local level. Recently, Glendale Unified School District resorted to increase class sizes and move toward teacher layoffs. Whether you agree with that specific decision or not, the reality is that the finances are not balancing out despite prudent planning.