When my oldest daughter turned thirteen I gave her a clothing allowance. We sat down and calculated what new items she’d have to buy that year, and how much they were likely to cost, and I handed her a cheque. That money had to last her for an entire year. If she bought too much and ran out of money, tough luck.

She did very well, mostly because she developed an amazing affection for thrift stores. She realized she could buy stuff cheaply and then keep the leftover money!

Actually living within one’s budget, though, seems rather quaint. A few years ago Steve Martin starred in a hilarious skit on Saturday Night Live called “Don’t Buy Stuff You Can’t Afford”. In the skit, a couple sits at a table, leafing through bills, when someone bursts in with a revolutionary new book on saving money. The book, though, is only a page long, and it’s called—you guessed it—Don’t Buy Stuff You Can’t Afford. The couple grapples with the concept. “So if I want it, but I don’t have the money, I can just buy it, right?” “No!” comes the answer. And on and on it goes as they struggle to wrap their heads around this once common sense idea.

As badly as we’ve blown it, though, governments are far worse. Imagine if the government had to live the way we should: stay within a budget, save 10% for a rainy day, and then give away a few percentage points to charity. Sounds like a fairytale, doesn’t it?

Canada will run a deficit this year, but that’s after a few years of surpluses and paying down debt. The Americans, on the other hand, have been overspending for quite a while, and now it’s getting worse. Up until now, “billion” was the biggest number in our common lexicon. Now we’re all trying to figure out “trillion”, as Obama throws a bunch of good money after what looks like worthless investments. Instead of rewarding people for budgeting, or providing a stimulus that helps everyone, the U.S. government in all its wisdom has decided to reward businesses, industries, and individuals who have wasted, pilfered, and gambled their wealth away. To make matters worse, those who actually do make an income, and do contribute to the economy, and do try to live within their means, are the ones who will have to cough up the cash.

And they’re not alone. Their children and grandchildren will be on the hook, too. Instead of using their own money to save for their own homes, these future taxpayers will still be paying this debt left from bailing out irresponsible home buyers. It’s crazy.

For most of my life I have assumed that one day one of my children might move to the United States, with its better employment opportunities. In the past few months, though, I have developed a new affinity for our True North Strong and Free. I believe we’ll grow and thrive over the next few years, while Americans will find their huge debt catching up with them. They bought too much stuff they couldn’t afford.

Canada’s debt is 20% of our GDP, whereas America’s is now over 50%. And debt means that eventually someone’s taxes are going to have to pay for all the money the government has already spent. All those interest payments are going to make it harder and harder for future Americans to pay for Social Security, or Medicare, or even schools.

I have no idea what’s going to happen to the economy for the next few years, but since Canada is so tied to the United States, I’m not overly optimistic. Rewarding irresponsibility and poor business decisions causes more irresponsibility! But I think the tried and true rules are still tried and true, even if government is making a mockery of them. We shouldn’t need Saturday Night Live to remind us; this should all be pretty obvious. Save for something before you buy. Don’t wrack up credit card debt. Don’t invest unless you’re prepared to lose the money, and most of all, don’t buy stuff you can’t afford. Now, is the government listening?

Labels: columns, economy, saving, spending