Caution in Financial Matters

It is always best to be cautious in financial matters.
Describe a specific situation in which it might be better not to be cautious in a financial matter. Discuss what you think determines whether or not it is best to be cautious in financial matters.
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In 2008, the United States underwent a financial crisis that bordered on becoming another Great Depression. Several factors contributed to the crisis, including, among others, subprime lending. People that could not afford to pay mortgages were allowed to purchase homes left and right. Many of those in the lending chain, from big bankers to brokers and lenders, greatly profited from signing on subprime borrowers. Essentially, people's greed spurred on the subprime lending---contributing to a financial meltdown. In retrospect, many learned that it is wise to be cautious in financial matters. When people, in general, make irresponsible financial decisions, the culture transforms in a way that breeds financial crises. In a sense, a nation's financial responsibility begins with its people and their individual decisions regarding money.

Essentially, the subprime lending trend was a manifestation of the US consumer culture. Encouraged by ubiquitous ads, Americans felt the urge to keep up with the Jones'. This meant buying new cars, new houses, going on luxury vacations, etc.---mostly on credit. People, in general, were living lifestyles they could not readily afford. "More" equaled "better" and many disregarded financial responsibility to maintain appearances. When credit card companies and banks could no longer open up credit following the 2008 disaster, many people re-learned an old lesson---that is, it is best to be cautious in financial matters. This is especially true when one is responsible for the lives of others (i.e., family) and will need to set aside funds for college, emergencies, etc. Credit will not always be there to the rescue and one should be prudent when dealing with financial matters.

The need for individuals to be responsible for their own finances may be thought of a microcosm of our nation's financial accountability. In retrospect, the aggregate of people's actions can cause national crises. However, leaders in Washington are responsible for making certain decisions that can either exacerbate or mitigate national crises. One example includes taking action to lower our ever-increasing national deficit. Leaders should be cautious by not approving more programs left and right that contribute to the deficit. Indeed, the more we finance programs and projects, the more beholden we are to our lender, China.

On a individual level, one need not be cautious with financial matters if he or she has a nest egg so large that there really is no need to budget. However, most Americans are not in this fortunate position and need to be wary about spending frivolously or taking out credit to buy non-essential products. The nation, as a whole, should try to become more risk averse in order to avoid falling further into the deficit hole. In certain cases, making risky financial decisions can result in wealth in an individual or national levels. However, in the current atmosphere of recession and recovery, it is probably wiser to take a prudent approach in making financial decisions.