Sunday is the 100th anniversary of the sinking of the Titanic, which provides many financial cautions, such as always be extremely careful when pulling over to pick up ice.
The great ship’s best lessons come from “Titanic” director James Cameron, who plugged his movie’s re-release by plunging 6.8 miles to the ocean’s deepest spot, making two vital points:
It actually is possible to sink farther underwater than my mortgage.
Even if you put 35,000 feet
of water between you and the surface, you can never escape the sound of Celine Dion wailing that infernal song.
A boatload of debt
Like the Titanic, Americans felt foolishly unsinkable themselves in piling on debt in the past, and may be doing it again.
According to the Federal Reserve, total consumer debt hit its highest level in three years during February. Debt had fallen 4.5 percent — $114billion — between 2008 and 2010. Revolving credit, such as credit cards, remains low, but other categories, such as auto and student loans are up, increasing total debt by $113.5billion and nearly back to its pre-bubble level.
With the economy slowly improving, credit is more available, so it makes sense that we’re using more of it — as long as we don’t run up tabs like we had before the credit bubble burst. The lesson from that Titanic bust, warns Mary Hunt, author of “7 Money Rules for Life,” is simple: Don’t run yourself into a financial iceberg.
“The No. 1 rule is the importance of spending less than you earn,” Hunt says. “If you spend all you earn, or more than you earn, you’re pretty much in trouble.”
If you skip that rule, Hunt says you can forget her other six guidelines. “If you’re living beyond your means, and you’re borrowing money, that’s toxic, and it’ll poison your life.”
Don’t sink financial ship
So, while the tide of the slowly improving economy may be lifting most boats, don’t take on more debt than you can afford.
Think twice, for example, if you’re heading to Cullen’s Upscale American Grille in Houston for the re-created 10-course first-class dinner for 12 from the Titanic’s doomed final night. It includes oysters a la russe, filet mignons Lili, $400-per-ounce brandy and will run you $12,000.
Instead, stay home and economize with a nice salad. That way you really can mark the occasion just like the Titanic — by hitting the iceberg.