No lifeboat for Titanic load of personal debt

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.

Brian O’Connor

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