BIO

Cliff Mason is the author of Millennial Money. He is the Senior Writer of CNBC's Mad Money with Jim Cramer, and has been that program's primary writer, in cooperation with and under the supervision of Jim Cramer, since he began at CNBC as an intern during the summer of 2005. Mason was the author of a column at TheStreet.com during 2007, which he describes as "hilarious, if short-lived." He graduated from Harvard College in 2007. It was at Harvard that Mason learned to multi-task, mastering the art of seeming to pay attention to professors while writing scripts for Mad Money. Mason has co-written two books with Jim Cramer: Jim Cramer's Mad Money: Watch TV, Get Rich and Stay Mad For Life: Get Rich, Stay Rich (Make Your Kids Even Richer). He is 100% responsible for any parts of either book that you did not like. Mason has also had a fruitful relationship with Jim Cramer as his nephew for the last 23 years and will hopefully continue to hold that position for many more as long as he doesn't do anything to get himself kicked out of the family.

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Nov.19

3:34 PM ET

Wednesday, 19 Nov 2008

Economic Woes Make Us Desperate, Not Thrifty

Posted By:Cliff Mason

Topics:Economy (U.S.) | Stock Market

Credit Cards
There's an idea that's been making the rounds on the internet, that the upside of the current recession is that it will teach us to live within our means. I don't buy it. The notion that an economic downturn will cause us to give up putting money on our credit cards and rediscover the virtues of saving may seem intuitive. But when you give it a closer look, it doesn't make any sense.

You might call the current financial crisis my generation's first truly formative economic experience. I sincerely doubt that it's teaching of us to be more thrifty.

Why? Because this recession hurts both the deserving and the undeserving alike. If you've assiduously saved up a lot of money and invested it in the stock market, what's happened? You've seen your savings get annihilated.

At the same time, if you lose your job and can't find another one anytime soon, does that really teach you to live within your means?

It may force you to. But think about it like this: if you're newly unemployed, the difference between having some money saved up and having a lot of credit card debt is just one of time. The time it takes you to go through all the money you have or can borrow in order to support yourself.

If you don't have a job and you're in your twenties, you'll just eat through your savings. And when that's through, believe me, you'll be sorely tempted to put whatever you can on your credit card for however long you can get away with it.

So is this recession really teaching us that it's important to live within our means? I think the real lesson that anyone who's hurting financially has learned is this: Your personal finance habits don't matter that much because there's just not that much you can do to protect yourself from the systemic risk in the system. And maybe we're also learning that credit cards are a great way to get through tough times. That's a lesson I'm fine with, but most personal finance scolds wouldn't be.

Your Thoughts On Spending

Economic hardship doesn't make us better at managing our finances, it just makes us desperate. And, frankly, I find any suggestion that this downturn is a good thing because it will make us more "virtuous"

when it comes to our money pretty heartless. That's the same thing the British Parliament said about the Irish potato famine, and history doesn't look kindly on those guys.

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