George B. Still Needs a Loan (from the Economist's View)
There's this guy I know, George B., and he's been having all sorts of financial troubles. A year or two ago he made some changes that lowered his income, but he didn't change his spending habits at all, and I think he may have even accelerated his purchases.
Because of this, month after month after month he has to borrow money to get by. So far he's okay, he's been borrowing against accumulated assets from the past, but he's clearly headed for trouble.
He wasn't too happy with me today. He called to tell me his good news. A couple of weeks ago he had called and said that, despite his best efforts, he was going to have to borrow $400 to get by this month, though he did say that estimate was likely to be too high. I keep trying to tell him he needs to increase his income since most of his spending is down to essentials, but somehow he believes he can make on his present earnings even though that's clearly not the case. Sometimes he even talks about reducing his income further which is nuts given the size of his unavoidable financial obligations.
Anyway, he called today with his good news. Because of revenues he didn't anticipate, he only has to borrow $200 instead of $400. He expected me to be happy for him, but several things prevented me from sharing in his joy and he's a bit miffed because of it. First, he's still borrowing money. It's less, only $200, but he's still going further into debt. I can understand why he might be happy to borrow less, but from a broader perspective he still has problems. Second, this didn't happen because he changed anything at all about his behavior since he called with the $400 estimate. Part of it was just due to the initial overestimate, though he seems to have forgotten that, and part was the unexpected increase in his income. But he didn't change a thing. Same old George. So, while the windfall may or may not continue - that isn't clear yet - it's hard to give too much credit when he didn't really do anything to change the outcome.
. . . more