A Fat Guy's Prediction: We Need Leadership or We Will Fall Off the Economic Wagon

And here I sit so patiently
Waiting to find out what price
You have to pay to get out of
Going through all these things twice.

-Bob Dylan

I struggle with my weight. A lot. I have tremendous discipline in business and finance but when it comes to weight loss, I'm the equivalent of a sub-prime mortgage.

I want good things to happen, even if I don't work for them. I want a healthy body, beyond expectations for someone with my lifestyle and family history. I don't want to take time to achieve my goals. I want them to happen overnight.

Preferably while I am sitting in the drive-thru line at McDonald's.

I laugh when economists say that Americans will be savers and misers, even when the economy improves.

Unless someone is capable of changing the American psyche, people are going to go back to their old spending habits. People will be using every dime of credit again, just like they did before the crisis.

It is the economic equivalent of a yo-yo diet.

People in addiction programs say that a person has to bottom out before he will seek help. A lot of Americans are bottoming out right now. They are behind on their mortgages, maxed-out on their credit cards and up to their necks in debt. Many have lost their jobs and are trying to re-adjust their incomes.

They have bottomed out. Most of them have gotten temporary religion and will tell anyone and everyone that they plan to be conservative.

When they get money and easy credit again, they will fall off the wagon.

I've been on every diet program ever invented. The only time I had success was when portions were completely monitored. When I start a supervised program, I throw every piece of food (including condiments like catsup) out of the house. I have no choice but to stay on the program.

I've been at my ideal weight several times. Each time I swear I am never going to gain weight again. Every time I do.

I eventually eat something that is not on the diet. Then I eat a larger thing not on the diet. Within a few months, I am back at the drive-thru, asking them to super size it.

In the diet world, they call it "going out of the box." I go back to old eating patterns.

The same way American spenders will go back to their same old spending patterns.

I've spent 27 years as a structured settlement consultant. I help injured people (and, sometimes, lottery winners) with their money. It's been said that 90% of people will run through a lump sum of money in five years or less. I'm sure that's true.

The only successful strategy is to not let people have access to their money in a lump sum. People who get money in monthly annuity payments (or from a trust) will still have money five years from now. The others won't.

100% of people I've met with tell me that they are going to handle a lump sum responsibly. 90% are wrong. And those 90% come from every social and economic background.

Unless Americans have built in restraints, they are going to run through money.

Right now, many Americans are "in the box" financially because they have to be. They can't afford to go to nice restaurants, buy new cars or live in houses costing far beyond their means. No one will give them credit.

Once things get better, they are going to "fall out of the box" unless access to easy credit is curtailed.

I grew up in an era where college students and broke people couldn't get credit cards. Interest rates were capped at 18%. We need to go back to those standards.

People who preyed on the poorest members of society then were called loan sharks. Now, payday loans and tax refund anticipation loans are considered, by some, to be legitimate businesses. Celebrities like Magic Johnson help to peddle their products.

Those products will make sure that their clients never "get in the box."

This is a unique point in history where we can put America "in the box" for a generation. The opportunity is here to pass laws that rid us of abusive, high interest financial schemes. Congress has only been taking baby steps when giant ones are needed.

I'm an optimist. I think Americans can learn to be good savers. I'm also a realist. I've spent 27 years watching people tell me they were going to handle their money correctly and then watching them screw up.

If I want to lose weight, I need to stay on a restricted program. If we are going to keep our country from facing another economic disaster like the one we are going through, we need to restrict easy credit and stop pandering to people's worst instincts.

There has to be a way to get out of going through all these things twice.

Or three times.

Or more times.

Don McNay, CLU, ChFC, MSFS, CSSC is the founder of McNay Settlement Group, a structured settlement consulting firm, in Richmond, Kentucky.

He is the author of two books. His next book Blood Money and Blowing It All: Why 90% of Americans waste an inheritance or insurance settlement and how to keep it from happening to your family, will be released later this year.

You can write to Don at [e-mail] or read his award winning column at www.donmcnay.com.

Comments

[joebaggadonuts]

Structured credit, enforced discipline.... things our parents should have taught us but they were too busy getting their brains turned to mush by TeeVee and talk radio.

Thanks for this, Don.

As a person who has successfully dieted and seen how few actually can, I know you are right about dieting and personal finance. The faux conservatives who preach "personal responsibility" can't actually walk that walk, they just talk that talk and hammer anyone who is not one of their tribe that fails, as sort of a sporting event. Then they forgive themselves for their own indulgence and blindness to the pain it causes those around them. Reminds me of the Church. It's no wonder the flock was so easily manipulated by them.

I think, Don, that we are coming to an awakening. Your comments may help with that for some. Thanks again.

[hearmeout]

Good thoughts, Don. Steadily rising unemployment and credit delinquencies (both the over-all rates and pace of acceleration are at all time highs) will prevent us from going back to our old ways any time soon, however. Our recklessness - debt-financed over-consumption and its associated speculative binges - has spawned the perfect storm of diabetes, cancer and atherosclerosis in the U.S. economy. None of us are innocent, from the ordinary consumer (formerly referred to as 'citizen') to the investment banker, the hedge fund manager and the politician. Even the world played its role to perfection by financing our binge so that foreign economies would grow at exaggerated rates. None of us are innocent, and we will all pay the price, which is... (drum roll please)... U.S. GDP WILL GROW @ LESS THAN 3% FOR AT LEAST FIVE YEARS. Mr. Obama, you'd be wise to revise them there deficit projections...

[Henry]

I listened to Naomi Klein the other night and her topic was similar to yours. That being that If America is seeking a recovery to the days prior to the downfall then we are doomed. She actually used Sarah Palin as the mentality that is wrong with American thinking. The connection being the drill drill drill mantra as the solution to the energy debacle. We need to come out of this with new respect for the word conservative. We also need to learn what is meant in the maxim: "we make money the old fashioned way, we earn it!" The notion of trade deficits into perpetuity to feed a consumer nation does not work. George Bush could see that, Barack Obama can see that and if we are going to be global then there needs to be some rules about trade deficits, govt budget deficits, and the general interest rate (there needs to be some proscription re usury). For starters. Look, even tthat red-neck republican, the corporate-raider T.Boom Pickens has something constructive to contrubute.

[Flavor]

Thank You for the article, I believe what you said about the american people will go back to the same old ways. I already see people who find it hard to adjust, they just simply got to have it. The word to use is dicipline something not all but some don't remember. Until we can dicipline ourselves the overspending won't stop. Just my view.

[paixa3]

Thank you for the great blog. I believe that your country will NEVER recover until you get the courage to out lobbyists, out your ciminal congress and start over to get a justice system.

In my view your country is both financially and morally bankrupt.