Sometimes Boring Is Good

Some of the events in the news this week (most notably that Newsweek article by Fareed Zakaria and President Obama's day-trip to Ottawa) have put Canada's banking industry in the spotlight, albeit only briefly. One of the realizations I've had on this topic is the one expressed in the title of this post: somethings boring is good.

When it comes to rules around how money gets lent out, I think they should be clear, concise and fair to all parties. I prefer a mundane system that says, "You must have at least 5% as a down payment on the property and the principle of your mortgage can't exceed two times your average family income over the past year" over one that really grabs you and shouts, "No money down! No one will be refused! Special introductory rates available!" Why? Because I think that something as important as money should never be borrowed by people who can't reasonably be expected to repay it. And because I think that we should all expect to have to save up for things when we can't afford them, rather than getting them right away (yes, I know that probably infuriates the Instant Gratification Generation, but whatever).

With big expenses like houses, cars and post-secondary school educations, loans are almost always necessary... but I personally believe they all should require skin in the game for the borrower (a down payment) and be limited to something reasonable. As someone who's had all of those types of loans in the past, I appreciated the fact that I could get them when I needed them, and I demonstrated that by repaying them as quickly and diligently as I could. Which is a completely boring way to live, I know, but also appropriate in matters of money. If more people had felt that way over the past decade or two, we wouldn't be in the financial disaster that seems to be getting worse every day now.