My wife and I watched Lassie in our pajamas on a recent weekend. You know from my profile that I’m a dog person and I really like the shepherding group of dogs. We have an Australian Shepherd named Karlee. She has been the prescription for the death of Snickers, our Border Collie, two years ago. So Lassie hits my sweet spot for dogs.
I highly recommend the 2005 version of the movie set in World War II England starring Peter O’Toole and Samantha Morton. It fits into our holiday movie rotation because it is set at Christmastime with snow and dogs in snow. We miss the snow after 18 years in the desert.
The boy’s family comes on hard times when the town coal mine runs out and the miners are suddenly unemployed. The wife suggests that the dog could be sold to raise cash for the family in hard times. The husband argues against it.
The local Duke, played by O’Toole, makes an offer of fifteen pounds for the dog. So Lassie is sold to the Duke who takes her to his estate in Scotland. Lassie escapes and faces a 500 mile journey if she’s to be reunited with her family at Christmas.
And this is where our link to borrowing comes in.
In exchange for fifteen pounds the parents sold the remaining years of future happiness between boy and dog. A bond that is as strong as any on earth.
The parents in the movie probably did not consider the future happiness that was being sold to raise cash quickly. They didn’t try to quantify the happiness the dog generated each day and apply the appropriate risk adjusted discount rate to that stream of happiness (OK, that’s a little over-the-top, wonky economist speak but that’s what flowed out of my stream of consciousness). They simply sold the dog based on what the market was willing to pay on that day so they could buy some things. The future happiness of the boy may have been mortgaged for a very low price.
I realize this is a stretched analogy but I’ve seen this played out many times over the last three years of the global financial crisis. Cities sell government buildings, already paid for by the taxpayers, to raise cash now and then lease them back from the investor. A church sells its cell tower lease revenue to plug a gap in the current year’s budget, in effect pulling multiple years’ lease payments into the current year. A retired man sells his cash value life insurance policy to raise money now to pay medical bills. All of these borrow from future benefit to raise cash today.
So what lessons does the movie Lassie teach us?
- Borrowing from future benefit is costly and should not be taken lightly
- Money borrowed today must be repaid with interest from future benefit
- Confused? Consult a trusted friend or qualified borrowing advisor before borrowing money
- Exhaust all ways to bridge your budget gap by cutting costs today instead of borrowing from future generations’ benefits
- Don’t make the five classic borrowing mistakes. Be a borrowing gladiator in the arena of debt
- Unless you have a generous benefactor or know a rich Duke, the cost to buy-back what you mortgaged may be very high
- Stop digging a hole in your financial garden with desperate borrowing. Even a dog knows to bury a bone for later
What is the one thing that brings you so much present happiness you could never consider mortgaging the future happiness that thing will bring?
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