First up was this comment from an Icelander who did not get caught up in the excess;
“I thought there was something wrong with me because I wasn’t taking millions in loans,” he admitted. “Everyone had brand-new cars and built big summer homes and boats. You felt like a loser or something if you didn’t have it. This is the feeling that many regular people felt if they weren’t making trillions, but maybe we weren’t so stupid.”
When Joellyn and I went in 2006 I noted how many young people there were driving very expensive cars. As seen in real time this was either evidence of success or excess and given all the cranes we saw on the way in from the airport it certainly seemed like prosperity and one way to look at it was that this was somewhere on the spectrum of success building to excess.
The Icelander quoted above managed to not get caught up in what was going on, was content with what he had and so survived it better than most. People in the US with enough common sense to not buy a house by borrowing 120% of the price going in or take on four flips at once also fared better than most (one would hope anyway).
A number of people suggested to me (the author of the article) that the nation, as a whole, was going through a period of intense introspection and that the consensus seemed to be that Icelanders needed to return to their roots.
Introspection and self-awareness are important traits to have and while that seems like an obvious statement I do think it is collectively lacking. I don't know if collectively the US' roots can be one of living below our means, saving a lot of money relative to what we make and trying to make our lives simpler but this can occur on an individual level and while that may not solve what needs solving at the societal level this realization will help some people.
“I analyzed the two other Icelandic banks, but I was unable to analyze my own bank,” he (former analyst at Kaupthing) confessed. “I was psychologically unable to admit that we were doomed.”
Maybe he was psychologically unable but part of the equation for success in financial matters is the introspection to understand your blindspots (we all have them) and if possible figure out how to mitigate some of them. There are countless books on these various biases, fallacies and other human defects that do in many people in terms of investing and spending.
I write about this stuff often for two reasons. One is that I find this sort of human condition stuff to be fascinating and the other is that when people make progress toward figuring this out for themselves they then can invest in a more suitable manner. When someone realizes that a $700,000 nest egg does not afford a $100,000 lifestyle they can then invest with a more suitable allocation, with a more suitable time horizon and probably reduce their financial stress.
Personally speaking I want no financial stress and the easiest way to avoid stress is to act on what you can control like savings rate and spending. Our income is not necessarily in our control in that if we work for a company we could get let go for some reason or if we are self-employed, business could dry up one way or another. The crisis in 2008 did not take down everyone in the country, and if there is somehow another leg to this that doesn't have to take down everyone either.