There was an article I saw on the dangers of higher credit card limits. During the housing boom, banks began increasing credit card limits in response to higher home equity values. Many people took the bait, as Americans dramatically increased their borrowing, using their homes as ATM machines.
Ed McMahon was no exception. Recently appearing on Larry King Live to ask for financial help, he discussed how his high income expectations led him to continuously borrow against the value of his home through the years and he eventually ended up in foreclosure.
Call me evil, but I didn't feel sorry for McMahon. There are millions of hard-working Americans with real jobs who had to fight through foreclosure without the luxury of begging for a bailout on Larry King Live. This is not to be insensitive to Ed's situation, but I think that his irresponsibility was reflective of not just many extravagant people in Hollywood, but also of many Americans who think that the financial sunshine will always be bright.
The lesson to learn from the article above is simple: set budgets, don't use extra credit card capacity to have things that you don't really need, be financially cautious. When thinking about money, keeping the worst case scenario in mind is a good financial policy to live by. Most of us can't go on Larry King's show to get a bailout.
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