In late 1996 and early 1997, the collapse of a handful of pyramid schemes led to widespread chaos in Albania, which had only recently emerged from nearly 50 years of xenophobic communist rule. Before order was restored, the economy had collapsed, large parts of the police and army had deserted, and 2,000 people had been killed.

At the height of the pyramid scheme mania, nearly 60 percent of Albania's 3.5 million people had invested in the schemes: People sold their homes and farmers even sold their livestock to get in on the action.

I remember reading about the schemes and their aftermath and thinking less-than-charitable thoughts about the Albanian people. I don't recall my exact thoughts but they were something about how "backward" and "unsophisticated" Albanians must have been to fall this hard for something so transparently bogus.

I owe Albania and its people an apology.

Really. Implicit in my judgment was the assumption that I and people like me were far too smart to ever fall for something so ridiculous as the promise that a market could only go up and, thus, letting it all ride was risk-free. People with professional degrees and who worked at jobs that required some knowledge of finance and the economy would never do something that, well, stupid.

People like a reporter for the New York Times. Oops! In a recent New York Times Magazine piece entitled "My Personal Credit Crisis," Times' reporter Edmund Andrews told the story about his own journey to the brink of foreclosure and bankruptcy.

Andrews wasn't just any reporter at the Times: He was an economics reporter who had been the paper's "chief eyes and ears on the Federal Reserve for the past six years." Even better (or worse): He had written "several early-warning articles in 2004 about the spike in go-go mortgages," the very practices that led to the recent near-death experience of global financial markets and brought on what is being (hopefully) called the "Great Recession."

In other words, Andrews, of all people, should have known better. Yet at the time the article was published, he was waiting for the bank to foreclose on his home eight months after his last payment.

What happened? It wasn't his base salary, which while "peanuts" compared to those of the people he covered, was a lot by any reasonable standard: $120,000 a year. It wasn't even so much the price of the house in question: At $460,000 it was a little less than four times his annual salary. While higher than is prudent (the recommended ratio is three to one), the difference alone might not have occasioned a mea culpa in the pages of the Times.

For that to happen, Andrews had to make a series of almost-unbelievable blunders wherein he let his feelings run roughshod over his reason. For instance, his take-home pay was approximately $6,800 a month. But, as he tells us, at the time he went house hunting he was separated from his wife of 21 years, who had custody of their sons and he was paying her $4,000 in alimony and child support.

That left him with $2,800 a month which, in the Washington area, is "barely enough to make ends meet in a one-bedroom rental apartment."

So why was he looking for a house? If you're thinking that a woman is involved, give yourself a gold star. He had been reunited with a friend from high school to whom he became engaged. While Andrews is coy about the timing and what, if any, role this reunion played in the dissolution of his first marriage, it doesn't matter from a financial point of view: His separation from his wife meant that his middle-class salary went to support two households instead of one.

While some studies suggest that, on the whole, men are financially better off than women following a divorce, this definitely wasn't the case with Andrews.

So, how did Andrews buy that $460,000 house? Through one of those "go-go mortgages" he had warned his readers about. Specifically, what he called a "don't ask, don't tell" loan in which he listed his assets but didn't have to state his income. At all.

If you want to get your mind around the sub-prime debacle, you couldn't ask for a clearer example: A man bringing home $6,800 a month, $4,000 of which goes to alimony and child support payments, is able to buy a $460,000 home, the monthly payments on which total $2,500, without stating, never mind verifying, his income.

You have no doubt noticed that the mortgage payment was nearly as much money as was left after Andrews fulfilled his legal obligations to the his first family. Or, as he put it, "we didn't have enough cash to cover more than a week's worth of groceries and gasoline." Even with his new wife's job, they "were spending way more than [they] were earning."

They squared the circle the way many Americans did: They went into debt — something their bank made it "easy" to do. The bank covered their overdrawn checks by tapping their credit cards $100 at a time and charging them a $10 fee. Thus, bouncing a check by $5 or $7 meant they owed the bank an additional $110. And, as you probably guessed, there were ballooning credit card balances: Transferring a $3,000 balance from one credit card to a "lower interest" one turned that $3,000 balance into a $6,000 one.

And so forth and so on until the Andrews were broke — as in $196 left in the bank — and deeply (as in more than $19,000) in debt. Andrews felt "foolish, ashamed and angry" about "trying to live a lifestyle that [he] couldn't afford."

Then, it got worse: His wife lost her job and they wound up not paying their mortgage and waiting for the bank to foreclose.

Andrews intends his own story to be an illustration of how lending practices got us into the mess we're in now. While there's plenty to fault about the conduct of banks and other financial institutions, Andrews' tale is really about the always-volatile and often-incendiary combination of money, credit, expectations and self-image.

Everything Andrews wrote about his mortgage broker's efforts to "enable dreams" was only possible because Andrews had those dreams in the first place. His eagerness to "start a new chapter in [his] life" with his new wife overrode everything he had learned in his years as an economics reporter who had covered the industry.

That shouldn't come as a surprise. There's no shortage of sound financial advice out there, including here at Boundless. Any financial counselor worth his or her salt will tell you to spend less than you make, postpone gratification and distinguish needs from wants.

They will warn you that if it sounds too good to be true (whatever "it" might be), it almost certainly is.

Yet, the only things distinguishing Andrews from countless other Americans were the extent of his folly, which made the Albanians I put down look sensible by comparison, and the humiliation that followed it. I'm willing to bet that virtually everyone who gets in over his or her head at the very least had doubts about the prudence of their actions.

But they still acted, anyway. That's because the prudent course of action didn't conform to their self-image, how they envisioned a "successful" version of themselves living. And the people working to enable Andrews' and others' dreams know this and use it. I know it because I'm not immune to this appeal.

A few years ago, I was in the market for a car. All I needed was a reliable compact car big enough for my son and me. Yet, when someone told me that I should consider a car more in line with "my station in life," they got my attention. It didn't matter than I had no idea what "my station in life" meant apart from "you're too old to drive a Corolla or Civic." It didn't matter that I don't drive all that much: less than 5,000 miles a year. "My station in life" was at stake!

Fortunately, my rational self prevailed. (Honesty requires me to acknowledge that the same wouldn't have been true in my 20s.) But the people wanting to sell us stuff and those making a living from "enabling" us know that this appeal works often enough to make their dreams come true. So, they appeal to what marketers call the "reptilian brain," i.e., the neo-cortex and cerebellum, the parts of brain that govern emotions and drives such as reproduction and survival.

In other words, they bypass reason and go straight for our instincts, as in "that car gets great gas mileage but it screams 'boring!' and chicks don't go for boring guys." Or "this is all the house you need but it's not the kind of house that says the right things about you." "Can't really afford it? That's good!" Credit card companies hate customers who pay off their balances each month: They call them "freeloaders."

The only way to avoid falling prey to this rationality bypass (other than learning the hard way) is to get it through your head now that, as Tyler Durden told his "maggots" in Fight Club, "you are not the car you drive" or your khakis or anything else you can buy (or sell). Anyone who thinks differently is not worth the time or effort getting to know, much less impress.

This is the only way to make yourself immune the siren song of stuff, status and credit. Until you understand this, it won't matter how much your think you understand about finances.

Apologies, Albania.