The other day I wrote a couple posts about debt, one on how debt attracts debt, the other looked at the quick loan situation, where people are buying now and paying later, with very few hurdles to jump. I came across this in an article where they were asking for legal advice:
I’m a single mum with three kids and I really wanted to give them the best Christmas as last year was so hard on us all. I couldn’t get a bank loan so I borrowed money from one of the ‘same-day loan’ companies you see advertised on TV. I got wrapped up in the excitement and ended up spending over $10,000 all up. Now the reality has set in and I can’t make the repayments. I’m really worried as the company has been in touch saying that if I don’t start paying up it will be deferred to a collection agency. I’m terrified of someone coming to the door and taking away all of the kids’ Christmas presents. What are my rights?
Firstly, who the hell spends 10,000 dollars on Christmas presents for three children...
I think this highlights the problem with these services, as while some people might use them somewhat responsibly, I believe the general user doesn't, as they suffer from thought error.
In a hypothetical scenario where a person earns 1000 dollars a month and sees something they want for 100 dollars now, but don't have the money for it so take a loan, what makes them think that they will have a 100 dollars next month to cover the debt?
Under normal circumstances, we should probably know what our income is and general expenditure, meaning that we should also have some idea of what income we have disposable each month - the money that we can "waste" without having to cut back on anything. Of course, this disposable income should no be the percentage that is used for saving. For example, if there is 1000 dollars earned and the goal is to save 100 a month, if all costs are 900, there is no disposable income. However, if all costs are 800, there is 100 for saving and 100 that can be spent. Also, that 10% should really be,pre-tax amount, not post tax.
One problem is that many people don't "automatically" see their saving percentage as already gone, making it appear as disposable. This means there is a far greater chance of spending the saving, rather than actually saving it. If possible, it is best to set up an automatic deduction into a savings account for a salary, or making sure that once paid, it is moved out of reach. Make the assumption that your willpower isn't as strong as you think, nor your memory.
It seems however, that many, many people assume that while they have a set salary of the 1000, they can take debt and find a way to pay back extra the following months. If they were able to actually tighten their belt, they would have had the money upfront, wouldn't they? People who are good with money don't need to take loans for Christmas presents.
And I think that this highlights a cultural issue as well, where we seem to think that we "deserve" rewards after bad times, like dessert after a meal. The problem is (and this happens with meals too), that we keep lowering the barrier required to get the reward.
"I went to the gym today, so I deserve a candy bar."
"It was a tough year - so I am going to go buy consumables on credit to make me feel better."
What is quite interesting to note is how few people "reward themselves" with something valuable. For example, last year I bought myself a birthday present - A couple hundred dollars worth of $5500 Bitcoin. I gotta say, it felt pretty good and continues to feel good in comparison to what else I might have rewarded myself with.
But, we life in an instant gratification culture where we continually expand our pleasure lifestyle, regardless of whether we can afford it or not. We keep going deeper into debt and as we can see in the quote above, it is stressful. This is what so many people don't seem to recognize, that the little bit of pleasure they get in the moment is a far lesser return than the stress it can cause in the future. It is like going back to that candy bar and while it is a quick pleasure return, done daily it will lead to weight gain, illness and likely a range of psychological problems, including depression. Is it worth it?
This is the same for entertainment too, where people seem to spend more and more of their time entertaining themselves in what are increasingly passive ways that offer no return or value past the moment. In the past, people used to entertain themselves in skill building activities that add to their capabilities, now it is largely sitting in front of a screen consuming nothing that generates any kind of value that helps build better life experience and well-being.
It is like someone who don't like to brush their teeth choosing not to as they, essentially making the choice to have rotted teeth (Is there a Tinder for crack addicts?). When they are sick and have to go to the dentist, they will then complain about the cost of having their teeth repaired. Not looking after your hygiene is costly in both money and possibility, and this includes economic hygiene also.
I have no idea what the woman above does for a living, but she is likely going to be under financial duress for some time to come and it will likely affect her behavior. Not only this, it is also likely to affect the relationship that her children have with her and money also - This is the epitome of short-term thinking without considering the long-term ramifications and consequences of actions. If a person really wants to give their children a better life, going heavily into debt is unlikely to achieve that end, in the same way that feeding them junk food is unlikely to help them become happy adults.
We all make decisions based on the best of what we know at the moment, but it also seems that many of us actively avoid learning better ways. Instead, we prefer to keep the habits we are a familiar with, even if it costs us everything that is important to us.
It feels good now, tomorrow it'll hurt.
Taraz
[ Gen1: Hive ]
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Somebody who could take care of the household economy under your roof. A traditional role in the Far East a long time ago...
By the way...I remember a textbook from the 2nd or 3rd grade, elementary school. It was the thing to be at a later stage replaced by History classes, so perhaps 2nd grade it was. There was a single lesson that focused on household economy. It said something like...
The money that your parents receive are the household income.
The money the family has to pay to meet the cost of living and for recreation are the household expenses.
When the income has been more than the expenses, it can be added to the family savings.
When the expenses are more than the income, the family needs to borrow money from the bank or from friends.
Savings are not a thing for me. There's always something to be bought in order to achieve better results in my work. From clothes, hardware, software, ads space, assistance, education (forums, conventions, seminars), trips, etc.
There's also the "be prepared" kind of mindset...
And the family properties that could always use some repair work when they get the priority. Gardens to be tended, great-grandparents' or grandparents' houses to be maintained...
All of the above can be thought of as some kinds of assets I wouldn't like to go to waste.
The etymology of "economics" is, household management.
While I think it is good to have a little cash around, I think "savings" needs to be redefined. Investments count as do tools of the trade.
I wonder if like the rough 10% rule for income savings, we also had a 10% rule for the time spent on self-development activities. I think we'd be better off.
!ENGAGE 20
They tried teaching me last year that a business need 10 % set for marketing, too.
Also, unfortunately, tools of my trade are rapidly depreciating assets in terms of monetary value. They are almost the same as consumables. Or fuel. Buy for 1600, sell for 200 when you're done with it. Or just keep it in a drawer since it's not worth it to sell it for 200. Then throw it away, sell it for 150, or keep it in the drawer forever ;)
but, do they make you more in their lifetime than they cost?
They do. The calculations should go beyond that, though.
The positive thing is, the pictures can be seen as long-term assets which generally increase their value as they age. Well, the meaningful ones in any case. But there ought to be some of those.
ENGAGEtokens.What the hell is with this madness! These incidents makes me wonder if poverty could be a mental illness. I know there are many causes that can make people poor. But this level of madness has to be a form of mental disability that is yet to be classified. That'the only way I can properly comprehend the actions of people like this.
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LOL. Yeah it is pretty crazy and by the increasing in people seeking help for debt issues, the illness is spreading.
In all seriousness though, I do think poverty could be some kind of environmental illness of a kind. If a person grew up in a very polluted city, some health issues would be expected. Would be similar if growing up in poverty too, I assume.
Most people are raised believing various things from their parents, like religion, political beliefs and what not. These affect behavior, yet not many think about what they teach their kids about money habits.
That's an idea that makes sense. We are living in a culture where isolation and thinking on your own is often discouraged. There's lots of "influencing" going around. Have you heard of https://en.wikipedia.org/wiki/Linguistic_relativity ? Stronger version of this is called linguistic determinism
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Jeez. And I thought the amount of money that was spent on the kids' Christmas presents on the one just gone was excessive x_x
at least mine are aware that not all Christmases and birthdays are equal
Stop insulting the things I do! ;D
making the nothing that generates any kind of value that helps build better life experience and well being
please don't mind me I'm laughing so hard right now, though it's managed to become mostly internal XD
People go crazy these days and I think that some of them do it for attention :D
I have sat in front of plenty of screens, not all hours spent are created equal - oh they are, but not the way I spent them :)
What spend a metric boatload of money for attention? I really don't understand people XD
It would be kind of hard to spend hours equally, I mean, some hours you're going to be more tired or more energised than other hours, and some hours are going to need to be filled with things you really, really don't want to do but need to do nonetheless (like cleaning x_x or transiting), and stuff like that XD
I feel for such an individual.
I was in revolving debt some years back.
I'm fortunate to get myself out of it.
It ain't easy.
Yeah, it is a killer cycle and I have had my own issues over the years. The thing is that there are ways out for most, but it requires a fair bit of change in mentality and behavior. Instead of working out what needs to happen, people seem to avoid dealing with it altogether, making it worse.
What do you think were key points for you to break the spiral?
It takes a simple decision, yet a very difficult to implement.
When I decided to get out of revolving debt I had to, on that day, cut all my credit cards except one which I kept.
First month, I paid minimum on all credit cards, and paid cash for everything. This was not easy because I found out that I did not have enough for everything I thought I needed. I did not buy any stuff, and luckily for me, I hoarded food.
Next month, I did the same, ate out less, bought what was just necessary, found that I had some $150 left over, paid extra that towards a credit card bill.
Then I decided once and for all... I am going to go for it!
I read everything I could get hold of regarding going debt free, Ramsey is one. He said I need too keep $1,000 first for emergency fund, so I did. That was easy, because I just did was to sell stuff.
I told my friend about it, so that they can support me. I did not shop for a year the entire year. I gave cookies and food for Christmas and birthday presents.
I still looked great, I did not have to shop. I found out that making my own food for lunch was okay. I made my own coffee... and as the months went by, I can't wait for the paycheck because I was going t pay down a credit card.
It took me two years... and looking back, it was just hard the first six months.
The key points for me were making the decision and telling my friends about it...
reading books, reading success stories, and watching videos to keep my motivation up.
I change habits in the process. I have a habit of asking myself why I have to buy something and is it absolutely necessary. I found out as years passed, that you don't need much in life. Everything is hype up! You determine whether you need it or not.
Thank you so much for adding this in here!
I think you must sometimes look back on your path and be pretty grateful that you spent that first 6 months in discomfort. Do you ever wonder what life would be like if you didn't?
Yes, I often wonder... just like today. Who knows if I'd go to extremes like that woman in your story.
I will never go back. And today, I am into saving in silver and gold.
🥰🌺🤙
!ENGAGE 50
Thank you for the ENGAGE tokens!
ENGAGEtokens.This is very serious. I can't believe she spent $10,000 on just presents?
If she could do that for just presents then what about meals and other house expenses?
Why do people keep driving themselves into poverty, debt, and long last depression?
If there is anything one should dread, it's loan and borrowing. You never can tell the output of that action if you don't properly or critically make out your plans for what is to come.
Like what the!...how did she plan on returning the loan after spending that much on just presents and not looking for ways to generate the money?
We end up messing our lives for short term pleasure. We ruin our future because of the longing and desires of today.
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I have no idea, but I think it is a vicious cycle where the lives we lead currently (society in general) make us feel empty, so we look to fill the void with consumables.
While this is extreme, I think that many are in a similar boat to a lesser degree, going further into debt a pre-buy at a time...
Hmm! It's sad when we can't realize that we are our problem.
Using our own hands to tarnish our name
Phew, that's really crass 🤢😰. I don't think that was just Christmas gifts, I can't imagine. She wrote "and ended up spending over $10,000 all up". It's easy to overlook spending, but that amount is pretty high for a short time, there must have been debt before or broken furniture or car, I think. But I really feel sorry for the kids and the wife, because that's going to be really expensive when it's forwarded to collection agencies and that can have severe consequences. This happened to me once when I forgot to pay a bill and didn't read emails. Now the mother has dragged her children into it and maybe they will all be afraid when is knocked or the doorbell is rung. I think the best solution is for the mother to contact the company herself. The company and the mother could work out what amount would be possible each month. Then she should buy only what is really needed and buy discounted things without affecting the children. This probably happens once in her life, but it happens to the next person who hasn't had this experience and isn't aware of it through other experiences. I know these letters, yesterday I got one "Make your life easy. 5000,-- Euro at your free disposal , it costs only 99,-- Euro per month" 😂. Maybe you do not read the fine print?
It is the kind of debt that'll take years to pay off. I have no idea what her previous circumstances were (the article didn't say) but I would assume that if a person acts like that, they probably weren't good. In Australia, the loaning agent is meant to make sure the person has adequate means to pay back, but what is "adequate" might not consider much.
I am really tired of getting SMSs for shitty loan services. I feel I am on some list saying, this person wants to be in debt.
Don't worry, it's not bad if you get this SMS for shitty loan services. I think I am also on the list and in the Schufa. I had a couple of shopping cards where I could always pay with any another card, and although I always had the money for it that I really needed, it was expensive fun overall. But now I've drastically reduced and almost everything gone. If you can do it, it doesn't matter. The lenders also somehow want to survive 😉😅
I remember that during one christmas celebration I got a first harry potter book. I am not sure if this was the same christmas but I also remember that one time my dad put maybe 20 litas (?) inside of a candy box. Good times...
Also I don't always understand why people are buying new things just because they are new. Sure having a new pc would be nice. But it also very expensive and by spending more time in front of pc I would damage my eyes more. My current pc seems ancient but it still works. the same situation with my phone. But I only need phone for calling people and taking photos( I don't use apps or even mobile internet). If would want to upgrade quality of my photos I would probably just get a real camera. But I am not a photographer. Without the skills of photography new camera would be barely more useful than my phone... So I will be very happy if my current phone will serve me at least 10 more years. Why
fixreplace something that is not broken?That sounds like the presents I would get :D
I agree. People seem to want to have the "new" as if it makes them early adopters - when in reality, it just makes them early buyers. :D There is very little risk in buying the latest iPhone or model car - but it makes people feel like they are on the cutting edge. One the cutting edge are the people who create new technologies, not those who buy them.
When it comes to gadget things, I don't care much as long as it serves my needs. I have a decent camera (new after my last died) and a decent camera in my phone for the first time ever (bought in 2019) because I only use my own images for my posts :) practical value.
I loved reading you, I like the way you make your point of view. Also, the opinion you share is very revealing.
Then I will keep reading your other posts, I will follow you to keep up to date, and with your permission, I will be very inspired by your way of writing to be able to go deeper in my posts as well.
Always saving the differences obviously.
Again, thank you very much.
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