Financial disacuity

Miscellaneous and Personal Stuff I Must Share
1

I tend to be surrounded by people who are fairly sensible and conservative about their personal finances, so it’s rare to encounter someone who doesn’t know the basic things they try to teach in Consumer Econ 101.

This weekend, though, I was at a family Xmas gathering and overheard one of the most jaw-dropping conversations I’ve heard in a long time, especially among well-established adults (early 50s, homeowners, kids grown and gone, etc.)

Sentence #1: “Yeah, we needed snow tires for the truck, but they were $400, so we bought the new truck instead because the lease payment is less than that.”

(“Lease,” IMHO, being the icing on that asininity.)

Sentence #2: “I’d love to have an upstairs bathroom but it would be about $5,000 to do the addition, and I don’t think we can get a third [mortgage] for that much.”

Sentence #3: “We’re going to sell the house [in the back woods of a small town in a fairly impoverished northern state] to retire in a few years, anyway.”

Sounded like a couple of 20yo high school dropouts talking about how they were going to make it big with their band, if they could ever get someone to give them a Stratocaster. It got worse when she started going on about a store somewhere that caught a lot of shit for having a creche in their window, because War on Christmas, you know.

Fortunately, there were sensible and amusing people to talk to, too. But… oy.

2

Welcome to my world.

I hear things like that everyday. Not overhear them, get me, but told them by people who appear to be otherwise normal adults.

3

I have a coworker who believes all kinds of crap she reads online. She was trying to convince all of us that the dollar was going to crash this past July first. She said we should all max out our credit cards before then. ( I didn’t bother to try to understand the logic of it.) We all think she may have actually done it!

4

Don’t a lot of homeowners have the same idea for their homes? Maybe even the majority? I guess I’m confused over who is crazy. Your friends or conventional wisdom.

5

wut

I’m not super familiar with home renos but am I crazy or is 5 grand for a bathroom cheap as hell? Not to mention, mortgage? I’m a poor-ass 20-something working off my college degree and I could come up with that in a few months depending on how critical it was and how tight I pulled the purse strings.

6

I have a relative whose spouse just inherited something like $300K. They’re in their 50s. They decided to retire. One was self-employed and the other had a minimum wage job, and while I don’t know for sure, it’s a safe bet they don’t have a retirement fund. They’re still paying a mortgage and at least one of their vehicles is quite old. Since getting the inheritance, they’ve gone on 2 cruises.

I see them looking for work within 5 years.

7

On a somewhat smaller scale, I take a very poor neighbor to the grocery store once or twice a month. She lives on $390 social security and about $190 a month Bridge card (food stamps.)

As of a few weeks ago I have given up trying to explain the “per unit” pricing at the grocery store. She just does not get it. I also know a poor person who has rented various appliances and a computer from a Rent-To-Own store. She pays, literally, thousands of dollars for stuff she could buy perfectly well for a tenth or less of the price used.

“But it’s only $39.00 a month. I can afford that.”

8

I remember my brother’s stepdaughter showing me her new SLR camera about 20 years ago. She had bought it from Sears, along with a couple of zoom lenses, kit bag, etc. I told her I thought it was a decent camera and then she tells me “Yeah, I charged it on my Sears card. They’ve been bugging me for a couple of months now because I stopped making payments, but. . .” ::aggrieved look and whiny voice kick in:: . . .“I can’t afford that, so screw them!”

WTF?

9

I do taxes for a living, and I can assure that this sort of thinking is far more common than you would think. As far as I can tell, somewhere between 25-35% of the US population is simply unable to make basic financial decisions. I don’t know whether to blame education, genetics, advertising or what… but they just don’t get it.

I had one client put together a business plan basically read like this “I’ll need $500,000 to start my business. $100,000 will be spent on equipment that I could rent for $1,000 a month, so I’ll be saving money. Then the other $400,000 will allow me to make the monthly payments on the loan for 10 years, and I’ll know by then whether the business is going to be successful or not.”

Or how about this: “I can’t afford my student loan payments for my underwater basket weaving degree, but they’ll loan me more money to go to grad school, so I don’t have to make payments for another two years.”

10

These are people living on credit. Works out great if you die before you run out of credit, otherwise not so well.

11

Sentence #1 used in the OP is really shocking in its depth of stupidity. I wonder how people like that manage to put on pants everyday.

12

I’m actually doing this, and I fully expect it to work out well (seriously). I will let you know in 2-3 years.

13

There are some people for whom it’s a reasonable plan. I assume you’ve done the cost/benefit analysis comparing the additional cost to your projected future earnings?

But the people who don’t look at earnings and just rack up $40k (or whatever) in new debt in order to defer paying the old debt… not such a good plan, guys. :smack:

14

Hell, at least your client HAD a business plan. We had startups come to us and ask us to write a BP for them. They didn’t have the slightest idea of revenue projections, cash flow or any long-term plan other than “we’ll be so successful someone will buy us out.”

15

My two personal favorites came from the same person

  1. I either asked for a lighter or saw the inside of her purse, either way, I asked her why she had like 6 lighters. She told me that she stops at a gas station every morning for a pack of cigarettes but it’s less than the minimum they allow to use her debit card (not the conversation for this thread) so she adds a lighter to bring it up over the minimum. My response was that she should just buy two packs every other day. She’ll use them and she won’t have all these extra lighters.

2)She came to work complaining that she got a parking ticket for parking on the street outside of her boyfriend’s apartment. I told her that if she’s going to be parking there regularly she should get a parking permit. Her response was that they’re a ripoff since the city charges like $50 a year for them. A few weeks later, she has another ticket for another $15 and the first one has turned into something like $40 since she never paid it. Again, I mentioned the parking permit and again she told me it was a ripoff. Fast forward a month or two and she called work and asked if someone could come and pick her up because the police confiscated her plates during the night. When I asked her how much she had racked up in parking tickets she started off with “well, I got one ticket that I didn’t pay and then…” I cut her off and said “no, just what do you owe right now” and she said it was something like five or seven hundred dollars. She still didn’t understand why it would have made more financial sense to just go get a parking permit for $50 instead of racking up all those tickets, even when I explained to her that if she had paid them on time, it would have paid for itself after parking overnight 4 times.

16

A few years out of college, I had a conversation with a friend who was not good about planning for the future. He wasn’t even contributing to the company’s 401(k) plan, but I suggested that he at least contribute three percent to get the three-percent company match, as that amounted to a risk-free 100% return.

17

“I didn’t realize the meeting was this morning. What was it about?”
“They’re upping the 401k match from 50% to 100%.”
“Oh. Do you participate?”
“Uhh, yeah… it’s an immediate 100% return on investment. It’s basically free money. You’d be stupid not to.”
“…”
“Wait… you don’t participate?”

(Then he explained that he was still paying student loans from a useless associates degree he finished 30 years prior, his wife racked up debt to get a master’s degree to homeschool the kids, when real estate crashed he couldn’t refi his mortgage to cover the payments anymore… etc)

18

I continually tell my family Tales of the $40,000 in Debt Co-Worker. That’s her CC balance. No, actually, that was her CC balance 2 years ago. I have no idea what it is now. She is convinced that I make so much more than her because I have almost no debt ($20K left on mortgage) and retirement savings. Finally I said, “No, it’s because when your vacuum cleaner went out, you bought a new Dyson. When mine went out, I bought one for $18 at Goodwill. In the last year you’ve taken 4 trips out of state. I haven’t gone anywhere.” I gave her a copy of Financial Peace I got for $1 at the library book sale. She said she’d heard of it but had never read it. 6 months later she’d still never read it.

We were talking last week. The expensive lens on her expensive Nikon DSLR had stopped working so she took it into the camera shop for repair. Of course, they were having a big sale so she spent $300 on a new tripod and camera bag. Put it on her credit card, of course.

She’s a business analyst for a Fortune 100 company.

StG

19

I knew a single, female SVP at a bank that did this; went to the dealer at lunch to get new tires; came back with a new car because it was less per month. I’m sure she didn’t pay too much over MSRP. :smack:

Wait! PD will remove plates from a vehicle w/o the owner present? Really??? Is this in WI? I’ve heard of them confiscating plates during a traffic stop but never on a drive by w/o the owner present. If that happened to me, I’d think they were stolen.

20

But don’t you see, it’s the principle of the thing!