# What is the definition of being "financially responsible"? **URL:** \ **Category:** Great Debates\ **Created:** [February 14, 2010, 5:24am UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931 "2010-02-14T05:24:17Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Bricker](https://avatars.discourse-cdn.com/v4/letter/b/977dab/32.png) [@Bricker](https://boards.straightdope.com/u/Bricker)\ **Post date:** [February 14, 2010, 7:26pm UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931/21 "2010-02-14T19:26:16Z")
> [@Rand\_Rover](#): > > I find this attitude bizarre. Some people have an almost religious aversion to taking out a loan to buy a car (and if they are Dave Ramsey follows, you can drop the “almost”). They love to proclaim “I pay cash for cars.” Well, good for them. They also pay cah for car repairs and maintenance, both of which are typically more expensive in a car that one can pay cash for. > > I prefer to think of “owning a car” as an operating expense as opposed to thinking about the cost to acquire any particular car as a capital expenditure. So, I’m willing to pay some amount per month to own a car of a certain level. If I decide to up the level then I’ll pay more. If I were to pay for it in cash, then I would just be pushing all those monthly payments to the first month. If I bought a really old used car, then more of that amount would go to repairs than would go to the cost of the car. > > So, anyway, bottom line is, I have an amount I’m willing to pay each month for “owning a car,” just like there’s an amount I’m willing to pay each month for “eating lunch” and “having cable.” The particulars of how that amount is spent are not that important to me. And I think the religious devotion to not having a car loan is ridiculous. I bought my last car new, for cash. It’s unclear to me how that choice, at least initially, would create more repair costs than buying the same car for credit. Since 1996, the year I bought the car, I guarantee you my repair costs have been far less than the interest I would have paid on a car loan. Sure, the amount is non-zero, and that’s the amount I’m willing to pay for “having a car.” But my requirement for a car doesn’t include “new” or “flashy.” So what am I paying for if I replace a perfectly useful, serviceable car? The moment my repair bills start getting high, sure – that car’s out the window. ---
**Author:** ![Happy\_Poster](https://avatars.discourse-cdn.com/v4/letter/h/c89c15/32.png) [@Happy\_Poster](https://boards.straightdope.com/u/Happy_Poster)\ **Post date:** [February 14, 2010, 7:48pm UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931/22 "2010-02-14T19:48:19Z")
Car loan debate beautifully touches upon that old perv Modigliani and the life cycle hypothethis. I have a great suspicion that Mr. Rover is familiar with the latter (and that both of you are familiar with the former). Perhaps Mr. Bricker could familiariese himself with said hypothethis? I am not saying I agree with the thing myself - for sure it is correct, but then I am not so sure how it important it is to be correct/rational… but then I am no economist; I live in reality (not too much this evening mind; rather drunk). ---
**Author:** ![RickJay](https://avatars.discourse-cdn.com/v4/letter/r/bb73d2/32.png) [@RickJay](https://boards.straightdope.com/u/RickJay)\ **Post date:** [February 14, 2010, 7:57pm UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931/23 "2010-02-14T19:57:48Z")
> [@ShibbOleth](#): > > I > If everyone lived similar to you, though, I think our economy might be beyond stagnant. Nonsense. Supply and demand are two sides of the same coin. If people were more careful with their money, you might not have people buying $1500 plasma TVs on 22% credit cards, but you’d also have fewer bankruptcies, less money wasted on interest payments, more money invested in business, more stuff bought in cash in the long run, people buying more permanent things and fewer things with no lasting value, and so on. It’d be easier for the government to raise tax money to pay for infrastructure, too. Bricker’s 1996 car is, let’s be honest, an extreme example - you can be fiscally responsible and not drive a 14-year-old car. It’s worthwhile to note that there’s not a shred of evidence that the glut of consumer credit in the last 30-35 years has led to more economic growth than was previously the case. The pervasive idea that people have to keep buying shit at Best Buy to make the economy grow is economically illiterate. > [@](#): > > Also, in your world, only the wealthy could afford to become poets, playwrights, musicians and actors. I’ll have to tell my sister and brother in law that they have to give up their careers as actors, since they’re not wealthy. Except, the funny thing is, they’re living within their means. So apparently it can be done. How about that. ---
**Author:** ![ShibbOleth](https://avatars.discourse-cdn.com/v4/letter/s/848f3c/32.png) [@ShibbOleth](https://boards.straightdope.com/u/ShibbOleth)\ **Post date:** [February 14, 2010, 8:44pm UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931/24 "2010-02-14T20:44:21Z")
> [@Bricker](#): > > I don’t know. My dad obviously had a great deal of influence on my views about the value of self-sufficiency. What I “learned” boiled down to: don’t spend what you have today, because you never know if you’ll be able to get more tomorrow. That doesn’t seem like such a complicated rule, frankly. Thanks for your responses. So I take it you learned this from your father. By any chance is he old enough to remember the Great Depression? Is he old enough to have been working age during those times? ---
**Author:** ![Blalron](https://avatars.discourse-cdn.com/v4/letter/b/35a633/32.png) [@Blalron](https://boards.straightdope.com/u/Blalron)\ **Post date:** [February 14, 2010, 9:02pm UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931/25 "2010-02-14T21:02:42Z")
Do whatever is possible to live within one’s means. I’m about as liberal as they come, but the poor are often their own worst enemies when it comes to finances. $4 daily lattes. $6-a pack cigarettes. Carbonated sugar water. Alcohol. Cable TV. Dining at restaurants regularly instead of cooking. Sending their kids to school with “Lunchables” because they can’t be bothered to take a few extra minutes to pack something cheaper. Designer clothes! A new car. If you’re making minimum wage and don’t have any savings cushion saved up, there’s no earthly reason why you should be buying the aforementioned things. ---
**Author:** ![ShibbOleth](https://avatars.discourse-cdn.com/v4/letter/s/848f3c/32.png) [@ShibbOleth](https://boards.straightdope.com/u/ShibbOleth)\ **Post date:** [February 14, 2010, 9:05pm UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931/26 "2010-02-14T21:05:34Z")
> [@RickJay](#): > > Nonsense. The collapse of the credit industry in the USA wouldn’t cause some problems? American Express, GMAC, Citigroup, Chase, et al would disagree with you. Note that I’m not saying that the credit industry is good for the country, just that it would be a MAJOR adjustment if suddenly everyone started acting responsibly. Not to mention the collapse of most colleges and universities as people only went to schools that they could afford. In the short term, it would be catastrophic. ---
**Author:** ![Wesley\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wesley_clark/32/20581_2.png) [@Wesley\_Clark](https://boards.straightdope.com/u/Wesley_Clark)\ **Post date:** [February 14, 2010, 9:23pm UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931/27 "2010-02-14T21:23:12Z")
> [@ShibbOleth](#): > > The collapse of the credit industry in the USA wouldn’t cause some problems? American Express, GMAC, Citigroup, Chase, et al would disagree with you. Note that I’m not saying that the credit industry is good for the country, just that it would be a MAJOR adjustment if suddenly everyone started acting responsibly. Not to mention the collapse of most colleges and universities as people only went to schools that they could afford. In the short term, it would be catastrophic. That is actually a reason we aren’t recovering from the recession. People went from a negative savings rate of about -1% to a positive rate of about 4-9% because there is no economic security. So now a plan is to increase exports, but consumption in places like China isn’t too good either. Short term its going to do damage to consume less (consumption is about 70% of the economy). However what other aspects of our society and economy are there aside from consumption? [http://www.hoover.org/research/factsonpolicy/facts/4931661.html](http://www.hoover.org/research/factsonpolicy/facts/4931661.html) > [@](#): > > Personal consumption accounts for 70 percent of gross domestic product. > > The gross domestic product (GDP) is the generally accepted measure of the size of the national economy. It is the sum of investment, personal consumption, government spending, and net exports. Personal consumption, at 70 percent, is the largest component of GDP. Other components of GDP include > –Investment: 17 percent > –Government spending: 19 percent > –Net exports: –6 percent How is government spending different from personal consumption? Much of government spending is on health care & pensions. [http://useconomy.about.com/od/grossdomesticproduct/f/GDP\_Components.htm](http://useconomy.about.com/od/grossdomesticproduct/f/GDP_Components.htm) > [@](#): > > The remaining 30% of GDP that is not for personal consumption is in two categories. The first is business investment, such as software, business equipment, and manufacturing (16%). The second is government, which is 20% of total GDP. State and local government produce 12% of GDP. he Federal Government produces 8% of GDP, and two-thirds of this defense-related. (Updated December 20, 2009) I really don’t see the difference. It seems business consumption (at 16%) is just another form of consumption. And a good deal of government spending goes to consumption anyway, just consumption of health care and pensions for the elderly (which they use on food, clothes, health care, etc). So what is left? Personal/business consumption and the infrastructure to be able to engage in consumption (scientific R&D, transportation, education, military, police, etc) seem like the only areas of the economy. ---
**Author:** ![dre2xl](https://avatars.discourse-cdn.com/v4/letter/d/34f0e0/32.png) [@dre2xl](https://boards.straightdope.com/u/dre2xl)\ **Post date:** [February 14, 2010, 10:32pm UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931/28 "2010-02-14T22:32:58Z")
> [@ShibbOleth](#): > > Note that I’m not saying that the credit industry is good for the country, just that it would be a MAJOR adjustment if suddenly everyone started acting responsibly. I think at my height of financial irresponsibility, I was paying nearly $2000/mo in interest. Is the economy really better served by that $2000/mo going to Amex, VISA, Citibank student loans, and various banks, than to actual purchases? ---
**Author:** ![Rand\_Rover](https://avatars.discourse-cdn.com/v4/letter/r/db5fbb/32.png) [@Rand\_Rover](https://boards.straightdope.com/u/Rand_Rover)\ **Post date:** [February 14, 2010, 11:03pm UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931/29 "2010-02-14T23:03:26Z")
> [@Bricker](#): > > I bought my last car new, for cash. It’s unclear to me how that choice, at least initially, would create more repair costs than buying the same car for credit. > > Since 1996, the year I bought the car, I guarantee you my repair costs have been far less than the interest I would have paid on a car loan. Sure, the amount is non-zero, and that’s the amount I’m willing to pay for “having a car.” But my requirement for a car doesn’t include “new” or “flashy.” So what am I paying for if I replace a perfectly useful, serviceable car? The moment my repair bills start getting high, sure – that car’s out the window. By paying cash for the car, you gave up the opportunity to earn a return on that cash. That return could have been higher than the interest you paid on the loan. If you wait until repair costs get high to sell the car, you may not be able to sell it for much. You may be able to sell it for more if you sold it sooner (and pay less in repair costs to boot). ---
**Author:** ![Happy\_Poster](https://avatars.discourse-cdn.com/v4/letter/h/c89c15/32.png) [@Happy\_Poster](https://boards.straightdope.com/u/Happy_Poster)\ **Post date:** [February 14, 2010, 11:09pm UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931/30 "2010-02-14T23:09:04Z")
> [@dre2xl](#): > > I think at my height of financial irresponsibility, I was paying nearly $2000/mo in interest. Is the economy really better served by that $2000/mo going to Amex, VISA, Citibank student loans, and various banks, than to actual purchases? Think about it this way. That 2k you were paying off a month… that was coming, ultimately, because you were making purchases with it at one point. So the capital was allocated from doing nothing, to going through the financial institutions to you, where you did something with it (bought crap), then gave the capital back at interest. Ain’t that great 🙂 Edit: This is a really fucking important point. I want to make this clear. **THE ENTIRE POINT OF THE FINANCIAL SERVICES INDUSTRY IS CAPITAL AND/OR RISK ALLOCATION** The money (capital) was sitting around doing nothing. It went to you so you could spend it. In return, the owners of that money got it back with a wee bit on top from yourself, gladly paying for the privilege of having spent it then. ---
**Author:** ![suranyi](https://avatars.discourse-cdn.com/v4/letter/s/e36b37/32.png) [@suranyi](https://boards.straightdope.com/u/suranyi)\ **Post date:** [February 14, 2010, 11:10pm UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931/31 "2010-02-14T23:10:49Z")
> [@Voyager](#): > > Someone - I thought it was Dr. Johnson but I can’t find the quote - said that the man who makes a penny more than he spends is a happy man, and one who spends a penny more than he makes is a miserable man. I believe you’re thinking of Charles Dickens’ quote from "David Copperfield: “Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” ---
**Author:** ![suranyi](https://avatars.discourse-cdn.com/v4/letter/s/e36b37/32.png) [@suranyi](https://boards.straightdope.com/u/suranyi)\ **Post date:** [February 14, 2010, 11:18pm UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931/32 "2010-02-14T23:18:25Z")
> [@Bricker](#): > > I think it starts with choosing a career. > > In _Pippin_, the title character sings about how he disdains the idea of ordinary tasks, ordinary jobs – when you’re extraordinary, like he is, he musically explains, you have to do extraordinary things. > > I mention this because I’ve talked to more than a few wanna-be actors, musicians, and philosophy majors who seem to think that as long as you’re happy, the amount of money you make is meaningless. > > Ah, what a beautiful world we’d live in if that were true. In fact, I think a responsible adult has to balance job satisfaction against money. There are undoubtedly reading-comprehensive challenged individuals who will make hash of this claim. But read it again: I’m not saying that compensation is the sole factor in choosing a career. I’m saying weight should be given to it, strong weight. It’s not determinative. > > Then I think people should live within their means. I don’t know too many people that do that. I grew up poor. When I started making money, I continued to live a very simple life. I let money accumulate against a future storm. I think someone ought to be able to live a year at their present expenditure rate even if they lost their job tomorrow. If you say that’s an impossible goal, I’m going to say that it’s a fair bet you’re not living within your means. I was the last of my neighbors to get cable. Right now, I drive a 1996 car. Why? Because it gets me where I want to go and doesn’t have bad repair costs. I bought it new in 1996, for cash, and I’ll drive it until its repair costs are excessive. Then I’ll buy another car. > > If you’re paying interest on a car loan, you’re probably living above your means. If you rely on credit for ANY purchase other than a house, you’re probably living above your means. > > All my neighbors have late-model cars. I have the oldest car on the block. > > But I guarantee you, if some financial disaster happened to one of them, they’d whine about how unlucky they were. They’d never think, “Gee, maybe I shouldn’t have a new car every three or four years.” > > I have a section of my basement stocked with food, potable water, basic medical supplies, weather gear, emergency money. If a blizzard stranded us at home for a month, we could survive. > > There are a host of specifics that make up reasonable financial prep. But I firmly believe the vast majority of people want to live a much higher lifestyle than prudence would dictate. And if you told them this, they’d hotly deny it. I chose a very lucrative career, so that nowadays I make a very high salary. I have no debt, and my family lives very comfortably. If I lost my job, we could easily last a year without changing our lifestyle appreciably. However, in order to get to this position, when I was in college I needed to take out student loans. For me, they were definitely worth while – I was able to pay them all back within five years of starting my career. ---
**Author:** ![Rand\_Rover](https://avatars.discourse-cdn.com/v4/letter/r/db5fbb/32.png) [@Rand\_Rover](https://boards.straightdope.com/u/Rand_Rover)\ **Post date:** [February 14, 2010, 11:27pm UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931/33 "2010-02-14T23:27:26Z")
The student loans I took out for law school will remain outstanding for the next two decades or so. I consolidated them for 30 years at 2% interest. At that interest rate, I’m not paying them back a day before I have to. ---
**Author:** ![dre2xl](https://avatars.discourse-cdn.com/v4/letter/d/34f0e0/32.png) [@dre2xl](https://boards.straightdope.com/u/dre2xl)\ **Post date:** [February 14, 2010, 11:57pm UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931/34 "2010-02-14T23:57:00Z")
> [@Angry Lurker](#): > > The money (capital) was sitting around doing nothing. It went to you so you could spend it. In return, the owners of that money got it back with a wee bit on top from yourself, gladly paying for the privilege of having spent it then. Uh, yeah, I made the rich richer with my own irresponsibility and they are happier for it. I understand that. That wasn’t the question I asked. Was I really better serving the economy unable to muster the self discipline to save up a few months for crap and consequently paying for crap several times over in interest, then, than now, when I can just walk in the store and buy crap because I saved up for it? It seems, at worst, a wash – instead of taking my money in interest payments and investing it however they like, the bank can take my savings and invest them however they like. ---
**Author:** ![Bricker](https://avatars.discourse-cdn.com/v4/letter/b/977dab/32.png) [@Bricker](https://boards.straightdope.com/u/Bricker)\ **Post date:** [February 15, 2010, 12:03am UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931/35 "2010-02-15T00:03:01Z")
> [@ShibbOleth](#): > > Thanks for your responses. So I take it you learned this from your father. By any chance is he old enough to remember the Great Depression? Is he old enough to have been working age during those times? My dad was born in El Salvador, but I’m sure the Depression was felt world-wide – and certainly El Salvador was not then and is not now a wealthy country anyway. But he was not really working age during the Depression; he was born in the mid-1920s. He was certainly old enough to see and internalize what extreme poverty was, though, and I guarantee you that what he had, growing, up, was REAL third-world, dirt floor, no electricity, no running water-type poverty. ---
**Author:** ![Bricker](https://avatars.discourse-cdn.com/v4/letter/b/977dab/32.png) [@Bricker](https://boards.straightdope.com/u/Bricker)\ **Post date:** [February 15, 2010, 12:10am UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931/36 "2010-02-15T00:10:23Z")
> [@Rand\_Rover](#): > > By paying cash for the car, you gave up the opportunity to earn a return on that cash. That return could have been higher than the interest you paid on the loan. Yes, that’s true. But there was no guaranteed investment I was aware of that paid as high an interest rate as I was getting. I could have rolled the dice, and in 1996, I probably would have won. In 1999, though, probably not. I’m not a financial genius, so I stick with what I know. If someone else’s skill set allows them to make more money by buying a car with a load and reliably investing the cash they would have spent, great. I don’t have that skill set. > [@](#): > > If you wait until repair costs get high to sell the car, you may not be able to sell it for much. You may be able to sell it for more if you sold it sooner (and pay less in repair costs to boot). True, but around here, a car that runs is worth something, especially if you can speak Spanish to conduct the sale. I’m comfortable that when I sell it, I’ll get enough back to make the decsion worthwhile. ---
**Author:** ![sinjin](https://avatars.discourse-cdn.com/v4/letter/s/ebca7d/32.png) [@sinjin](https://boards.straightdope.com/u/sinjin)\ **Post date:** [February 15, 2010, 12:36am UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931/37 "2010-02-15T00:36:26Z")
> [@Rand\_Rover](#): > > The student loans I took out for law school will remain outstanding for the next two decades or so. I consolidated them for 30 years at 2% interest. At that interest rate, I’m not paying them back a day before I have to. Talk about sucking on the government tit.:dubious: Welfare queen. By the by, we have also lived a quite conservative fiscal life and have a nice chunk of change saved up, no debt except the mortgage which is not even 1/2 of $3400, and buy everything with cash these days\*. However, unlike \*\*Bricker **and Rand, I know people who have done the same things only to end up at 55 laid off with no prospect of getting another job** with health care benefits ever again, except maybe at Walmart or Home Depot. They did all the right things and now are trying to hang on, not one year, but 10 years until they qualify for medicare. Oh and some of them have kids in college and some still have kids in HS. Wow was that bad planning or what? \*Back in the day, when we were just starting out, we lived from month to month like so many in the world and America. **Bricker** , you say you started out poor. How did you get by as a young person? How many years did it take you to get to the point you are now? What were your options if you or one of your loved ones fell ill? \*\*Engineers one and all. Yeah stupid us, we should have all become lawyers. ---
**Author:** ![Rand\_Rover](https://avatars.discourse-cdn.com/v4/letter/r/db5fbb/32.png) [@Rand\_Rover](https://boards.straightdope.com/u/Rand_Rover)\ **Post date:** [February 15, 2010, 12:49am UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931/38 "2010-02-15T00:49:14Z")
Sinjin, you say that as if I have ever said anything bad about “welfare queens.” If you think I have, you are very much mistaken. I think it’s perfectly OK for someone to take whatever the government wants to give them, even if I think the government shouldn’t give that in the first place. ---
**Author:** ![RickJay](https://avatars.discourse-cdn.com/v4/letter/r/bb73d2/32.png) [@RickJay](https://boards.straightdope.com/u/RickJay)\ **Post date:** [February 15, 2010, 1:04am UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931/39 "2010-02-15T01:04:34Z")
> [@ShibbOleth](#): > > The collapse of the credit industry in the USA wouldn’t cause some problems? American Express, GMAC, Citigroup, Chase, et al would disagree with you. More people living within their means would not cause the “collapse” of the credit industry within any realistic scenario. Even if we start genuinely encouraging fiscal responsibility, you’re not going to have a nation of Brickers. I’m making car payments - zero percent interest car payments, mind you, but someone’s making money off it somehow. There’s always a market for credit even if people aren’t using MBNA to buy flatscreens. And I’ll disagree with the notion that borrowing money for school is fiscally irresponsible; all evidence I have ever seen on the matter demonstrates that money spent on school pays off in spades. To my mind, fiscal irresponsibility is largely found when people buy things that do them no good with money they do not have. Education pays off. Anyway, money that is not spent doesn’t disappear under a mattress; it’s usually put into banks, who lend it and invest it, and in the long run it does just as much good as if the person saving it had spent it all on iPods and Olive Garden. ---
**Author:** ![sinjin](https://avatars.discourse-cdn.com/v4/letter/s/ebca7d/32.png) [@sinjin](https://boards.straightdope.com/u/sinjin)\ **Post date:** [February 15, 2010, 1:22am UTC](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931/40 "2010-02-15T01:22:34Z")
> [@Rand\_Rover](#): > > Sinjin, you say that as if I have ever said anything bad about “welfare queens.” If you think I have, you are very much mistaken. I think it’s perfectly OK for someone to take whatever the government wants to give them, even if I think the government shouldn’t give that in the first place. Nope, just calling a spade a spade. [Previous page](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931.md?page=1) [Next page](https://boards.straightdope.com/t/what-is-the-definition-of-being-financially-responsible/528931.md?page=3)