Top Ten Ways to Get into Debt (Part 2)
Posted by John Draper | Filed under Debt Traps
Continued from yesterday’s blog
#6 Expenses Go Up but Spending Doesn’t Go Down. There are the people who buy a home and think they can still eat out six nights a week. There are the people who have kids and still think they can spend $600 on a handbag. There are the people who start their own business and still think a vacation every year is their right. Whenever you make a move that sends your expenses up, but don’t cut back on your discretionary spending, you’re stepping on the road to Debt Hell.
#7 We Don’t Talk about Money. How can you have an intimate relationship with a partner and then refuse to talk about your money? How weird is that? All the time I hear people say things like:
- “That’s his money. He earned it.”
- “She makes more than me so I don’t have the right to ask questions.”
- “I try to make a budget, but he just won’t have anything to do with it.”
- “She spends money and doesn’t tell me so I never know if I’ll have the money to pay the bills.”
- “He has no self-control. We just fight about money all the time.”
- “She keeps the stuff she buys a secret. I find things with the tags still on them.”
Really? You love each other enough to make a life commitment but aren’t willing to talk about how to manage your money as a team? Perhaps it is because one or both of you don’t want to be help accountable and so long as no one’s watching, you can just do whatever you want. Or maybe you’re self-esteem is bruised because your partner makes more and throws his/her weight around. Whatever the reason, Debt Hell is around the corner. So may be #8.
#8 Divorce. Two people cannot run two separate households as cheaply as they can run one, so if you divorce one or both of you are going to feel a lot poorer. It’s a sad reality that a huge percentage of households are torn apart both emotionally and financially by divorce. And when one partner leaves the other holding the bag, skipping out on financial responsibilities, the outcome is horrible. If you’re going through a divorce, go read the stuff in the Splitsville section.
#9 Gambling. I can’t believe the number of people who piss away their money on games of chance. From the lottery to the slots, from poker to the casinos, people are dumping millions and millions of dollars they could be using to build their own lives into the profits of those who run the Dream Machine. Some people have such serious issues with gambling that they lose their homes. Imagine. Putting your children onto the street because you’re so lazy – or desperate? — you’d rather chase a roulette ball than do a hard day’s work.
#10 Banking on a Windfall. Not unlike the gambler, the person who is banking on a windfall doesn’t want to have to work as hard as it would take to get the life they want. Count all the people who aren’t saving for their retirement in this group. Ditto the people who aren’t putting money away for an emergency. Like magic, money will fall into their laps and they will be able to right all their financial wrongs. Except that most people who benefit from a windfall end up in debt anyway because they never had the discipline and strategies for money management in the first place. More money isn’t the answer. Focus and a plan are.
Going into debt is sometimes a choice. We make the choice when we buy something we can’t afford to pay for, every time we don’t bother to check to see if we have enough money in the bank to get to the end of the month, every time we waste $5. There are life events that can contribute to pushing us into debt, but if we had been managing our money all along – saving some, covering our risks with insurance, being responsible with our money – those life events could have been a lot less painful. Illness, widowhood, divorce all carry big price tags. And that’s why having a BALANCED financial life is so important. Sure you can forgo one leg of your financial plan because you’re trying to make another stronger; giving up saving until your debt is repaid is the classic example. But don’t fool yourself into thinking you’ve got a balanced plan. For like a table with a weak leg, it’ll only take a little pressure in the wrong place to make the whole thing fall down go BUUFF!
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October 23, 2008 at 9:26 am
Another great post, Gail. One of the reasons I think it’s hard for people to stay out of debt is because we live in a “now” culture, where we get used to having everything we want instantaneously. We are consistantly told by marketers that we have the right to get everything we want right now. Don’t plan, don’t save, buy now. There was a guest on the Colbert Report a while ago who said that she thinks Americans need to rethink what they really want, and that’s true too. We don’t always have the right to that extra week of vacation or that handbag. We need to change our philosophy to one that encourages planning and focus, rather than just feeding that “now monster.” Because – surprise! – it turns out a frugal life is more satisfying. I guess it’s true – the best things in life come to those who wait.
October 23, 2008 at 10:30 am
Well said, Saver Queen.
CBC played a hilarious skit off of SNL a few weeks ago, in which Steve Martin was introducing this revolutionary new idea for getting and staying out of debt: don’t buy things until you have the money!
He and two other comedians went on for almost five solid minutes riffing off this idea. It was so funny. And so tragically true.
The environmental cost of our consumer culture is another factor that I find truly sickening. We’ll be paying the piper for all that “stuff” in more ways than just monetary debt.
Gail, my favourite response to the combined attitude of #9&10 – people who are die-hard lottery ticket buyers and plan to win the lotto as their ultimate financial solution – was one I read a few years ago in a magazine. A man wrote about doing up a budget with his wife, staring at the meager numbers and suggesting hopefully that they should buy a lottery ticket. She sweetly suggested that they might as well get in the car, head out to the highway and drive around for a few hours looking for bags of money on the side of the road. Statistically, they would have the same chance of coming into that windfall. Smart lady.
October 23, 2008 at 11:06 am
Mountain Girl, I MUST watch that SNL skit – sounds hilarious!!! And the magazine article is so funny and so true, too. The saddest Till Debt Do Us Part episode was the one where the couple with small children lost their house because of gambling problems. It’s interesting how people are more likely to believe that something positive will happen, rather than something negative, even if statistics show the opposite. For example, they think that winning the lottery “could happen to me” and yet, cancer, car crash, or divorce “won’t happen to me” even though you’re far more likely to be affected by the latter.
October 23, 2008 at 11:38 am
Great posts Gail! If anyone watches This Hour Has 22 Minutes, this week’s show had a great skit about money (what is that paper stuff?) I thought of you Gail, when I watched it. Check it out at cbc.ca/22minutes. Video from October 21 called Cash. So fitting for this day and age!
October 23, 2008 at 11:42 am
Saver Queen, went to look it up, wanted to see it also, here is the site;
http://consumerist.com/consumer/clips/snl-skit-dont-buy-stuff-you-cant-afford-252491.php
Enjoy.
Julie
October 23, 2008 at 12:35 pm
Saver Queen, what epidsode/season was that one? And I thought I had just about seen them all…must have missed that one.
October 23, 2008 at 12:50 pm
Erran, it is with Ronald & Vivian, episode 21 season 2.
Juile
October 23, 2008 at 12:51 pm
Erran, I *think* it was the episode with Bethany McLean from Oct.13, 2008. Enjoy
October 23, 2008 at 1:41 pm
Oh I thought you meant Colbert, haha. Yes if it is Till Debt Do us Part you mean, Julie from Quebec is right! Thanks Julie
October 23, 2008 at 1:53 pm
I live in BC, and my bank — actually a credit union, VanCity — currently has an ad for a savings account on the website that says something like “instant gratification is overrated. Savour the anticipation” or words to that the effect. It brings a smile to my face every time I see it.
October 23, 2008 at 10:00 pm
Hey Gail – you would be proud of me. Today I reached my milestone! I paid off my student loan OSAP!! Initially, my student loan was around $70K (that’s right – that’s seventy thousand dollars) for 2 professional degrees (1999). OSAP had a loan forgivness where it forgave $22K of that which left me with $48K. The $48K took me nine years to pay off! It was hard work initially for the first few years but I continued paying it off as much as I can. And today, I made my final payment to OSAP! I have NO credit card debt, NO line of credit and now, NO OSAP!! I only have my mortgage. It is such an AMAZING feeling to be debt free (the only debt now is my mortgage). It is a high that is priceles. I was making $418.00 payments every month towards my student loans. Now, that $418.00 goes into my pocket! Yes! If I could do this, ANYONE can do this. I am so blessed b/c I feel like the riches person in the world.
October 23, 2008 at 10:18 pm
Congratulations Todd!
October 23, 2008 at 10:46 pm
Here is a link to the SNL skit with Steve Martin.
http://consumerist.com/consumer/clips/snl-skit-dont-buy-stuff-you-cant-afford-252491.php
October 24, 2008 at 12:31 am
Woohoo Todd!!!! I remember that feeling after making my last payment…savour the moment, you deserve it!!!
October 24, 2008 at 5:23 am
Congrats Todd. Your determination has been rewarded. What a light feeling you must have now.
October 24, 2008 at 5:28 am
Way to go Todd! I see the clock ticking on my loan, 9,880.53 left to go, 6500/year in my pocket when its done!
October 24, 2008 at 9:22 am
Well done, Todd!
I slayed the student loan beast a couple of years ago and I’m still high off that feeling!
My husband and I are currently killing off his SLOC very aggressively and it is so satisfying to watch that number tumble lower every month! Once that debt is gone, we’re free and clear!
Unless I go back and do that Master’s degree…
Ajana – thanks so much for the link!
May 12, 2009 at 5:03 pm
Hi,
Just for the info..I was on this show Foreclosure… Couldn’t keep up with the plan!!!
May 12, 2009 at 8:11 pm
Vivian – That’s too bad that you weren’t able to keep up with the plan. We were all rooting for you and your family. What was the hardest part?