Consuming Ourselves to Debt
Posted by John Draper | Filed under Bad Habits!
People can justify spending gobs of money on just about anything. I’ve seen people in deep debt turn themselves inside out to explain why the thing I’m telling them to sell or not buy is sooooooo important.
There’s the new electronic toy that they’ve just bought or are planning to buy on a Buy-now-pay-later program. They say things like, “I have six months to pay it off before there’s any interest. We’ll have it paid off by then.”?? Wanna bet?
If you think you have the discipline to do this, then why didn’t you simply set aside the money you’ll be making in payments until you’d saved enough to pay cash? Because you DIDN’T have the discipline to do it. And when that bill finally does come due, the interest rate will be RETROACTIVE to the date you took that big screen TV with surround sound home, and your interest rate will be about 36%, so you’ll end up spending TWICE what you thought you had.
Here’s another whine that’s like nails on a chalkboard for me: “But it’s my wedding! I dreamed about it forever. It has to be fabulous!”?Really? You owe $30K in student loans and another $15K on your car, never mind the $8 on your line of credit, and you’re going to run up another $35,000 in debt for a party?
If your wedding day is so all-fired important to you, and you want to pretend to be a prince or princess for a day, then why haven’t you saved the money to make it so? I have no problem with how people spend their money, as long as it’s THEIR money they are spending, and not credit. You want to blow $50,000 on a wedding, then have $50,000 in the bank. It’s that simple. But to go into debt for a wedding is just about the stupidest thing I can think of. (Ditto to the parents out there who take on this kind of debt so their little angel can have her dream wedding.)
I’ve heard cars and trucks justified as “safer for the kids.” I’ve heard vacations justified because “we work so hard.” I’ve heard new furniture justified as “an investment.” All the while, the debt keeps growing.
Buying bigger houses than we need is another example of how we can justify spending money beyond our means. We listen to the “experts” who support our desires – they guys who reassure us that the appreciation over time will more than warrant the cost – and then we plunge right in. After all, how can bigger not be better?
We spend on gifts we are giving others that we can’t afford because we don’t want people to think us cheap. We spend money we don’t have so that other people won’t know we don’t have the money. We spend money because we feel guilty and are using stuff to replace the time we should be giving to our friends and family.
And sometimes we spend money because we are laaaazzeee! Instead of doing the research, looking for the deal and spending the least amount necessary, we just buy what’s at hand because it’s convenient, damn the cost.
Having become a society of consumers, we can justify just about anything we want to put on credit. There’s always a “good” reason to spend.
Here’s a quote from Your Money or Your Life:
“…money has become the movie screen on which our lives play out. We project onto money the capacity to fulfill our fantasies, allay our fears, soothe our pain, and send us soaring to the heights. In fact, we moderns meet most of our needs, wants, and desires through money. We buy everything from hope to happiness. We no longer live life. We consume it.”
Now it’s your turn. What have you seen people go into debt for that made you shake your head? And what’s the dumbest thing you ever put on credit?
November 11, 2008 at 9:49 am
A car, and it was me who made the dumb mistake. In my 20s, I leased a 1995 Camaro (absolutely loved the car). Just before I cut my losses and dissolved the lease early, I determined that the car lease and insurance (not including gas and maintenance) had cost me $18,000 over two years! That was enough for me to realize that it was the biggest mistake of my life and so I got rid of it.
November 11, 2008 at 9:51 am
One of the stupidest things I did was in college. I worked in a department store…so I bought something on my store credit card and returned it without a reciept at another register so I could get the cash back. I had found an item that the no reciept return was pretty close to the price I was paying.
It was the only way to go out that night with my friends “We spend money we don’t have so that other people won’t know we don’t have the money.”
November 11, 2008 at 10:26 am
When my husband and I were much younger (and dumber), we moved to across the country and had no furniture at all. We got approved for an IKEA credit card and bought a bed and a table and chairs. We were so broke in those days that we were doing the minimum payment thing on a credit card that charged 28%. It took us a couple of years to pay it off, as my husband was in school and I was working as a self-employed artist.
When we did get our personal finances back in shape, I felt absolutely sick when I realized that we had payed for that bed about three times over in interest.
But we did learn our lesson!
We never ever ever carry a balance on our credit cards, and you wouldn’t catch me anywhere near a store credit card charging that kind of interest.
I have two younger brothers who fall into the “pay later” trap continuously. It’s frustrating. I want them to learn from my lesson, but I guess they need to go through the same process before it hits home?
Otherwise, the stupidest things I see other people buy on credit are new cars and weddings.
Oh, wait! I also shake my head at the expectant parents who shell out $1000+ bucks for high-end strollers or cribs, or spend hundreds on fancy baby clothes. Stuff that they’ll be lucky the baby can wear for a week before they grow out of it. I went consignment shop and secondhand all the way. My kidlet is going to have a nice fat RESP, not a pile of old baby clothes and gear it can’t remember wearing or using!
November 11, 2008 at 12:14 pm
Only 1 thing comes to mind. As soon as they went on sale this past summer, we bought tickets to a big event that we’ll be attending when we go on vacation in late February. In order to have more time to save up, and continue paying for home renos, we choose the option to pay half then, and half this month (Nov). This wouldn’t have been a problem except that the tickets are in $USD, which has now tanked, so the second half of the tickets have ended up being more expensive than anticipated.
November 11, 2008 at 12:19 pm
I think the worst thing I have gone into debt for is someone else’s debt. Helping someone out made me feel good because I could help solve their problem, and I had the money available in credit. I know I will get the money back, and I don’t regret it, but in hindsight, the best way I could have helped both of us was to help him find a better source of income to come up with the money.
November 11, 2008 at 12:30 pm
One word: Wedding
i only dream what we could have done with that 25K!!!!!! and how it took us 5 years to pay off – arggg
November 11, 2008 at 12:46 pm
Two things I regret “buying” on credit: Stock (Nortel!) through a margin account and like Karlene, I had the available credit to lend someone money (3K) which I know now, will never be repaid.
November 11, 2008 at 12:58 pm
I think one of the silliest things I puton credit was $400.00 for knives, the really good kind that they sell you at your house….but we didn`t have the money…
November 11, 2008 at 1:17 pm
I’ve never done anything I regret with my own credit. I do have a few regrets about how I spent when I was younger and dumber with my parents’ credit, though.
November 11, 2008 at 2:43 pm
i think the dumbest thing i put on credit was everything. everything that i put on my card, that i didn’t pay off at the end of the month was dumb.
now i am smarter with my money and never ever carry a balance!
November 11, 2008 at 3:15 pm
I used to have a horrible addiction to The Shopping Channel. I bought thousands upon thousands of dollars worth of CRAP over the years and it all got charged. Ridiculous.
I don’t necessarily agree with the thought that if you can’t save up enough now that you shouldn’t use ‘buy now, pay later’. I bought living room furniture this way as well as my 5 brand new appliances and all were paid off before the due date. There are people like me out there who are smart about ‘buy now, pay later’ and use it to their advantage. Now I know that for all the people like me out there, there are probably at least 10 times more people who don’t pay these off in time and then end up paying exorbitant amounts of interest. One must be disciplined.
November 11, 2008 at 4:07 pm
I’m with Cassie.
Well said!
November 11, 2008 at 4:11 pm
Well in the past I did a lot of dumb things because I didn’t understand how credit worked. When I got my first credit card I bought not 1 but 2 leather jackets! Then I got a $10,000 line of credit to take a post grad course which I ended up pulling out of and I lived worry free off the $10,000. Let’s just say those worries quickly caught up to me when I had to figure out how to pay it all back! It’s all to easy to pay the minimum amounts and forget about the fact that you still owe a huge chunk of change!
I’m much different now and I can say that I have become frugal. I am paying off my debt and I can honestly say that my debt does not define me. Today I am not the person I was yesterday
)
November 11, 2008 at 4:25 pm
A friend of a friend in University took her student loans and took a couple vacations on it. She had a credit card her parents had co-signed for and that’s how she bought her books. Made my head hurt.
November 11, 2008 at 5:07 pm
My biggest regret is going into debt buying Christmas gifts. Wish I hadn’t and now I don’t and my family are all much happier having no credit card bills after the holidays.
November 11, 2008 at 6:11 pm
Whenever we run low on money my husband charges beer for him to drink–sometimes hundreds of dollars worth. I don’t drink and we don’t have friends over. The year he got his dui we had to charge everything, including food for the four of us and utilities, since we only had enough money coming in for the house payment. I had paid the credit card off before that and, years later, we still haven’t gotten out of that hole. There were other bad choices that we charged over the years, but these were/are the stupidest in my opinion.
November 11, 2008 at 6:31 pm
I just spent an entire week-end talking my husband out of buying an 11000.00 snowmobile. We already have one that is a few years old…but this new one was on ’sale’. I said I had no problem with him getting a new snowmobile, as long as he could pay cash! So his plan is to save and get one next year. It will be interesting to see come November 2009 if he has saved the money (from his bonuses etc.)…or if other ‘priority purchases’ come up instead! Funny how something that seems so important at the time, fades away and is quickly replaced with a new want/desire…
November 11, 2008 at 7:48 pm
I had a boyfriend whose family went away for Christmas one year (to Mexico, poor baby) and I ran up a $400 phone bill with him calling me everyday collect, and went on $1000 shopping spree for gifts for him for Christmas (this was in the 80’s, so a lot of money). I was a student at the time, living on my own, paying my own way and out of “love” I thought I would spoil him because he was so miserable not having a traditional Christmas. Needless to say he didn’t cover any part of the phone bill and my generosity wasn’t reciprocated. I was still paying off that credit card long after we had broken up.
November 11, 2008 at 8:50 pm
“I CAN’T have used appliances or put my OLD furniture into a NEW house!”
My beautiful sister with excellent taste said this as she put on credit thousands of dollars to fill her new home with deluxe livingroom, dining room and kitchen furniture and all new black appliances 3 years ago.
When she said that, it made me feel cheap and ugly…. really I felt sub-standard! You see, when we built our home 9 years ago we could only afford ratty hand me down furniture and used appliances (except the stove). It hadn’t even occured to me that my stuff wasn’t “good enough” for my new house, after all the endless expenses of buying the house, the last thing my husband and I wanted was to get into debt over furniture!
We have been replacing the old stuff with really nice things over the years, but we prefer to save up the money before we buy. It gives us lots of time to research and decide what we really want. We have even taken advantage of those buy-now deals and kept the saved money in a high interest account until just before the bill is due!
As for weddings, we were all about getting to be a married couple, not about the wedding day! We did it on the cheap, $1500 (including the dress and rentals and wedding portraits!). My mom pitched in $1000 for the reception refreshments. It was a very nice ceremony and we had a wonderful time sharing the moment with friends and family. It was our choice not to start our lives together in debt!!! That seems a terrible way to begin the happily ever after!
November 11, 2008 at 9:49 pm
“(Ditto to the parents out there who take on this kind of debt so their little angel can have her dream wedding.)”
A friend’s mother wanted her dream wedding (the one she didn’t have when she got married) for her daughter. The tenor of the loan the mother took out far outlasted her daughter’s marriage!
November 11, 2008 at 10:11 pm
Watching my university friends spend all of their student loans on clothes they didn’t need, and then beg their parents for grocery money when they couldn’t afford to eat – that was pretty bad. I’m sure they’re still paying off that cute skirt today.
As for me, the worst mess I got myself in was renovating our first home. We had cash, but of course it ran over budget and we ended up buying flooring on credit. Luckily it was interest-free (other than a $100 financing fee) and we were able to pay it off faster than required. I learned my lesson about home renovations, though.
November 11, 2008 at 11:45 pm
Uggg I hate to be reminded of my worst thing. About 8 years ago me and my sister in law got talked into joining a pyramid scheme by our other sister in law. Needless to say it cost us each 1250. Still to this day can not believe that i gave a perfect stranger 1250. It disbanded before we could recoup our money. Dumb Dumb Dumb.
November 12, 2008 at 12:15 am
Ours was taking so long to make the decision to move. We had been renting a place that was costing us an ernormous amont to live in – the rent was on the low side, but the utilities were sky high! Since we moved to a cheaper place, we’ve been so happy (and our debt been dropping significantly every month)! Wish we had made the decision sooner.
November 12, 2008 at 12:35 am
Gail, can I hug you, can I? Cyber **hug**! How I wish more people, young and old would get this THROUGH THEIR THICK HEADS! I don’t care home much you think you deserve it, if you don’t have the money, then you CANNOT AFFORD IT!
Sorry about the yelling!
***hugs*** again! (Love your blog!)
November 12, 2008 at 11:43 am
A horse… I always wanted a horse growing up and I was going through some tough personal times and used the horse as a means to connect with others to feel more fulfilled… I have become honest with myself and have learned a lot about not having to please others so that you think they like and accept you more… sounds a bit confusing… I do love my horse and I can’t really bare parting with him but I have racked up a huge line of credit that I am currently working on to get rid of… thanks to your show Gail. Like they say in the horse world, the cheapest part of owning a horse is buying him. It’s the upkeep, vet bills, etc. that cost the most. I also did the naughty and used my line of credit to pay for Christmas shopping, horse shows and pay off my credit card… I now know that I should not do the above thanks to your show.
I have a personal loan (ugly debt), a credit card and a huge line of credit… I have plans to pay off the first two by May 2010 and hopefully the big one by 2013. My goal is great rid of a great portion of my consumer debt free by the time I turn forty, now about to turn 37.
I have learned to not spend… I just started the jars (baggies) last month and I’m starting to feel a bit of control in my finances. Your show has taught me to start living within my means and save for in the future. I have not got to the point where I have started my emergency fund but I think it would have came in very handy when my dog went for $400 surgery last month which now leaves me scrambling to find money for my $400 winter tires…
I am now looking for part-time work so that I can add money to savings, emergency fund and to pay off my consumer debts . I am more focused and have planned grocery shopping list (really helps to look at store specials and plan your meals for the week based on the specials). I have forecasted my budget
Thanks for your website blogs and your show Gail… I wish there was a high school required “Gail Finance” course. I never really discussed proper financing with anyone before.
Thanks again Gail!!!!!
November 12, 2008 at 5:51 pm
@ Darren – it’s none of my business but as a web friend I really think you have to take a close look at selling your horse. I’ve seen Gail on her show saying you shouldn’t have a plan to be out of major consumer debt that takes longer than 3 years I believe, and your tentatively scheduling yourself 5 years. It also sounds that your currently picking up additional debt, instead of reducing it. My experience has been that what happens yesterday will happen today — there is no perfect time to start saving, the time is now and between the lines I don’t think you’re going to be able to with your horse. Don’t look at the sunk-cost so far, look at the debt reduction opportunity / savings and dont’ feel bad as long as you can find a good home for your horse, think about what happen if you go bankrupt suddenly. Though I do understand the emotional commitment involved.
November 12, 2008 at 6:05 pm
@ Darren – Alternatively, why not sell (or rent) “shares” in your horse? You’ll still own him, but with two, three or four other people, so all the costs and responsibilities don’t fall entirely on you? You can schedule your time with Horse and still enjoy your time, but sharing will lessen your cost burden tremendously and you may be able to cut your debt repayment considerably.
Just a thought. I’m considering looking for a share in a horse as I’ve always wanted one, but just don’t have the funds to be responsible for one on my own.
November 13, 2008 at 9:18 am
I think my stupidest move was buying a house with someone I didn’t know long enough/well enough. The relationship ended and it cost me a fortune! I don’t have regrets, but I would certainly do things differently if I had the opportunity to do it again.
November 13, 2008 at 10:35 am
Thanks Annie and Geoff for the suggestions. Unfortunately, the emotion attachment to my horse would be the equivalent of one selling one of their kids. As for renting him, that’s a slippery and sometimes dangerous slope. He’s a performance horse and is not easily ridden by new riders (ie. experienced rider needed). I also hear you about the 3 year plan versus the 5 year plan. I have seen episodes that there are more than 3 years of debt payment. I would like to get to a three year plan but that will be determined by my success of finding an additional part-time job.
I have seen some of your blogspots and I’m liking how you folks track your savings and other goals. I will have to do the same.
November 13, 2008 at 12:46 pm
Darren – good luck with everything. Initially so you know I tried using an excel sheet / database to keep track of our spending but ultimately I’ve had the best success with a simple notebook and pen left on my kitchen table. Try just writing everything you bring in and everything you spend and see how that goes, if you’re not doing anything like that now. It’s eye opening.
This whole 3 year vs 5 year plan links back to possibly my only complaint about the TDDUP show and it’s not gails’ fault I know. I wish that Gail would withhold 50% of the amount the “contestants” win for 6 months to a year to see if they maintain the course and do a ‘reunion’ update. It’s not a sprint, its a marathon.
November 13, 2008 at 3:32 pm
Geoff – Thanks for the tips. Yes, about 2 months ago, I started an EXCEL spreadsheet that keeps track of my paydays and their amounts and the expected expenses and debt payments required for each pay period. It’s a real eye opener for sure and points out the waste and spontaneous spending habits of my past. The same EXCEL workbook keeps track of my three debts (credit card, personal and line of credit) as to how much how I still owe, how much I’m contributing for debt payments, when I can give extra money, the interest charges and my expected date to totally pay off the debt.
Currently the spread sheet is a 6 month window but with some annual and biannual expenses tagged on. It’s help me to be a smarter sharper. I currently budgeted $75 a week for each groceries and transportation. I’m probably using only $75 for two weeks worth of gas, so the other $75 is going to go to truck maintenance expenses. I think I can probably get my two week grocery budget of $150 to $125, but going to leave it at $150 and use the extra monies for the occasional bigger grocery expenses (laundry detergent, dog food, cleaning supplies, etc.). I will reevaluate after a few months.
I have made the U-turn as to realizing the waste of interest on debts and the waste in my spending. Now I’m living within my means and coming pretty close to having money at the end of the month. This time of the year has been crazy (unexpected vet bills {dog and horse}, truck maintenance, truck inspection, Christmas spending). I’m looking forward to next fall when these expenses have been saved over the entire year.
Friends have been bugging me to participate in horse clinics, lessons and shows and I have refused and will continue to refuse until I get my finances in line. I will be using Gail’s suggestion today to use horse clinic and shows as rewards to my paying off my debts.
Happy Saving and Paying Debts off everyone!
December 1, 2008 at 2:05 pm
I confess too to my consumer sins
. mine was replacing my functioning used car (paid with cash) with a new one and i financed it! this was in 1991 so it was similar economic situation. what a dumb move! thankfully i managed to pay it of before full 5 yr term and i have never since than bought a new car! saved tonne of money that way, i’m comfortable with myself and will no longer be defined by THINGS I OWN. my ego isn’t bruised because of that and other than the mortgage, i have noooooo debt 
.
good luck and all the best to all the readers. we can all do it.
January 19, 2009 at 2:52 pm
I think my dumbest move so far, and it’s not very long in the past, was to put a large down payment on a motorcycle, but half of the downpayment was on the line of credit because the motorcycle came up for sale before we were completely ready for it. So far I’ve paid off $1500 of the line of credit by paying the same amount we were saving toward the downpayment every month, and my DH has something to sell to pay off the rest plus some more on the bike, but he won’t be able to sell it until spring (which was when we originally planned to buy the bike.) So we now have a bike payment and a debt payment – so frustrating when we had neither only four months ago! Dumb, dumb, dumb. I guess old habits die hard, even when we think we have the debt monster slayed.
June 7, 2009 at 11:06 pm
Gail I absolutely agree! The strange part is that society right now does not support this approach and it can be difficult at times to go against the “Spend it Now” mentality. My husband and I will have our house paid off in 5 more years. That’s 17 years total using accelerated payments. We have two old cars which are paid for, so no monthly car payments, RESPs for our kids and are doing our best to fund our retirements. We are using your advice to work on building an emergency and long term savings for (new cars, new roofs etc.),vacations and more for retirement but overall we think we are doing not to badly. The thing is, I know there are questions being asked among our peers who have more “things” than us. Heck, we even had family members ask us what we do with all our money! The save-first-buy-later approach is definitely the exception versus the rule. In the end, we feel it is a question of priorities. We are willing to forgo a few luxuries now to ensure we and our children a good life later. Your show and Web site really are helpful in supporting those who chose to “buck the trend”. Thanks.
July 3, 2009 at 11:26 pm
When I was a kid, I use to think that it was crazy that people didn’t save to buy a car. Fast foward 15 years and not only didn’t we save 1 penny for the car but we actually gave a thank-you card to the salesman and his boss for selling it to us ( with extended warranty). That “stupid stick” was EXTRA LARGE! Fortunately for us, through devine intervention, we got a “free out of jail card”. So we are now in good place financially. Reading your blog keeps me in check from ever putting my family in financial “suicide” again. Thank-you Gail!