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Why Don't People Manage Debt Better?

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Re: Why Don't People Manage Debt Better?

#191

Post by encoderer »

pessimizer wrote: post #102
douche wrote: post #61

Earlier quoted context omitted.

It's pretty numb to use debit cards as opposed to credit cards, for various reasons. A.) You can't over-draw a credit card, and get hit with overage fees or bounced-check insurance, or all the other things banks do - particularly with the slightly nefarious way they often choose to order your transactions when they close their books. Particularly troublesome with businesses that put in a hold on your card, then charg…

A) Opt out of "overage fees and bounced-check insurance" which would be the problem here, not debit cards. Keep track of your own finances. B) Don't live check to check. Keep track of your own finances. C) And if you fail to do that once (because you're probably living check to check), you've nullified any free benefit you ever received. D) Horseshit. I had my card stolen by the Target breach, there were charges on i…

The facts are simple: Consumers have more protection on a credit card than a debit card. The Visa/MC logo on your debit card gives a false sense of consumer security.

Here's an example. Buy a laptop from ebay. Pay with debit card. Seller ships a brick in a laptop box sends via Fedex. You sign for the package, open the box, realize it's a brick. You dispute the charge with your bank. They are nice so they provisionally give you a credit. They call the sender. Sender says "I have a tracking number, he signed for it, he's lying, I sent him a working computer." You lose this dispute. The bank tells you to sue him in small claims court.

With a credit card, as long as you dispute before you pay the bill, the dude doesn't get paid, and you don't get charged. Once you pay, your rights are diminished.

Re: Why Don't People Manage Debt Better?

#192

Post by colmvp »

njharman wrote: post #96
kdamken wrote: post #42

Better question: why do people buy things they can't afford and most often don't need, putting themselves in this position? So many of my peers don't make a lot of money, but then still go out and buy a new or newish/used car and put themselves on a multiyear payment plan. "Oh but it's only 200 a month, I can swing that". Repeat for like 3-4 other things and suddenly they're always complaining they have no money and…

> why do people buy things they can't afford and most often don't need Advertising. Most people are afraid?/too proud? to admit or even consider they may not be 100% rational or 100% in control of the own actions despite numerous studies showing you are not Advertising, very obviously, manipulates people into making choices. Most of which are not in their interest. The original article even has an example; in the thr…

You've touched upon the idea of people unwilling to admit that they are in control of their own actions.

I read Blink by Malcolm Gladwell recently. He posted an exercise where by the end of it, it revealed certain internal biases I have towards black people people, namely that there's internal friction to associating positive words with black people as compared to association with white people (I'm not white).

I don't consider myself deliberately racist to black people. However, when I consider the representations of black people I get to see, it's usually negative (in the news, TV/movies) vs. the wide gradient I see for white people.

I know I unconsciously make connections between concepts, such as when I'm learning a new programming language, practicing an instrument, or reading article after article about a certain topic. I don't need to state a = b, because my mind will often make the connection for me. Given the amount of money and time invested in ads, surely I'm also influenced by messages that I consume and that they can affect how I connect certain concepts.

I've been able to attempt to counter it is to practice mindfulness, in order to be more conscious of these thoughts and question why certain feelings erupt. Additionally, reading more about automatic thoughts and the biases that influence them. Lastly, detaching myself from sources of 'bad' information, namely minimizing usage of Facebook Mobile (filled with ads) and television.

Re: Why Don't People Manage Debt Better?

#193

Post by marcosdumay »

bradleyjg wrote: post #58
imgabe wrote: post #17

Anyone at a point where they are making monthly payments on multiple credit cards has already lost the debt game. People don't manage debt better because they have been marketed to and taught to use debt completely inappropriately. Debt should be used to purchase an asset that will appreciate or otherwise provide an income in excess of the interest payment on the debt. Full stop. That is how businesses use debt and t…

I don't think such an absolute position is warranted. It's true that saving up for a big purchase will end up costing you less money than borrowing to pay for it and paying it back. But you will have the item purchased for less time. Suppose you have enough disposable income to pay for a new $1200 TV over the course of 12 months. In scenario 1, you save $100 each month. The bank pays you 0.5% interest. As of January…

> You've essentially paid $72 for the privilege of getting the TV you wanted a year earlier.

And that's almost an entire month of savings.

Now, correct your rates with what's on the other replies, and we are suddenly talking about 2 or 3 months of savings. Just for getting that TV an year earlier.

Yes, that may be worth it. But almost always isn't.

Re: Why Don't People Manage Debt Better?

#194

Post by evunveot »

epimetheus wrote: post #158
ac29 wrote: post #95

Earlier quoted context omitted.

> Suppose you have enough disposable income to pay for a new $1200 TV over the course of 12 months. In scenario 1, you save $100 each month. The bank pays you 0.5% interest. As of January 1st next year you'll have a new TV and $2.75. In scenario 2, you put $1200 on a credit card with a 10% APR. You pay $100 each month towards the credit card bill. As of January 1st next year you have a TV you've been watching for a y…

Actually, a lot of places constantly run "Zero Interest If Paid Off In 12 Months" deals all the time. Lowes, Furniture stores, and even some Credit cards. We've paid off Couches, A refrigerator, a new Sewer Drain, and several other things (a nice Kitchen Table most recently) this way. It's not as good as saving for it, and getting a few dollars of interest, but that's a marginal gain anyway.

The Amazon Prime Store Card is an example. You can choose per transaction either 5% cash back or 6/12 (sometimes 24) months interest-free financing, depending on the size of the purchase. (You can only use the card at Amazon, though, and there's the Prime membership fee.) I've bought several plumbing fixtures and a laptop without paying any interest this way.

Re: Why Don't People Manage Debt Better?

#195

Post by mordocai »

tamana wrote: post #132
pc86 wrote: post #75

Earlier quoted context omitted.

This whole idea that "oh you have multiple creditors obviously you've made bad decisions" is misguided and naive in the extreme. People have medical bills. People need the counsel of attorneys. You generally need a reliable car to get to work and a roof over your head. You can have huge mountains of debt and be forced to dig your way out by the skin of your teeth through no fault of your own. Paying hundreds a month…

There is no reason to use credit cards for these sorts of debts.

Yeah, they should use payday loans instead!

Seriously though, it is astonishing to me how many people are so entitled they just literally cannot understand why someone would have legitimate problems with money.

Not everyone is lucky enough to make a break out of poverty, nor is everyone born in middle class income or above. And yes, breaking out of poverty requires some luck in addition to hard work and determination.

Re: Why Don't People Manage Debt Better?

#196

Post by melted »

Easy: there's a saying, you borrow somebody else's money for a time, but pay back your own and for good. So paying off debts is inherently a much less pleasant activity, which people want to avoid thinking about. Combine that with the complexity a typical financial arrangement entails, and peoples inability to comprehend basic math, and you can see why they don't manage their debt better.

Re: Why Don't People Manage Debt Better?

#197

Post by resolaibohp »

ac29 wrote: post #95
bradleyjg wrote: post #58

Earlier quoted context omitted.

I don't think such an absolute position is warranted. It's true that saving up for a big purchase will end up costing you less money than borrowing to pay for it and paying it back. But you will have the item purchased for less time. Suppose you have enough disposable income to pay for a new $1200 TV over the course of 12 months. In scenario 1, you save $100 each month. The bank pays you 0.5% interest. As of January…

> Suppose you have enough disposable income to pay for a new $1200 TV over the course of 12 months. In scenario 1, you save $100 each month. The bank pays you 0.5% interest. As of January 1st next year you'll have a new TV and $2.75. In scenario 2, you put $1200 on a credit card with a 10% APR. You pay $100 each month towards the credit card bill. As of January 1st next year you have a TV you've been watching for a y…

I am not sure I agree that the kind of people who would need a year to save $1200 do not have the sort of credit to get a 10% APR credit card.

There are plenty of high income earners who are just as irresponsible with spending as some low income earners. I always had a good credit score during the years it would have taken me a year to save $1200.

Re: Why Don't People Manage Debt Better?

#198

Post by ChristianBundy »

marcosdumay wrote: post #193
bradleyjg wrote: post #58

Earlier quoted context omitted.

I don't think such an absolute position is warranted. It's true that saving up for a big purchase will end up costing you less money than borrowing to pay for it and paying it back. But you will have the item purchased for less time. Suppose you have enough disposable income to pay for a new $1200 TV over the course of 12 months. In scenario 1, you save $100 each month. The bank pays you 0.5% interest. As of January…

> You've essentially paid $72 for the privilege of getting the TV you wanted a year earlier. And that's almost an entire month of savings. Now, correct your rates with what's on the other replies, and we are suddenly talking about 2 or 3 months of savings. Just for getting that TV an year earlier. Yes, that may be worth it. But almost always isn't.

> Yes, that may be worth it. But almost always isn't.

I don't disagree with you, but until you provide some evidence this is just the opinion of some random stranger on the internet, and should be taken with a pound of salt.

Re: Why Don't People Manage Debt Better?

#199

Post by ohitsdom »

charlesdm wrote: post #101
kdamken wrote: post #90

Earlier quoted context omitted.

I'd disagree on that last part - I'd say that if you're not making a crazy salary his advice is even more valuable. Most people spend an obscene amount of money on things they don't actually really need. Some classic examples: A $3 coffee everyday adds up to about $90 a month, when you can usually just drink free coffee from your office or buy some cheap pre-ground stuff. Spending $5-6 for lunch each day at work can…

This is the best way to get depressed. It's always significantly easier to negotiate a $1k raise than it is to reduce your spending on basic stuff by $1k. Focus on earning more, not saving (on useless expenses).

If you don't have any sort of budget, making more won't solve your problems.

Re: Why Don't People Manage Debt Better?

#200

Post by kdamken »

Ocerge wrote: post #143
charlesdm wrote: post #130

Earlier quoted context omitted.

If you want to save money, do it on large purchases. Buying a $30k car? Negotiate aggressively so you can buy it for $23-25k. Anything above a few $100 is worth haggling over. Do you know how many people pay the listing price of a car, yet cut coupons to save a few euros/dollars? A lot. It's ridiculous. Some of the joys in life are simple things, such as drinking a $2-3 coffee or having a cocktail in a nice bar, etc.

Absolutely. I fully recognize my $2.50 americano every morning could be a couple of cups of free office coffee, but I look forward to it every single day. I also drive a 10-year-old but reliable car, so I don't have any huge monthly expenditures outside of rent and my $150 student loan payment. I'll take the $100 or so hit every month in exchange for me starting my mornings on a positive note. It's not going to posit…

Playing devils advocate here: you're spending $1200 a year on coffee. With that money you could not only buy a really nice coffee machine and make it yourself every morning, but also have a bunch of money leftover to put towards your loans, invest, put towards a nice vacation, etc.

The idea is that those small daily expenses tend to add up, and there may be a lot more of them than you realized.

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