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Rental America: Why the poor pay $4,150 for a $1,500 sofa

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Re: Rental America: Why the poor pay $4,150 for a $1,500 sofa

#31

Post by diminoten »

aliston wrote: post #8

While this particular example applies largely to the poor, you could write a similar article about the vast majority of Americans. How about "Why engineers in the Bay Area pay 1 million for a 600k condo" or "Why smart people pay 400k for a 150k education." Fundamentally, the high price of the couch is really a reflection of the risk made in the "loan." Americans are too leveraged and don't save enough across the boar…

Non-poor people don't pay nearly as much interest as poor people, and as such, generally wouldn't even pay $4,150 for a $1,500 sofa even if they did decide to take out a loan to pay for it.

That's actually kind of the point of the whole article - that poor folks are unlike other people in that they have no way of mitigating their risk in the form of lump payments to creditors.

Re: Rental America: Why the poor pay $4,150 for a $1,500 sofa

#32

Post by kansface »

tehwalrus wrote: post #6

What is stopping an entrant going in at 50% APR rates, and competing with these guys on the weekly price? Or is the cost of doing business where 9/10 people default (mostly because you charged them too much) just that high?

Do you think an ethical pay day loan business could exist? I tend to think anyone with ethics wouldn't touch the industry in the first place.

> mostly because you charged them too much

Why don't you think both parties share the blame?

Re: Rental America: Why the poor pay $4,150 for a $1,500 sofa

#33

Post by Glyptodon »

I think all the people comparing this to buying house are kind of off base (though maybe less so in the Bay Area).

In most of the USA housing is a choice between spending $500 to $1500 a month and building equity or spending the same amount while not building equity. Obviously building equity is typically better even at a loss than spending the same amount for nothing assuming you don't plan to move frequently, etc.

This is in no way, shape, or form comparable to a couch. A shelter must be had. A couch is 100% a luxury, and there are loads of substitute goods, like bean bag chairs, or just plain cushions on the floor. Not to mention that all of them are mostly worthless used (unlike a house).

Re: Rental America: Why the poor pay $4,150 for a $1,500 sofa

#36

Post by josu »

wfjackson wrote: post #17

I wish the government or charities helped these people out by educating them about the various ways they can be frugal and the typical ways they get fleeced by holding free seminars and giving out flyers/books. Perhaps the tips in Reddit's /r/frugal can be made into a book and freely distributed to such people? There's an immense amount of money being spent on such folks, much of it from taxpayer dollars and it still…

Something like these?

http://www.mymoney.gov

http://www.pfeg.org/

http://www.financialliteracy.gov.au/

http://www.condusef.gob.mx/Revista/index.php/usuario-intelig...

http://www.finanzasparatodos.es/

Most of the governments have financial education programs in place. They just don't seem to be that effective. My guess is that the answer to this has to come from the private sector. A company that somehow creates the incentives for these people to save instead of borrowing.

Re: Rental America: Why the poor pay $4,150 for a $1,500 sofa

#37

Post by FLUX-YOU »

abbot2 wrote: post #29
FLUX-YOU wrote: post #24

Earlier quoted context omitted.

>Normal families have sofas, she says, and you’ll do what it takes to feel normal.

Seriously? I don't consider myself poor by any standard, but I'll also think 5 times before buying a 1500 sofa. It's just stupidly expensive.

I think that headline is misleading. In the article, they say it was $1500 for a sofa and loveseat, which isn't bad if the material and construction is high quality (who knows, Ashley Furniture is probably crap next to actual craftsmanship).

Re: Rental America: Why the poor pay $4,150 for a $1,500 sofa

#38

Post by bane »

The truth is, almost everybody ends up financing something and paying a lot more for it in the end than the sticker price. The trick is figuring out how to either avoid financing if possible, or minimizing the extra that you pay when you have to.

Even when you aren't explicitly financing something, people throw away huge sums of money all the time when there are cheaper alternatives. For example, how many of us pay rent for housing?

For non-optional things like shelter, this is harder to navigate. What makes people scratch their heads about a sofa is that strictly speaking, you can get by without a sofa. It's an optional purchase. It sucks not to have one, but there's no "sofa" in Maslow's Hierarchy of needs. My parents in law come from a culture where sitting furniture is a completely optional item for example (Korea) and most people sit and sleep on the floor perfectly fine.

I remember when I was first married, my wife and I were really desperately poor, for at least a year we didn't have any furniture at all. Even after we stopped being poor I don't think we bought a sofa for the first 4-5 years of our marriage and then it was a triple discount coupon holiday sale sofa. 10 years later we still have that sofa and have no plans to get rid of it any time soon.

Money's great, it can almost instantly eliminate all sorts of inconveniences, and easy access to more money than you can effectively manage is a real problem. Even relatively smart people, given absolutely free money (like lottery winners) don't know how to deal with it.

Re: Rental America: Why the poor pay $4,150 for a $1,500 sofa

#39

Post by DubiousPusher »

This is a poor example of a real phenomenon.

I was raised in a family of four with an anual income around $14,000 a year. Today, I'm an engineer with a base salary in the six figures. I can tell you first hand, wealth gives you not just the ability to do more but the ability to make the money you do have go further.

It's not the $4,000 sofas that strain poor people to the financial limit. It's the hot water heater you have to put on a credit card instead of paying cash. It's the groceries you pay twice as much for because you can't afford them in bulk. It's the overdraft fees that make a $100 mistake into a $500 one. It's the nickle and dime medical bills because you can't afford to address the root cause of an affliction.

Re: Rental America: Why the poor pay $4,150 for a $1,500 sofa

#40

Post by crassus2 »

gxs wrote: post #16

You know, I hate to sound elitist or conceited or whatever word you may want to use to describe the following statement, but it's true: there is a huge element to these decisions that goes beyond education and background. At the end of the day, it boils down to plain old reasoning ability. I have a friend who is pretty well educated in a non stem field and is decently successful (lower middle class). We both drive th…

Education can only make up for so much of a deficit in cognitive ability. We know that cognitive ability and income levels are correlated.
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