You know what really grinds my gears? People that don't understand money. Or maybe they do understand it, but figure if they ignore their common sense, they can buy more stuff. I've heard that candians, on average, spend anywhere from 114%-146% of their income. Is it just me that sees a serious problem developing? So if someone makes $40,000 a year, they are spending at least $45,000. How is that possible? Easy, they are digging a hole, from which I am affraid, a huge percentage of them will never escape.
I know of a person, who had a small, cheap pickup truck. It was paid for in full. The owner rented a basement suite, but wanted badly to buy a condo. She decieded on a plan to get a down payment for the condo. She would trade her small, economical, paid for truck in on a brand new Ford F150. After the five years of payments were done on the F150, she would sell it, and have money for a down payment on a condo. So going that route, she would buy a $30,000 truck, spend another 3 or 4 thousand on interest, and sell the truck in 5 years for probably $15,000.
Or lets say she drove her current truck for the next 5 years, and put the same payments she would be making on her new F150, into the bank. After 5 years, she would have $30,000, plus a grand or two in interest. What is a better down payment $15,000, or $32,000? Oh and lets not forget, after she sells her new F150, she has no vehicle, so where does she get a new one? Not to mention the $32,000 down payment will mean she will owe less money on her condo to start with, saving her thousands more on interest, throughout the life of her mortgage.
My question is, is she really that dumb, or is she doing whatever she can to justify buying a new truck? If it's the latter of the two, who is she fooling? She is screwing herself out of thousands of dollars.
The other one that gets me is the car dealers that will consolidate your debt into a new car. "Bring in your creditcard debt, student loans, line of credit, debt owning on a current vehicle, and we will put you in a new car, and you'll have smaller payments!" Yippie! A free car! If you have a bunch of debt, do you really think buying a new car will solve your problems? Not only is all of your old debt still there, but now you owe for a new car. Not to mention the fact that now all of the creditcard debt and line of credit debt has been transfered, so you will probably rack those back up again.
People today seem totally content on spending every penny they can make, plus whatever the bank will lend them. People are addicted to spending. Most of the spending, is on stuff they don't need. Stuff that will be collecting dust on a shelf in three months, but they still have 9 months of payments left on. People keep borrowing against their mortgages to buy cars, and toys, and stuff. Every time they build another few thousand dollars in equity in their house, they pull it out and go on a holiday, or buy a bigger TV. How do you expect to pay off your mortgage, when you owe the same amount you did ten years ago?
It all starts early. If kids today make the wrong choice early on, it will haunt them for the rest of their life. A co-worker, who is just out of high school, and working full time wants to buy a Dodge Ram. Not a new one, an older one for $15,000. Again, he drives a small economical truck now and has no use for a larger truck, aside from the fact that he "likes" them. Right now, he lives at home, and pays very little rent. He doesn't make a lot of money, but because he lives at home, he has almost no overhead, leaving him with a fairly good amount of disposable income. So his plan is to take out a three year loan and buy himself a Ram. Within those three years, he plans to move away from home, to a basement suite. The major problem I see here is, in three years, when he is living on his own, he will have major overhead. Rent, cable, phone, internet, food, etc. Bills he doesn't have now. In three years he will have little, to no disposable income. How will he find the extra money to save for a down payment on a condo, or house? So he has a choice. He can spend the next three years paying for a truck he doesn't need, or he can spend the next three years, putting those, would be truck payments into the bank, so he has a down payment. If he buys the truck, I doubt he will ever be able to save a down payment due to the cost of living on his own. The long and short of it. Buy a $15,000 truck now, and he will never own property. It's harsh, but true. Of course he doesn't want to hear that, because he is trying to justify buying a truck. One purchase, early in life might screw you over for the rest of your life.
Where does this leave us? I see a serious problem forming. People are digging, deeper, and faster into debt than ever before. It can't sustain itself. We have already seen a small recession. People losing their houses and belongings because they were stretched to far finacialy. The banks couldn't collect their money, as people walked away from their SUVs and 4000 square foot houses. The government had to bail the banks out. People are going so far into debt, they will not ever get out. So what happens? Instead of handing money down to their children, they hand down debt. I don't know who is to blame. The banks for lending the money they know can't be paid back, the corporations for brain washing the public to buy stuff they don't need and can't afford, the salesmen, for telling people "it's not $30,000. It's only dollars a day!" or maybe it's the general publics fault for buying things, they know they have no right buying. No matter who is to blame, the road, the spendaholics are going down, is not sustainable.
I have one more point to make about consumerism. I've covered the fact that people are dumb enough to go deep into debt for brand names, useless electronics, gadgets, cars and other things to try to impress the neighbors, but I need to make a point, and I hope it will put a very positive spin on this sad situation.
Til next time...
No comments:
Post a Comment