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SNL made a wonderful infomercial in 2006 about point 3: avoid debt. Depending on your location you should be able to watch it in [1] or [2]. During my years in

SNL made a wonderful infomercial in 2006 about point 3: avoid debt. Depending on your location you should be able to watch it in [1] or [2]. During my years in the US it always puzzled me that, upon reaching my credit limit, it would not just increase without any interaction, but sometimes double! American "plastic", as hailed in "The Graduate", was a significant lesson for me. [1] http://www.nbc.com/saturday-night-live/video/dont-buy-stuff/n12020 http://www.nbc.com/saturday-night-live/video/dont-buy-stuff/... [2] http://www.youtube.com/watch?v=R3ZJKN_5M44 http://www.youtube.com/watch?v=R3ZJKN_5M44

chedar 11y ago
For the unlucky that couldn't see it on [1] & [2], here is [3]. [3] https://vimeo.com/145194633 https://vimeo.com/145194633
tuttifrutti 11y ago
I was always puzzled how people in the US are quick to spend on credit, and not worry too much...
- fit2rule 11y ago
  One of the great western habits I inherited after living in the US for 15 years, is the use of the credit card for everything, and then just paying a single bill (the credit card) every month. If you do it properly, it can really increase the quality of your life - rewards, points, etc. - and it can also be very, very dangerous for the undisciplined and income-averse ..
  - flexie 11y ago
    the income-averse; I have yet to meet those. work-averse or income-challenged maybe. Or underpaid or poor.
    - fit2rule 11y ago
      By income-averse, I mean those who are averse to generating the incoming required to pay the current bills, and alas this is a subtle but simple difference between solvency and debt. I never really carried much debt, between payments. But I sure did borrow a lot, to cover my monthly budget.
  - mclovinit 11y ago
    For those I know, including myself and my partner, the habit to strive for is spending less, and I agree that credit can be a useful tool if used wisely, but never really know when life can throw a curve ball. For now, we use credit cards, but manage to eliminate our debt by paying everything soon after incurring debt. Call it using debt for leverage I suppose. For any big purchase (which is rare), we aim to use credit when no interest penalties are present and pay off before any are incurred. A small house, inexpensive vehicles, and thrifty habits even with the use of credit cards allowed us to save quite a bit in contrast to those heavily in debt with terrible credit, but it is still a gamble. I don't blame others for having debt. There are many reasons for this. Without any major life events this system works for us...until perhaps it doesn't.
    - fit2rule 11y ago
      The #1 rule is, stay cash-positive: don't spend more than you've got in the bank to cover the bills, but be willing to defer the payment and continue income in the interim, because .. after all .. nothing feels better than having all bills paid and still having a net positive every month, to save away ..
- madaxe_again 11y ago
  They are acclimatised to debt - most westerners can't imagine not having a credit card - when I tell folks I cut up my first and last card at 17 they assume I'm a delinquent, broke, punishing myself - for in this society we have managed to redefine debt as wealth.
  - dalke 11y ago
    Here in Sweden, people have a debit card or use a debit app. Most people here easily get through life without a credit card. While I don't think it's true that "most westerners can't imagine not having a credit card", I don't have a sense of how much other Western countries use credit cards as compared to debit-based systems. http://news.bbc.co.uk/2/hi/business/5380718.stm http://news.bbc.co.uk/2/hi/business/5380718.stm from 2006 says that UK has the most credit card debt of any European country. "The average British resident owes £3,175") while "The average European owed just £1,558 in unsecured debt." The more recent http://www.thepennyhoarder.com/how-does-our-credit-card-debt-compare-to-the-rest-of-the-world/ http://www.thepennyhoarder.com/how-does-our-credit-card-debt... from 2012 says: > Most other countries tend to be more cautious with their credit, opting instead to use debit cards (like in the UK and France) or online bank transfers (like in Germany) rather than to charge up a card. And when it comes to charges calculated per year, Europe makes us look like we spend with abandon; French people charge less than $300 each on their credit cards each year, on average. And Germans seem to eschew the “buy now, pay later” mentality as well, only charging an average of $158 per person per year to their credit cards. That makes it seem like credit card use and debt more a US issue than a more generally Western issue.
    - purplelobster 11y ago
      Funny thing is, as a European I never saw the point in credit cards. So when I lived in the US I didn't get one for a few years. Finally my girlfriend pushed me to get one for the free cash back, but the application was denied since I had no credit history (yet a high-paying job and $100k in the bank...). Just weird. You have to be in debt to show that you're responsible enough to handle debt.
      - 11y ago
IkmoIkmo 11y ago
'avoid debt' is too simplistic. Debt is simply an opportunity increasing instrument. You have no money to make certain investments that create a net benefit, debt gives you access to that opportunity, and it comes at a cost. If that opportunity is worth the cost, debt is great. Of course it makes sense to say 'avoid needless debt', or 'be careful taking on debt', but just to just say avoid debt is to also say avoid taking opportunities that you should be taking and throw out the baby with the bathwater. One could very well say 'avoid debt for needless consumer spending', buying a new TV with debt, usually at some ridiculous APR, just makes no sense. For companies, debt is even more interesting, because in corporate finance you'll find that debt is subsidised through tax rates. It sounds a bit weird but it's true, and so there is an incentive to take on debt. In some countries due to the tax systems, this applies to individuals too, e.g. for mortgages, the cost of debt reduces effective income and thereby reduces tax liabilities further than if you saved up first and then bought the house without debt, such that in some countries people did not pay off their mortgages because deductible interest payments were attractive. Debt sucks, I know, I hate the debt culture as much as anyone and as a European the American creditcard industry is something I pity, but the discussion on debt today is extremely one-sided.
- ezequiel-garzon 11y ago
  'Avoid debt' is an apt title. The points the author makes agree very much with yours, including the clear warning the infomercial gives against compulsive, superfluous spending: "I do not speak of merchants buying and selling on credit, or of those who buy on credit in order to turn the purchase to a profit. The old Quaker said to his farmer son, "John, never get trusted; but if thee gets trusted for anything, let it be for `manure,' because that will help thee pay it back again.""

chedar 11y ago

For the unlucky that couldn't see it on [1] & [2], here is [3]. [3] https://vimeo.com/145194633 https://vimeo.com/145194633

tuttifrutti 11y ago

I was always puzzled how people in the US are quick to spend on credit, and not worry too much...

fit2rule 11y ago
One of the great western habits I inherited after living in the US for 15 years, is the use of the credit card for everything, and then just paying a single bill (the credit card) every month. If you do it properly, it can really increase the quality of your life - rewards, points, etc. - and it can also be very, very dangerous for the undisciplined and income-averse ..
- flexie 11y ago
  the income-averse; I have yet to meet those. work-averse or income-challenged maybe. Or underpaid or poor.
  - fit2rule 11y ago
    By income-averse, I mean those who are averse to generating the incoming required to pay the current bills, and alas this is a subtle but simple difference between solvency and debt. I never really carried much debt, between payments. But I sure did borrow a lot, to cover my monthly budget.
- mclovinit 11y ago
  For those I know, including myself and my partner, the habit to strive for is spending less, and I agree that credit can be a useful tool if used wisely, but never really know when life can throw a curve ball. For now, we use credit cards, but manage to eliminate our debt by paying everything soon after incurring debt. Call it using debt for leverage I suppose. For any big purchase (which is rare), we aim to use credit when no interest penalties are present and pay off before any are incurred. A small house, inexpensive vehicles, and thrifty habits even with the use of credit cards allowed us to save quite a bit in contrast to those heavily in debt with terrible credit, but it is still a gamble. I don't blame others for having debt. There are many reasons for this. Without any major life events this system works for us...until perhaps it doesn't.
  - fit2rule 11y ago
    The #1 rule is, stay cash-positive: don't spend more than you've got in the bank to cover the bills, but be willing to defer the payment and continue income in the interim, because .. after all .. nothing feels better than having all bills paid and still having a net positive every month, to save away ..
madaxe_again 11y ago
They are acclimatised to debt - most westerners can't imagine not having a credit card - when I tell folks I cut up my first and last card at 17 they assume I'm a delinquent, broke, punishing myself - for in this society we have managed to redefine debt as wealth.
- dalke 11y ago
  Here in Sweden, people have a debit card or use a debit app. Most people here easily get through life without a credit card. While I don't think it's true that "most westerners can't imagine not having a credit card", I don't have a sense of how much other Western countries use credit cards as compared to debit-based systems. http://news.bbc.co.uk/2/hi/business/5380718.stm http://news.bbc.co.uk/2/hi/business/5380718.stm from 2006 says that UK has the most credit card debt of any European country. "The average British resident owes £3,175") while "The average European owed just £1,558 in unsecured debt." The more recent http://www.thepennyhoarder.com/how-does-our-credit-card-debt-compare-to-the-rest-of-the-world/ http://www.thepennyhoarder.com/how-does-our-credit-card-debt... from 2012 says: > Most other countries tend to be more cautious with their credit, opting instead to use debit cards (like in the UK and France) or online bank transfers (like in Germany) rather than to charge up a card. And when it comes to charges calculated per year, Europe makes us look like we spend with abandon; French people charge less than $300 each on their credit cards each year, on average. And Germans seem to eschew the “buy now, pay later” mentality as well, only charging an average of $158 per person per year to their credit cards. That makes it seem like credit card use and debt more a US issue than a more generally Western issue.
  - purplelobster 11y ago
    Funny thing is, as a European I never saw the point in credit cards. So when I lived in the US I didn't get one for a few years. Finally my girlfriend pushed me to get one for the free cash back, but the application was denied since I had no credit history (yet a high-paying job and $100k in the bank...). Just weird. You have to be in debt to show that you're responsible enough to handle debt.
    - 11y ago

IkmoIkmo 11y ago

'avoid debt' is too simplistic. Debt is simply an opportunity increasing instrument. You have no money to make certain investments that create a net benefit, debt gives you access to that opportunity, and it comes at a cost. If that opportunity is worth the cost, debt is great. Of course it makes sense to say 'avoid needless debt', or 'be careful taking on debt', but just to just say avoid debt is to also say avoid taking opportunities that you should be taking and throw out the baby with the bathwater. One could very well say 'avoid debt for needless consumer spending', buying a new TV with debt, usually at some ridiculous APR, just makes no sense. For companies, debt is even more interesting, because in corporate finance you'll find that debt is subsidised through tax rates. It sounds a bit weird but it's true, and so there is an incentive to take on debt. In some countries due to the tax systems, this applies to individuals too, e.g. for mortgages, the cost of debt reduces effective income and thereby reduces tax liabilities further than if you saved up first and then bought the house without debt, such that in some countries people did not pay off their mortgages because deductible interest payments were attractive. Debt sucks, I know, I hate the debt culture as much as anyone and as a European the American creditcard industry is something I pity, but the discussion on debt today is extremely one-sided.

ezequiel-garzon 11y ago
'Avoid debt' is an apt title. The points the author makes agree very much with yours, including the clear warning the infomercial gives against compulsive, superfluous spending: "I do not speak of merchants buying and selling on credit, or of those who buy on credit in order to turn the purchase to a profit. The old Quaker said to his farmer son, "John, never get trusted; but if thee gets trusted for anything, let it be for `manure,' because that will help thee pay it back again.""