8 ms·

The secret shame of the middle-class isn't their credit debt, it's that they are poor decision makers. The author completely glosses over this, only dedicating

• randomf1fan 9y ago
  To be fair to the author, he does say this "I don’t ask for or expect any sympathy. I am responsible for my quagmire—no one else. I didn’t get gulled into overextending myself by unscrupulous credit merchants. Basically, I screwed up, royally. I lived beyond my means, primarily because my means kept dwindling."
  • fjdlwlv 9y ago
    He still makes the false excuse that his problem is earning, not spending.
• mattmanser 9y ago
  Are they poor decision makers, or were they poorly taught financial concepts? Were they ever taught how to budget, how to see the actual cost of borrowing, etc.?
  • overcast 9y ago
    Does buying something you don't actually have money for, something that requires education? I mean, that's just self explanatory.
    • epmaybe 9y ago
      I don't think that's what the original commenter meant. Most people understand that, but don't know how to budget for things that ARE necessary. I myself am terrible at budgeting, yet have a huge safety net so that even if I go past my budget I am safe.
      • overcast 9y ago
        Mint was a pretty big game changer for me in the world of budgeting. But it's not as if that is rocket science. It's just good to see spending trends. You make X dollars per month, don't spend more than that. That's a basic budget everyone should adhere to for starters.
        • epmaybe 9y ago
          I actually just reset my Mint account yesterday to try and budget better! It wasn't connecting to my bank and credit card accounts before but it seems to be okay now.
    • nlawalker 9y ago
      Understanding "don't actually have money" is something that requires education. With the way things are, it's very easy for someone who hasn't been explicitly educated otherwise to look around and just assume that buying all you can and making minimum payments is just how things work.
      • CWuestefeld 9y ago
        I think understanding this is a big part of it, and is something Megan McArdle mentions sometimes in her columns. The idea is that we see lots of people around us who we think are very much like us. And we see that lots of them have a house with 3000+ square feet. And lots of them drive an Escalade. And lots of them have their kids on travel sports teams. And lots of them have this and that and the other thing. Every time we see that people around us tend to have such a thing, that suggests to us that we can afford it too. The thing is, we make each of those observations independently. We don't generally take a complete inventory and see that Family A is paying for those sports activities, but doesn't have the top-of-the-line cable TV package; while Family B has the cable TV but goes without the annual vacation to the Caribbean. We tend to want all the things that we observe that much of our community has, without thinking too deeply about the fact that none of them actually have all of it. EDIT - spelling
        • ethbro 9y ago
          It's not just people making these choices on the basis of what they observe: they're actively being influences to make poor financial choices. Advertising spending is at around $200B/yr in US media alone. ... And how much of that would you say is targeted at getting people to make good financial choices for themselves?
      • pfranz 9y ago
        I agree. It's funny to hear so much "it's self explanatory" on a forum where UX is praised and the results of the current system are obvious (with so many people with so much debt). A good friend, years ago, was paying the minimum payments on his credit card for years was complaining the balance was higher than he started. I thought it was obvious, but it wasn't to him. I really like seeing newer things on bills like, "At rate X the balance would be paid in Y months." The credit card company isn't incentivized to do that on its own. There's clearly a problem and it should be addressed both by education and better UX (likely through legislation).
    • throwaway049 9y ago
      It's very normal to buy a home, car, or other major purchase with credit. This normalises the idea of using credit, as does it's wide availability for other, less essential spending. In the UK, Martin Lewis and others are campaigning to have personal finance taught in schools. I think that's a good idea, given all the misconceptions I have encountered on the subject.
  • LyndsySimon 9y ago
    Speaking only for myself, I'm a poor decision maker. I could easily teach a class on financial planning for young adults, but it's everything I can do to keep my own financial house in order. It's certainly not because I don't know what I'm doing wrong.
    • Sleeep 9y ago
      May I offer an unsolicited tip? Multiple bank account with automatic payroll deposits are your best friend as weird as it sounds.
      • LyndsySimon 9y ago
        I appreciate it, and it doesn't sound weird at all. I've tried several solutions ranging from separate bank accounts by purpose to physical cash in envelopes. The issue doesn't seem to be one of organization but of mindset. FWIW, I strongly suspect that I've turned the corner on that in the past few months. It's amazing how difficult it is to break the habits acquired while younger and less financially secure. The mindset of "If there is money, spend it on things that you need before it's not there" has been taken me almost a decade to shed.
  • SilasX 9y ago
    Sure, let's go through that cycle again: "People shouldn't be able graduate high school until they can understand the financial implications of a loan!" "Schools and teaching are ruined because they blow all their time teaching to the test! My little mini-me is held back from graduating because he can't calculate compound interest!"
    • talmand 9y ago
      I don't think those two things are necessarily permanently linked together.
  • dv_dt 9y ago
    I think what we see there is that humans learn a lot from social cues from their parents, relatives, and peers. For many cases this is an advantage because you don't have to explicitly break down a topic for teaching and learning - there's probably a 1000x times when this implicit learning ends up better for the group than not. But when the middle class is shrinking, then there are a lot of built up tribal approaches for handling finances which are diverging from stable choices in reality then that copying breaks down - especially if you're in a cultural group where it's taboo to some degree or other to discuss finances. e.g. You have to go to college - modern explicit caveat: studying a major that has a chance of paying back the college debt. It's a good to buy a single family house - modern explicit caveat: only if you have sufficient income stability and down payment saved - before a house was a small enough portion of middle class income that it could generally work out well in a wider range of cases. Keep up with your peers spending on social cues: vacations, new cars, etc - keeps you networked into a social group for work/business opportunities (but if the group as a whole can't sustain some lifestyle... then this becomes a negative...) etc... I don't think this is the sole problem, but I think it's a big social driver of it.
• snarf21 9y ago
  You're right but there is a lot of predatory lending. Should people even be able to get a $20K limit on a credit card? How many could ever reasonably pay that off? What about payday loans, etc.?
  • brianwawok 9y ago
    So get rid of all of that, and I think you will find the problem remains. You can get paid in cash with no loans and STILL blow your entire paycheck in 2 days. Or you can get paid in cash and STILL save 50% of it in a bank and live in your means. Not that we should not touch predatory lending. But so much of our economy is built on advertising and stuff, just shutting off the loan tap will not fix the problem.
    • fjdlwlv 9y ago
      Blowing all your cash is trivially obviously better than running up credit card debt
      • brianwawok 9y ago
        What about a cell phone with a $100 monthly bill? How about $250 cable tv package? Neither are loans. Both are as bad if not worse than credit card debt.
    • graedus 9y ago
      Of course that's possible, but I think more people will avoid that if they know they won't be able to afford food the next day. Easy credit is a big factor allowing people to continue making the bad decision to keep living outside their means for quite a long time without directly feeling the negative effects until farther in the future. By then they end up with a hefty amount of debt and their lifestyle preferences are ratcheted up; they don't want to downgrade from their BMW to a Honda, move to a less fancy neighborhood and start cooking more meals at home. They are more inclined to keep scraping by with their luxuries, overburdened by debt service.
      • 9y ago
• pascalxus 9y ago
  This guy made a lot of financial mistakes. His earnings are many many multiples higher than people from less fortunate countries, even after adjusting for cost of living. >"Ate eggs for days, while waiting with my last 5$" ?? Eggs are no-where near the cheapest food you can get. eggs are 12$/2000 calories!! He should've gotten oatmeal -> at 70c per pound, it comes out to less than 1$ per/2000 cals. And I'm sure this is only the tip of the ice berg of financial mistakes, as he's making over 50K per year average. But, there's a bigger message we can draw from this. 1. We desperately need better personal finance training - it should be a primary subject taught in k-12 2. We need to get housing costs down. The most important money you spend is shelter - everyone needs shelter, everyone deserves it. It's appalling that in over a hundred years we haven't made any progress at all in this industry. And by progress, I mean, nationwide: the cost of housing relative to inflation has not decreased at all. Some states have been regressing to the extreme: California. Part of the solution: Get rid of all housing regulation that prevents innovation in this industry. Outside of housing cost, there's many ways to save, it just takes some research.
  • fjdlwlv 9y ago
    Eggs are $1/dozen which is 1000cal, unless you buy pasture eggs. Oatmeal is low on fat and protein
    • pascalxus 9y ago
      Oatmeal is moderatly high in protein. Normalized for a 2000 calorie diet, it would provide 70g of protein, much more than the recommended 50g.
    • maxxxxx 9y ago
      "Eggs are $1/dozen " Where is that?
      • Sleeep 9y ago
        ALDI.
  • 9y ago
• derekp7 9y ago
  The theory I came up with: at middle class income level, spending money gives hope of increasing happiness, or reducing stress. So if you have an unreliable car, it may be cheaper to keep spending money on car repairs -- but it can leave you stranded when you really need to get to work. So buying a newer more reliable car reduces that stress. But it increases financial stress. I wonder if people are wired to prefer a single stress source (financial), instead of a bunch of smaller stresses.
• carsongross 9y ago
  > Don't blame credit, you did this to yourself. Sane western cultures don't allow citizens to fall into debt-peonage. This is why we forbid usury for so many centuries, based on the late roman empire experience.
• Dirlewanger 9y ago
  I'm so sick of reading these articles about how horrendous our financial habits are, and they end up pointing the finger at everywhere else but the individual. There's so much literature out there on how to better oneself that it's near-inexcusable nowadays, especially when nearly everyone has access to the greatest library in the history of civilization (if they don't, they most likely know someone who does or can get access to it [public library and such]). 30-40 years ago I can see financial illiteracy being more forgivable. But not today. Yeah, shit fucking sucks today. Wages haven't increased, student loan debt, etc. etc, but there's a point where people have to stop whining and start protecting themselves against the reality of the times.
  • pascalxus 9y ago
    Yup! And there's even more ways to save today than 30-40 years ago. You have pay per mile insurance (metromile) that costs less than half of traditional drivers insurance. Phone plans that cost 10$ per month or less (www.usmobile.com), 2nd hand places to buy (craigslist, close5, letgo, etc) and countless other ways to save. And yet, people choose not to.
  • pfranz 9y ago
    If enough people are having problems that it becomes a systemic issue (student loans might be in this category), then personal responsibility isn't cutting it. The big flaw of a true free market is information imbalance and externalities. I only have one chance to save for retirement while a financial company may deal with 100s of thousands so it's harder for one side to learn from mistakes than the other. Like regulations around children's toys I think both sides have fair arguments--neither is 100% correct. I just don't think it's 100% personal responsibility in a modern society.
• QuantumGravy 9y ago
  Vicious cycle / feedback loop. I recall there being a few studies suggesting that being poor can lead to poor decision making, and I certainly agree that poor decision making reinforces negative outcomes such as credit card debt. Thus they are individually responsible for what they've done, but the impoverished middle-class as a whole shouldn't be blamed for where they're headed. Poverty Impedes Cognitive Function http://science.sciencemag.org/content/341/6149/976 http://science.sciencemag.org/content/341/6149/976
• JoshMnem 9y ago
  > That's it. Full stop. You bought a car without having a stable job. You bought a house way outside your earning ability. You bought fancy clothes and gadgets without having the cash to pay for them. Don't blame credit, you did this to yourself. Your conclusion assumes that marketing doesn't work. (It does.) The people who get consumers to do those things are more sophisticated and organized than most consumers. Many people do need to use more discretion with spending, but that isn't the whole story. Another thing to consider is that it's very difficult to improve one's situation when you don't have modern things that save time: transportation (car), housing that isn't too far from work, and other things that save enough time to allow one to invest time into increasing total assets. Making money often requires investing money. People who do have sufficient money don't think about the small things that give them enough free time to make more money.
• abandonliberty 9y ago
  >Don't blame credit, you did this to yourself. How casually we disregard the people whose poor decision making underpins capitalist society. Falling for carefully crafted messages to alter human behavior, they work in near-servitude to purchase their dreams and happiness. Someone has to pay interest on credit cards - I don't :) I don't know if financial literacy can be taught effectively; it may link back to fundamental behaviors.