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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

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).
- Sleeep 9y ago
  I think the CARD Act of 2009 required them to put "At rate X the balance would be paid in Y months" on CC bills.

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).

Sleeep 9y ago
I think the CARD Act of 2009 required them to put "At rate X the balance would be paid in Y months" on CC bills.