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I don't get it.. There's a childrens song in Denmark, it's lyrics go, roughly translated "and if you have money, then you can have, but have you none, then you
by dusted 4y ago
I don't get it.. There's a childrens song in Denmark, it's lyrics go, roughly translated "and if you have money, then you can have, but have you none, then you may go!" (it's about buying bread at the bakery)..
When I see how people spend money they don't have, I'm always wondering if their parents never sang for them when they were young, or if they are of a particular dim nature.
Sure, I can see why some people would take out a loan for big things like a house.. But for just about everything else? No. Either you can afford it or you can't.
"But I need a car!" Yes, but you don't need a car you can't save up for, you need a car you CAN save up for.
"But old cars break down and are expensive to get repaired" Yes, but you don't have money to pay someone else to repair it, old cars have cheap parts and are relatively simpler to repair, learn how to do it, you're not in a position to be fussy about what skills are beneath you if you can't pay someone else to do it, stop thinking so highly of yourself and get to it!
When I see the option to finance a sandwich, my brain just melts.. No! If you don't have money for fast-food, then go to the grocery store and buy the ingredients yourself, you can make a weeks worth of sandwiches for what one ready-made one cost.
- yladiz 4y agoI think this is a bit too simplistic of a way to look at it. Having sone debt is not necessarily bad, even outside of enormous purchases such as a house or car. First, c'mon, people don't (directly) finance sandwiches. Have you ever seen a sandwich shop accept Klarna? If you're talking about a credit card that's something but that's not what this article is talking about, which is BNPL. Second, in general it's not as black and white as either having or not having the money right now. If you have enough regular income to afford something over time and the interest rate is low/0%, it may make sense to spread the payments out over time rather than all at once. For example if you wanted to buy a €5K camera and maybe you don't have the money all at once but can afford to make 12 payments, what's inherently wrong about doing so?
- ivanche 4y agoIf you can afford 12 payments with interest, you can by definition also afford to save for 12 months and then buy the camera. BNPL and credit card companies are masters of exploiting psychology and especially currently prevailing wusiness and entitlement ("But I want it now!!!1!", "I deserve to treat myself like a king").
- yladiz 4y agoOkay, I repeat my question above: if you can afford to pay over 12 months (meaning, you don't go into debt to do so), what's inherently wrong with doing it instead of waiting 12 months and paying all at once, besides ideological reasons?
- christkv 4y agoI think the argument is that its easy to get out of control and leave yourself exposed. If you have discipline then I don't see any problems. I might behov the industry to be forced to do more stringent credit checks before allowing it either by law or regulation.
- Dalewyn 4y agoI have no sympathy for adults (important distinction!) who have no discipline with their finances. They aren't children who literally don't know better. Those who do have financial discipline should not be inhibited for the sake of those who do not. Besides, /most/ cases of financial ruin aren't literal death. They are generally just very expensive and horrible-to-go-through life lessons.
- christkv 4y agoSure but regulations are the to avoid them creating systemic risk by lending to dead beats.
- kortilla 4y agoIt’s financially reckless. What if you lose your job?
- Ultimatt 4y agoYou then pay off your outstanding debts if you think there is risk you will be paying out more in the near term... That's why you only carry debt when you could otherwise afford something. Literally thats the point. Realistically though its even better if you lose your job because you have the cash in the bank you would otherwise have sunk into an asset. I just quit my job to be self-employed and have a bit of a career break. Before I did I got a 24 month interest free credit card. If I suddenly have to pay for something really expensive like a new boiler or something, I can put it on there and I have two years to decide what to do, or get a job with zero additional cost. That's security more than it is a liability. I've had a perfect credit score and never paid for credit other than my mortgage interest. People who refuse to use credit out of some broken parental advice of "never carry debt" is far more reckless since you're ignoring an entire avenue of financial management for yourself. Absolutely don't carry debts you cannot afford. But everyone should abuse the fuck out of the credit system, and the institutions designed around fleecing people a lot stupider than you. The bar for credit company profits is set at people where money is like water through their hands, not people who know how to keep a personal budget in a spreadsheet.
- desas 4y ago> First, c'mon, people don't (directly) finance sandwiches. Have you ever seen a sandwich shop accept Klarna? If you're talking about a credit card that's something but that's not what this article is talking about, which is BNPL. In the UK, Deliveroo (a food delivery company) will let you pay by Klarna for orders >= £30, including from sandwich shops. Here's the press release: https://www.klarna.com/international/press/deliveroo-and-klarna-partner-to-offer-smooth-flexible-payments-whether-you-pay-now-or-pay-later/ https://www.klarna.com/international/press/deliveroo-and-kla...
- paulgb 4y agoThe article also links to https://zip.co/us/store/uber-eats https://zip.co/us/store/uber-eats, which is similar in the US.
- Ultimatt 4y agoKlarna does more than just BNPL loans though, they do normal credit too.
- desas 4y agoCopied and pasted directly from the link I gave: Deliveroo customers will see Klarna as an additional payment option when they arrive at check-out, where they’ll be able to choose one of three payment options: Pay Now, to pay the full amount immediately; Pay in 30, to pay the full amount within 30 days; and Pay in 3, to pay in three equal installments, spread over 60 days.
- Arnt 4y agoPaypal offers me a pay-later option, apparently no matter how small the amount is or what I'm paying for. Sometimes two options (pay everything next month + pay in instalments). Or perhaps it's alwys two? I haven't really paid attention. The next-month option is free (for me) anyway. I assumed that the risk of a one-month loan is low for Paypal and worthwhile because it takes a few transactions from the other payment processors usually offered by the same webshop. But that's just an assumption.
- 4y ago
- onion2k 4y agoBack in my twenties I bought a car using a 5 year 0% interest loan from the dealer. I had the cash in the bank to buy it if I'd wanted to, but interest rates were around 7% at the time so using the 0% loan effectively gave me a 15% discount because I got to earn the interest on the value of the car instead of the dealer. Managed debt is fine. It's only an issue if you over-extend yourself or you have a catastrophic change in circumstances (and you can insure your debt against that...)
- __alexs 4y ago> First, c'mon, people don't (directly) finance sandwiches. Have you ever seen a sandwich shop accept Klarna? I put a (vegan) sausage roll from Gregg's on Monzo Flex the other day...
- sidewndr46 4y agoInvariably people who use that service plan to spend 100% of their monthly income. Whenever you have an unexpected expense in that 12 month time frame and have to pay for that, then you can't make the payment on that loan.
- toss1 4y agoYup, debt is purposely setting you up to put you in exactly that bind, and then you owe the serious interest. Kind of a reverse lottery where you lose. It doesn't happen to everyone, but at scale, Life Happens, and a certain percentage of people will get behind and wind up paying huge interest, and there's the profit model. Also, people are chronically up in arms about taxes, but here, they are signing up for voluntary taxes on everything. At least taxes buy something real, like roads, mostly reliably safe food supply, education, police, fire defense, etc., while interest just buys indulgence today then headaches tomorrow. Interest is fine if you are creating an asset that create greater future value (e.g., building a business), or where the asset itself is a security (e.g., a house). But for transitory consumption, debt is a losing game. (I'm distinguishing debt from credit cards as a payment convenience paid every month - don't let them slide)
- jermaustin1 4y ago> Invariably... Hate to throw a variable into it, but I usually spend less than 50% of my income (after savings and retirment), and I still use BNPL and payment plans when I can get interest rates and fees for under 10%.
- nibbleshifter 4y agoFood delivery apps in Europe (Deliveroo, Lieferando, etc) take Klarna, which is BNPL. And people use it. Its absurdly common.
- aspyct 4y agoI agree that it's stupid to finance everything. However some big things make sense to finance. Take your car example: I'm not rich enough to buy a car that won't break down every year (I know, I tried). However, when my car breaks down, I can't go to my clients and I lose money. In this case, it makes sense to rent out a car that's going to be working properly, and with guarantees in case it doesn't. However yes, I wouldn't buy a toaster in multiple payments...
- deleted 4y ago[deleted]
- Sevii 4y agoThe issue is that financing changes what is available in the marketplace for you to buy. There are cheap new cars that don't break down every year (ex. toyota hilux) that are not sold in the US. Because it's more profitable to finance you a 50k truck than a 20k truck. The housing market works the same. If we didn't standardize fixed rate mortgages houses would be cheaper smaller and more available.
- ericpauley 4y agoThe Toyota Tacoma is pretty comparable to the international Hilux aside from powertrain (gas vs diesel) and a very small size difference. In theory you could probably get one for $30k.
- flextheruler 4y agoI’ve always heard new cars are far more expensive in Europe at least Germany. You have sources?
- aspyct 4y agoWell, 20k isn't exactly "cheap"...
- strken 4y agoIt's sometimes an emergency loan to get your car fixed or to get a replacement car, so that you don't get fired from the job you drive to, so that you have enough money to continue paying for a roof and food.
- mschuster91 4y ago> "But old cars break down and are expensive to get repaired" Yes, but you don't have money to pay someone else to repair it, old cars have cheap parts and are relatively simpler to repair, learn how to do it, you're not in a position to be fussy about what skills are beneath you if you can't pay someone else to do it, stop thinking so highly of yourself and get to it! You're ignoring the "boots theory" [1]. A new or somewhat-recent used car is like the pair of boots of the story - the poor person that buys a trash barely roadworthy 2000$ car each year pays at least 20000$ over ten years plus whatever the extra cost of maintaining a trash car each year is, higher insurance rates, more fuel and has more trouble with unreliability and the followup costs (i.e. unplanned uber/whatever fees to get to work because the car broke down). Not to mention if they do repairs themselves, they need to have or acquire the skills and tools and have the time available for doing such repairs. Neither of this is cheap. In contrast, the rich person who either buys a decent new/recent-used car or finances it pays roughly the same amount of money if he sells the car after these ten years, paid less for maintenance, insurance and fuel, had less issues getting to and from work and a higher quality of life. The real problem is that a full time employed person in most Western countries can no longer afford a new Western-made car without going into serious amounts of debt. Cars have gotten too expensive and wages (especially after tax, rent and basic costs of life) have gotten too low - a complete turnaround from the Ford era whose principle it was that a worker should be able to afford the product he makes in a reasonable time! [1] https://en.wikipedia.org/wiki/Boots_theory https://en.wikipedia.org/wiki/Boots_theory
- DocTomoe 4y agoAs someone who only ever bought what you would describe as "trash" cars of up to 2000 Euros, let me give you some data. Looking through my car repair/TCO excel file, I average to about 60 Euros per month in maintenance and repairs (that includes stuff like new tires every once in a while). Over the average lifetime of my cars (which is 5 years), that's 3600 Euros in repairs and maintenance. I regularly sell the cars for 500 Euros, so that's a TCO of ((2000-500)+3600) = 5100 Euros per vehicle, or about 1020 Euros per year. The initial, 6-month manufacturer-suggested service for a new car alone is upwards of 2000 Euros, for a car that should not have and trouble. Most cars are nowadays impossible to repair yourself, or repair cheaply (new headlight bulb was 3 Euros before, now you have to change the whole 1300 Euro unit). But let's assume I'll have 150 Euros in maintenance per month... that's 9000 Euros. Depreciation over 5 years easily is a third of the vehicle's value, let's say 10000 Euros overall, on top of maintenance and repairs. Together, I get to a TCO per year of 3800 Euros, or a whopping 2780 Euros more! Now, fuel efficiency. I drive about 25000 km/year. My clunkers consume - on average - 7.5 liters per 100 km - that's about 31.4 MPG. For something comparable, the manufacturer (if we want to believe them) currently lists about 5.8 liters per 100 km, or 40.6 MPG. This means that I could save 475 liters of fuel with a new car. A liter right now costs about 1.80 Euros, meaning I am leaving savings of 855 Euros on the table. So ... I pay 2780 Euros more to save 855 Euros - BEFORE the extra cost of a loan to buy a new car ... NOT a good deal.
- newaccount2021 4y ago[dead]
- mrjin 4y agoNope, it doesn't make sense as you mentioned. But imagine that you were an investment bank with almost infinite cheap money has nowhere to go, you will probably put it into whatever dumb idea out there as long as there is a clear exit strategy. It's virtually exploiting those financially vulnerable ones by providing heavy incentive to lure them into using BNPL and bump up the share price so they can exit with profit. Even if it did not work out, it just a failed investment that can be written off. But for those desperate users, as long as they can get what they want now, they don't really care whether if they can repay at all.
- Eddy_Viscosity2 4y agoNot having money, i.e. poverty, and how you have to balance needs/wants/now/future is bit more complicated than this. In the same way you can't tell an alcoholic to 'just stop drinking' or someone in an abusive relationship to 'just leave them'. Because there is more going on than a simple econ 101 decision process happening.
- deleted 4y ago[deleted]
- __s 4y agoSee the SNL skit: Don't Buy Stuff https://www.youtube.com/watch?v=R3ZJKN_5M44 https://www.youtube.com/watch?v=R3ZJKN_5M44 which advertises a self help financial book whose contents are "If you don't have the money, don't buy it"
- havblue 4y agoThe fast fashion debate is similar to this. People who are against it say that it's environmental unsustainable and expensive to buy new clothes more frequently. People who like fast fashion respond that it's only rich people who have the luxury to buy durable, high quality clothing that lasts more than a season. The pro fast fashion argument is that they have no choice. The reality is likely that they just like buying new clothes from these stores more frequently and can easily come up with a justification.
- epolanski 4y agoIn the last decade credit rampage has spread in Europe too, I still remember not long ago where the idea of buying things in installments seemed crazy to the average Italian. The only thing that gets a pass is a mortgage. But buying a phone or computer in installments? How does that make sense? You can't afford it, end of story. I'm also not used to pay interests on my credit card, if I spend 1000 euros, at the end of the month takes away 1000 from my account and that's the end of story. Why would I pay interests on my daily finances, sounds crazy and a recipe for always having to worry about money.
- asoneth 4y ago> But buying a phone or computer in installments? How does that make sense? > You can't afford it, end of story. I'm not saying you are privileged, but I generally only hear this argument from people who have never been poor, or people in countries with functional social safety nets. Having no computer, phone, car, or washing machine (or an extremely old one) can cost more money and time in the long run due to Capt. Samuel Vimes' boots theory of socioeconomic unfairness (https://moneywise.com/managing-money/budgeting/boots-theory-of-socioeconomic-unfairness https://moneywise.com/managing-money/budgeting/boots-theory-...). For example, a lot of government paperwork is now online, if you have to do it at the local library now you have to spend the time to get there. Simple things like managing your passwords or personal documents is harder if you have to run your life from a thumb drive plugged into a public computer. If you have to use a commercial laundromat you will end up spending more money (not to mention time!) cleaning your clothes. If you have no car and can't afford to live in a walkable neighborhood you'll spend a good chunk of your life waiting for the bus. A car helps but a very old car eventually becomes a temperamental money sink that may also result in you being late for work which jeopardizes your income. Being poor is expensive and time-consuming in ways that people who have not been poor typically do not understand. Of course many people go into debt to buy luxuries they do not need, and that is bad. But going into debt for items that save you time or money in the long run can be a financially sound decision.
- epolanski 4y agoI agree with all you say, but I don't see the connection between paying front up or in installments. A decent laptop can be bought on craiglist or similar websites for 150/200$, and you can get a decent mid tier laptop from few years ago, a smartphone would be half of that. Thus, where's the jump to buying a brand new computer in installments?
- mywittyname 4y agoI'll be honest with you, it sounds like you've lead a pretty sheltered life. Living in poverty is fucking hard. All around you are parasites looking to take what little you have and kick you back to the floor. Yeah, of course parents tell their kids to do better in life. But it feels like the world is conspiring against you at every step of the way. The only time anything good happens, it's due to the kindness of someone else, and kindness is not something you see often.
- unity1001 4y agoHe is in Denmark, where there is social democracy, high taxes and all encompassing social programs to protect people from the ravages of the Randian market. Of course he lived a sheltered life. But its not a fault on his side. People in countries with Randian realities not being protected from the ravages of the economy is where the fault is at.
- samjmck 4y agoTo me, it sounds more like they have lived a European life, not a sheltered life. Outside of the UK, there aren’t any European countries I know of that use e.g. credit cards on a daily basis. We are taught to avoid taking on debt and are financially risk-averse.
- Olphs 4y agoCredit cards are used in Europe too, but the credit part not so much, most people pay it in full end of month (or whenever their next bill comes)
- subarctic 4y agoIsn't that how most people use their credit cards everywhere, or at least everywhere in the developed world? I thought the 20%+ interest was just a way to take advantage of you if you mess up and rack up too big a bill, or forget to pay your bill.
- 4y ago
- alexjplant 4y agoI always see articles like this and wonder what the big deal is... I frequently use PayPal Credit, store credit cards, and Affirm on larger purchases because I like being that much more liquid. Then I realize that I always use the 0% APR option and that I've paid exactly $0 of interest to all of these services. I couldn't imagine paying 12% APR for the privilege of owning a $1400 synthesizer much less for a delivery order of sandwiches at a house party (as mentioned elsewhere in this thread). Side question: how are these services able to offer lower APRs than credit cards without collateral? Do they evaluate your creditworthiness on the basis of paying equal installments as opposed to revolving credit with a minimum payment? If so then how are they different from an old-fashioned personal loan from a bank?
- jerf 4y ago"I like being that much more liquid" There's "I use debt to buy things I can't afford", there's "I don't use debt to buy things I can't afford", and then there's "Yeah, I could totally drop cash on this but I'm going to take 0% debt just to avoid the liquid drain". If you're in that third category, you're just too far away from the first one to understand it very well. (In self discipline, not income. There's no amount of income itself that keeps you out of that first category!)
- nradov 4y agoThese services are able to offer lower APRs than credit cards by charging higher fees to retailers.
- evrydayhustling 4y agoIn America, the psychology and boom-bust cycle around every form of credit is really influenced by inequality. Step 1: Create cashflow problems for poor people by delaying pay, but frontloading unexpected expenses (healthcare, education, repairing a broken car that gets you to work), making alternatives incredibly overpriced (renting vs owning a home), and adding extra fees for late payments overdrafts and similar. ("Being poor sure is expensive." [1]) Step 2: Expand access to credit in the name of equality. Sub-prime and aggressive lending products help people who are living inefficiently make better choices like buying a house, taking that job in the next town, getting a degree etc etc! Step 3: New markets always mean (a) bigger interest rates being promised upfront, (b) borrowers who are less experienced with credit and (c) lenders who don't really know the nature of risks in he new market. This is a huge opportunity for middlemen to create products that are exploitative to the borrower (sandwich financing), to the lender (CDOs full of NINJA mortgages), or both -- so folks show up to do just that. [1] https://finmasters.com/cost-of-being-poor/#gref https://finmasters.com/cost-of-being-poor/#gref
- mindslight 4y agoNo, Americans are never sung that song, nor are we taught that debt is a bad thing, nor are we generally taught to save money by doing things like fixing our own cars. The societal focus is on maximizing income in your narrow employment, so that you can just buy new things and otherwise push your problems onto someone else. And unfortunately, due to the overwhelming monetary inflation of our economy (which would otherwise experience strong price deflation due to technology and offshoring), taking on more debt is actually economically advantageous - you get to capture more of the classy handout that is the asset bubble.
- wyuenho 4y agoJust because you are financing, doesn’t mean you are buying things with money you don’t have, only financially illiterate people of a particularly dim nature would say that. There are plenty of reasons to delay paying for things as much as possible, especially if the financing has zero cost. Say you bought a new £800 stand mixer on Black Friday. Splitting the costs in 3 allows you to deploy the funds elsewhere, such as investing in an index fund, buying bonds or put into a CD account or anything productive to offset some of the cost or if you are lucky, cover it. A dollar today is not the same as a dollar tomorrow. Another common reason for that is to stretch your credit limit without affecting your credit score. Say your credit card has a £30k credit limit. There is an expensive 4-5 figure gift you want to buy for your girlfriend for Christmas or take an expensive holiday to some exotic location. You can afford it, but it’s going to cost a few months’ salary and a dip in your credit score. You can pay for your purchase with BNPL without leaving you nothing at the end of the next few months and have no impact on your credit score. BNPL is a great financial buffer for everyone, as long as you have some baseline discipline to pay off what you owe.
- barbazoo 4y ago> ay you bought a new £800 stand mixer on Black Friday. Splitting the costs in 3 allows you to deploy the funds elsewhere, such as investing in an index fund, buying bonds or put into a CD account or anything productive to offset some of the cost or if you are lucky, cover it. Those 0% financing offers only exist because interest rates are extremely low. I don't know about others but you know what else is low these days? The return on my index funds. If I invest those £800 now, I miss out on what, £8 over the course of a year? Compounding that makes very little difference at retirement age but for many of us, the mental overhead to manage these loans and the chance of taking on too much (interest rates will go up again) and making a mistake is just not worth it. Besides, if you BNPL you wouldn't want to park that money somewhere volatile anyway, an index fund, what if interest rates rise and you need that money all of a sudden but your index fund didn't gain anything. All of a sudden you lost money. Maybe I just don't get it, I'm happy to learn if there's a flaw in my thinking here.
- wyuenho 4y ago
- Existenceblinks 4y agoYou sound like me, a friend who's not fun at objects party. All my friends told me I hold my debit card wrong, should get a nice promo credit card and spend like there's no tomorrow. All discipline they told me just eliminate 97% of the point of credit. "Someone else money" is the only appealing because the someone will take care of a lot of hustle for us.
- pessimizer 4y ago> If you don't have money for fast-food, then go to the grocery store and buy the ingredients yourself If you're talking about the US, if you're poor the nearest grocery store will be miles away, dirty, and the prices will be a 50% markup over what people pay in nice neighborhoods. Also, McDonald's will sell you an entire meal for $3 and is down the street.
- asoneth 4y agoI was going to say the same. I suspect that anyone who believes that fast-food is more expensive than a grocery store has never lived in a poor neighborhood.
- sebzim4500 4y ago> "But I need a car!" Yes, but you don't need a car you can't save up for, you need a car you CAN save up for. How are you going to save up for a car if you can't drive to work? You certainly can't afford to move to one of the three places in the US with functioning public transport systems.
- jollyllama 4y agoTime preference. People can't think in enough detail about the future or prefer pain later over pain now. What's worse, the entire economy modifies itself to suit the needs of the borrowers. The price of goods increases for people who are paying cash because they are now competing with those who will borrow. Then policy is tailored to their needs via inflationary currency. There is a reason ancient societies banned lending or had regular debt jubilees.
- speeder 4y agoSometimew people really don't have a choice. I personally hate debt and when possible I pay everything with cash up front. My wife got pregnant, and our spending, specially on health was already sky high, so I did 5 months of overtime chasing a promised raise and possible promotion. Then I got fired. My last day of work was mid December. Child will be born soon. (Maybe even today, we are hoping for natural birth). The medical crew we hired (back when I had a job and was chasing that promotion) want way more money than what I have left. I will have to take a loan, because as far as I know I can't tell the baby to wait until I have a new job before coming out of the womb... Need clothes, medicine, furniture, prepare the house (it is my first child, house is not kid friendly) Also: I erased most of my savings buying a "cool" car and of course a lot of people criticized me for it. What happened was: 1. My house is on the top of a huge hill in an rural area, only way to reach the house in practice is with a powerful car. The car I had before was barely powerful enough, if there was more people in the car it would fail to climb the hill. 2. Someone totalled the car I had, and my wife job was literally in another city, her workplace also in middle of nowhere. 3. I needed a new car urgently, options were: cheapest European or US cars were double the money I had saved. Asian cars (like Hyundai and Chinese ones) were 1.5 the money I had, but weaker that the totalled car, they certainly wouldn't climb the hill. 4. So I bought a used Mitsubishi Lancer. It is a cool flashy car? Yes it is. But it was 100% my savings (instead of 200%), powerful enough to climb the hill, and big enough to fit baby chair and all the stuff a baby needs. The corolla or the civic, used, were 200% my savings, new were 300% my savings.
- grishka 4y agoSo you can barely afford your own needs and have no savings, but you decide to have a child?.. No offense, I'm just curious about your thinking and priorities.
- asoneth 4y agoThe person you are replying to had a job (likely in tech), a house, a car, and a chance at promotion when the child was conceived. That seems like a better position than most. If your implied threshold for conceiving a child is that you must have acquired all of these things plus enough savings to weather unexpected medical events and extended job loss then that seems like a threshold that the majority of couples will not reach during their childbearing years.