Tag Archives: saving vs spending

It’s Expensive to Pretend to Be Rich

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In broad terms, the most common goal for most people is to save money and get out of debt. It costs a lot more money to pretend to be rich, than to actually become rich. There isn’t a difference between a $40 pair of jeans and one that costs $400. Except one thing. When you know what that is, and how important that difference is to you, I can predict your financial destiny.

Pretend wealth means the latest, greatest whatever. Whether it’s fashions or the newest gadget, cars, shoes, or sports gear. It also means these things need to be replaced every season, or with every new model. That gets very expensive. My iPhone 7 works fine – but there are millions of people who had two or three version of iPhone 14 and can’t wait for the 15 to come out.

That’s money spent that can’t be saved in just keeping up. No, you won’t take every dollar you save on skipping one season’s fashions and put it into investments. You’ll read that from some people, but it isn’t real life. But saving $200 to $400 a month builds wealth. It’s not flashy, nobody knows it, nobody can actually see it, but it’s real and it’ll grow and grow.

You’ve heard and read the sentiment of pretty much resenting the “top 10 percent,” or that the top one percent keep getting richer. Well, it’s kind of unfair. Most of those people skipped the “gotta impress people” stage and started saving. Years later, their investments grew to hundreds of thousands of dollars. THAT is how they keep getting richer while the image-people keep spending and going broke.

Yes, the top 10% have it made. A $50,000 investment that took years to build will grow $5,000 or so every single year on auto-pilot. The image people spend that a year on credit card payments. It’s not a fair fight or comparison..

Someone on Facebook with me lives in a winter city. He started Facebook posts in September when he bought a super-expensive exotic sports car. Hundreds of likes and comments every month or so. I bet those people are really envious. Well, it turns out it’s a three-year lease at $1,300 a month. He’s still re-posting pictures of it every few months to keep getting the bang for the impressing-you buck…even the six months he can’t drive it.. For vast numbers of younger people it’s more and more escalated on Instagram.

In three years, this guy has to return the rented vehicle, or pay the lease buyout with another loan. He’s out $50,000 or so in payments…but has hundreds of FB likes and people who are super impressed…versus the $50,000 in investment…There’s a difference – a big difference.

Dear Retailer: I’m In Financial Trouble So You Won’t See Me Much This Christmas

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Dear Retailer:

I know that you’re really counting on me to spend a lot of money in your store this Christmas season, so I thought I should give you a heads up that I’m not going to be.

Media reports say I’m supposed to do my part in spending this holiday season. But I have to be honest and let you know that we’re no longer on the same financial page here. You see, for my family, reality is starting to set in. I’m broke. There, I’ve said it out loud. Now I’m going to start saying, “I can’t afford it” – a lot!

I’ve heard it said that often an alcoholic has to hit bottom before he or she will change their behavior. Financially, that’s pretty close to where I’m at. Myself, and the average person aren’t saving much, our debt keeps growing, 25% of us are cashing retirement money just to pay our regular bills, and it’s not like I can increase my income much in the coming year. My credit card balances are high, way too high, and I’m saddled with my car payment and my line of credit that seemed like a good idea at the time.

Right now I’m surviving and not thriving.

That leaves the one thing I can do, and that’s to look in the mirror and choose to make some different financial choices – some better financial choices. It starts with what I knew as a teenager: I can only spend the money I have – and I don’t have much left over at the end of each month. In fact, right now, if the truth were known, I’ve got a lot more month left after my money is gone.

The merry go-round is over and it has stopped being fun spending all that money I don’t have. I need to, and choose to, make Christmas more about Christmas and less about, well – your store and more stuff. Facing my financial reality has made me realize that all the stuff I’ve bought from you hasn’t gotten me any more happiness. In fact – it’s quite the opposite. It’s created a financial hell for me right now.

You want me to do more of what isn’t working in my life: more shopping, more debt, more instant credit and no payments for a year. But be honest: What do you care about my higher credit card balances, longer term car loans just so I can juggle all my payments, my exploding property taxes, utility bills, increase in food I do HAVE to buy, and the line of credit I needed just a few years ago?

You see, I no longer trust you. We’re not on the same page here. Your goal is to get me to spend as much as possible. If you want proof, it starts right at the cash register when you force your staff to push your credit card on me so I can save 10% today. But I’ve realized that the five bucks of savings today is costing me hundreds of dollars of interest since I can’t possibly afford to pay off my balance. And, according to a recent survey, two-thirds of us will still be paying that balance off a year later!

Your ads say I can “save” 20% – but I’m starting to realize all these savings are making me go broke. It’s the 80% I SPEND that’s killing me, and that I can’t ever “save” when I set foot in your store. Besides, by the time I pay off the stuff I’ve bought, even with the “savings,” I’ll have paid over double the amount on my credit card.

But right now all I can pay is the minimum monthly payments and sure wish I could live the words of that Rod Stewart song: “I wish that I knew what I know now, when I was younger.” So if you’re going to advertise with some of those “don’t pay for 14 months,” “best savings of the year” or “no-money-down” deals, I’m more likely to throw up than show up.

I know I’m accountable for my own actions, and financially I haven’t done a very good job. It’s as though I’ve been at a great party and had a little, OK a lot, too much to drink, and it’s now the morning after.  I am going to look after my financial needs in healthy and constructive ways. I am going to face it to replace it, instead of looking to spend my way out of it with more refinancing, another line of credit or cash advances.

The financial reality is that I’m in trouble and in a big hole. And when you’re in a hole, the first thing to do is to stop digging!

What I want most for Christmas this year is to get my financial house in order, to be able to sleep again without worrying whether I can make my payments next week or next month. I want to be able to not jump when the phone rings wondering if it’s about a collection issue. I want to look forward to getting my mail again, instead of dreading what bill is arriving today and I want to know, and not hope, that my family will still be able to afford to be in our home this time next year.

I’m going to start to do more of what my parents did: Work hard, pay off my debts and start saving my money. I didn’t – so far. Now I get to work like a dog because I’ve already lived like a king – with borrowed money, buying a lot of stuff from you in the past.

10 Bad Borrowing Traps You Need to Avoid

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The definition of being stuck in debt frustration is to keep doing the same thing over and over, month after month, and somehow expect different results in the future – it won’t happen. You will have to do some different things to have different results.

After more than 20 years in banking, credit and finance management, I’ve literally watched tens of thousands of people make really bad borrowing choices. But they’re not done by choice. It happens when we don’t know the rules, tips and tricks to borrow smarter and don’t know the right questions to ask or the traps to avoid. It was the main drive in publishing the It’s Your Money book. There probably isn’t a page where you aren’t going to find one tip or another that’ll save you somewhere between a few hundred and a many thousands of dollars.

So I’ll keep sharing insights, tricks, tips, hurdles to watch. As well as ways of looking at credit & debt in some different ways, but here’s a short list of bad debt traps that can lead to real trouble. Wouldn’t it be great if none of these actually applied to you?

1. Hurray! – An increase in my credit card limit. More temptation to charge it up and less opportunity to pay off the monthly balance if you ever do charge anywhere near the limit.

2. Not having a low interest credit card when you KNOW you’re going to carry a balance each month. The rate you’re paying is likely twice as much as necessary.

3. Considering only the price of something today versus the total payback of what it will cost with all the interest and fees, when it’s finally paid for. Or even worse: making buying decisions only based on monthly payments and not the price or total cost.

4. Any financing longer than the reasonable or useful life of the purchase, such as putting your vacation on a two year loan or on your credit card at minimum payments for a decade or more.

5. Kidding yourself in the difference between gotta have and wanna have. There is a big difference between what you need to buy and what you’d really really like to have right now! Sales and good deals are like trains – there’ll be another one along any moment.

6. Debt without something tangible: A car in the driveway with payments is quite different than a credit card balance from years ago with nothing left to show for it.

7. Feeling fortunate just to be approved, instead of taking control, shopping around and asking questions to borrow your way and on your terms.

8. Not reducing your term on any borrowing by even just a few months when you can afford a slightly higher payment to make the pain of payments end that much quicker, and with a whole lot less interest.

9. Cash advances from credit cards. Drawing money from your credit card or line of credit is NOT income – it’s debt, and some the most expensive and painful debt you can possible have.

And one of the biggest debt traps we put ourselves in? Buying into the marketing mentality that you’re saving when you’re really spending, and saying to yourself: I can’t afford it right now, so I’ll just charge it.