I Am A Recovering Spendthrift
Posted by: tony on 08/24/2007 05:52 PM
Updated by: tony on 08/24/2007 05:54 PM
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Expires: 09/24/2007 12:00 AM
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"My name is Tony, and I used to be a spendthrift."
"Hi Tony."
When I was growing up, I had a difficult time understanding the value of money. I was a very "immediate gratification" kind of guy. I wanted stuff now, and I spent all my money getting things I wanted but really didn't need.
But I understood myself and my particular weakness.
When I married my wife, I realized that God, in His infinite wisdom, had given me someone who complimented my monetary weakness exactly. My wife is frugal. She saves money and carefully determines needs and wants and prioritzes them properly.
So early on in my marriage, I placed our family's monetary life in my wife's hands and have never regretted it. I give her my paycheck every week, and I automatically get a small percentage of it back as an allowance which I can spend as I wish on things that I want.
Also early in my marriage, I applied for, and received a credit card. This was "my" credit card, as opposed to the "house" credit card. I was very careful to use the house card for things for the house and my card for things for me.
But I wanted to get things now, and the card was the way to do it. I only had to budget $25/month for the credit card payment, and I could have anything I wanted right then! So in a relatively short time, "my" card was carrying a $1200.00 balance on it. I was paying $55 per month and $20 of it was going to pay off the principal and the other $25 was interest. So if I made the minimum payments, over the course of the loan (and that's what it was, a loan) I could expect to pay back at least three times as much as I borrowed. And for things that were not really necessary (by definition, "my" card went for things I wanted but didn't really need).
So I got fed up with forking over $25/month for effectively nothing and I cut the credit card up, I got a debit card, and I started doubling up payments while affording the things I wanted with the little money I had left over from my allowance.
Over the next two and a half years I paid off the debt, and soon was debt free. (I got smart and took advantage of the introductory offer of credit card companies of zero interest on balance transfers for 6 to 12 months. Since I immediately cut up the new card, I got 0% interest for the intro period, and when that was over I took advantage of another offer to transfer it to someone else).
That brings me to another part of my story. I get credit card and home equity loan applications in the mail every week. The ones that are pre-approved, I write *VOID* on the app and send it back in their business reply envelope, and the others I simply shred. I have no shortage of people trying to get me into debt, and not caring much whether I can afford it or not. As a matter of fact, they recently lobbied and had passed stricter bankruptcy laws to make it more difficult for me to wiggle out from under predatory lenders.
So over the past 6 months, listening to Sirius satellite radio, I get to listen to the ads between talk segments.
"Call Countrywide! We can get you a loan even if you've been turned down by other lenders!"
"Quicken Loan can gat you a million dollar loan for a payment of $270 per month!"
And followed by...
"Are you drowning in debt? We can help."
"If you have a $20,000 or greater tax levy, let our crackerjack tax lawyers settle for the IRS for less than you owe!"
And now we hear that the economy is in trouble because of the collapse of the sub-prime lending market.
"Sub-prime". It's an interesting term. It actually means: "We-are-greedy-bastards-who-will-hook-people-who-cannot-afford-a-
mortgage-ito-loans-with-usurous-interest-so-they-can-own-their-own-
home-which-we-will-actually-own-for-the-forseeable-future-because-
that-really-low-payment-is-predicated-on-interest-only-payments-
with-pre-payment-penalties-if-they-ever-afford-to-pay-more-than-
the-interest"
These guys are not much better than Guido and Mario the loansharks in my opinion. The only difference is they won't break your kneecaps like Guido and Mario. They'll simply garnishee your wages and leverage any bank account you might have.
These mortgages are risky. That is why the high rate of return. Many times these mortgages are sold by banks of telemarketers to people who are really not savvy enough to understand exactly what they are getting into.
These people are partially to blame for taking out a mortgage they really can't afford, but part of the vetting process is done by the bank who in the old days would be doing you a huge favor by refusing you a loan (only you really didn't understand it at the time).
Sister Toldjah has also been there and has done that, only she saw the writing on the wall in time:
When I set out to buy my first house two years ago, I had an idea in mind of what I could afford, but in a rush of excitement and heat of the moment passion, I nearly got in over my head. The first townhome I attempted to buy I backed out of when reality hit after I had gone over all the figures once I got home, and all the while I was doing this the guy working on my loan was calling me and emailing me trying to figure out ways he’d be able to have approved for me for a loan I couldn’t really afford. The second time around was much better. I found a place that was a perfect fit for me both financially and personally. Had I gone with that first loan though, I would have been snowed under, and I would have had no one to blame but myself. It doesn’t take a rocket scientist to figure up your bills and add to them what your mortgage payment would be, in order to see what you can afford. [ed.-Emphesis, mine]
So these guys deserve every hit they're taking. And the federal reserve shouldn't tinker with interest rates to bail these guys out, hitting the savings of all the little old ladies who are keeping their money in money market accounts.
But I learned a lesson a long time ago. Deferring gratification until you can afford it is a good thing. It builds character, builds wealth in the long term, and makes you a better steward of those gifts which almighty God has given you.
I wish our society would learn that.
But I fear we won't while our government and the big lending institutions are in cahoots.
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