# Living beyond our means



## rainyday (25 Jul 2003)

While browsing in an electrical store over the weekend, I overheard a 30-something couple arranging to buy a €4,500 plasma screen TV on store credit. 

OK, so you're going to tell me to mind my own business. Fair point. Then you're going to tell me that I'm just jealous - well maybe, but not really - While I do like the flat screen TV's, I don't think it would suit out sitting room. 

*I just find it absolutely amazing that anyone would by such a pure luxury item on credit, particularly store credit.*

My narrow, boring, conservative mind would say "If you can't afford to buy it for cash, don't buy it" - can't you just slum it with a mere €1.5k 32" widescreen. Or if you are going to buy a major purchase like that on credit, you should at least have the brains to ensure that you get a decent interest rate on your loan, which is extremely unlikely on store credit. 

Who's the crazy one - me or them?


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## ClubMan (25 Jul 2003)

Yeah - that's funny particularly when it's highly likely that the same people are the very ones who would moan about the price of a sliced pan or the fact that they pay a few quid in bank charges annually! :\


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## Cash Flow (25 Jul 2003)

*Who's crazy?*

Rainyday, easy to see *you're* crazy (   ) but as for the 30 something couple - we can't say.  Consider the following.

I am near retirement.  I have more than enuff money and pension potential than I need.  But when I was 30 something my balance sheet was deep in the red.  I cut back on consumption to try and live within my means - see I was also crazy and old fashioned like you.

But I was missing the plot.  The whole point of financial services is to enable one to align your lifetime cash flow to your lifestyle needs. 

It is now clear to me that I could have afforded to live a much more opulent lifestyle when I was young as I could now easily afford to pay back any accrued debts.

Lots of 30 somethings are looking forward with reasonable certainty to a long period of increasing income but haven't a bean to spend on the luxuries of life at that particular life stage, just when they can enjoy it most.

As to whether store credit was wise it may be they had used up all the cheaper forms of credit - doesn't necessarily condemn the transaction as either financially foolish or reckless.

Life is not a rehearsal.  The truly clever ones are those who live life to the full and maximise the financial lifestyle engineering which is currently so plentifully available.

Ok, I hear you say, that path could go horribly wrong.  Tell that to those who are borrowing to the gills to mortgage a new home - are you agin' that as well? Rainyday.  Anyway, ever heard about insurance.

BTW one piece of evidence in favour of the crazy case is that anybody who buys a plasma TV must be a bit skinny on top and I don't care if they're Michael O'Leary in the bank book stakes.


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## Backwardation (25 Jul 2003)

*Living below your means*

Agree with you rainyday, this is what keeps working and middle class people in their places. 

Consumerism is deeply unfulfilling but marketing campaigns drive us towards consumption by feeding are desire. We accumulate debts, we loose sleep, we are iriitable and eventually miserable. 

Check out the living below your means board on the Motley Fool, something we should all aspire to.


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## Curvy (25 Jul 2003)

*Living below your means*

I think life is meant to be enjoyed.  How we enjoyed is up to each of us. Some of us like nothing more than a pint down the pub and a walk in the fields with our dogs, others hanker after BMWs and tall leggy blondes who work in advertising and all the crap that comes with that kind of situation.

I would love to have a plasma screen but I can't afford one and I'm not  gonna go into debt to buy one. So it comes down to principles, I guess. But I take rainydays point, as a country we are getting crippled by personal debt. Several people I know have huge debts and that's on top of their mortgage. It getting too acceptable.

The customer in question should have got a credit union loan or even a bank loan, anything is better than paying the rates  that the stores charge.


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## Reasonable (25 Jul 2003)

*Living*

"The whole point of financial services is to enable one to align your lifetime cash flow to your lifestyle needs."

Couldn't agree more. What's the point of ending up at 60/65 with €1millon in your pension fund and you physically can't spend it.

The mortgage is paid, the kids are all gone and you can't eat or drink as much as you used to. You may be a widow/widower.

The average Irish man/woman has 85% of their net wealth invested in some form of property. Not very liquid, is it? Why bust your b***s now for that scenario.

BTW. I thought that some of these stores were now offering 0% finance. I'm sure I got something in the post lately advertising this feature.


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## Elanfd (25 Jul 2003)

*The joy of debt*

Victorian moralists and lefties like Rainyday share something in common - they think debt is a dirty word.

Tell that to the corporate financier who gears his company to the hilt, first borrowing cheaply on secured mortgages but when that is used up paying through the nose for quasi junk corporate bond issues.

The philosophy is the same as that of the thirty somethings.  The financier is very bullish about his company's future prospects but she needs cash NOW!

If we all followed the crazy naiveté of the lefties and shunned debt the economy would implode and none of us would have any means to live either above or below.


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## Elcato (25 Jul 2003)

*Re: The joy of debt*

Hmmm Rainyday - Did you check the terms of credit ? Seems plausible that they were low or zero interest deals. If so I don't see why not. Why save for two years and buy it new then when you can do the same but have the goods immediately.


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## Shanks1 (25 Jul 2003)

*Re: The joy of debt*

One thing I've noticed about zero interest offers in shops (ESB stores are always doing this) is that the price is higher that that available elsewhere. The interest is already included into the quoted price.


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## AMB (25 Jul 2003)

*The joy of debt*

Shanks,

I bought a cooker from the  ESB on interest free package and  the price charges was the exact same as power city/ DID.  So this may not alwys be the case.

I think if you are going to buy it anyway use the interest free option.


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## daltonr (25 Jul 2003)

*Re: The joy of debt*

Rainyday's original point is valid.  Looking at the interest rates charged by Dixons for example you'd wonder why anyone would do it, but people do.

As for the idea that they might have used up all the cheaper credit, that's all the more reason not to take on more.

Finally a dislike of Credit is not a Leftie thing.  There's a big difference between borrowing to buy a house or a company, and borrowing for a Plasma Screen TV.

The most financially successful people in the world (Capitalists one and all) avoid consumer debt.  even when they borrow for their home they tend to have small mortgages compared to the typical Middle Class debt ridden family.

Read the Motley fool Dealing With Debt or Live Below your Means boards and see the other side of consumer debt.

-rd


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## tedd (28 Jul 2003)

*Re: The joy of debt*

I am really interested by the above discussion. 

Rainyday, I would have thought your opinion was a total no-brainer...I mean, that much money for a telly? On credit? Store credit? You must be joking! Only a fool (not a Fool!) would do that... (Conflict of interest declaration: I got rid of my TV about 2 years ago, so I might be biased against the telly thing!) So I was surprised to see most people in this thread had a different view.

I have the impression consumer debt is really escalating and I am not certain its for the best. Personally, I don't care if the fact that I won't take out a loan to be a "good consumer" damages the economy. And I'm not against all debt. But I am very much against *unsecured* debt, especially for dispensible consumables. 

My experience of friends with debt is that such people tend not to have a sufficient safety margin for the unexpected things in life. So they don't really *choose* debt, but have no alternative. And they usually manage to get by and sometimes with a great quality of life. But it seems that with each payslip, things slip a little and a greater chunk of money goes towards repayment. Personally that would freak me out. I like the flexibility of being able to have the occasional month when I (purposely) try to spend very little to get the rest of my finances back on an even keel. But if repayments are a large part of your life, you give up that flexibility. In the case of almost everyone I know with debt, savings does not form part of their life. Or only a SSIA, which they think will have some magical redemptive effect on their life on its maturity!

Of course the downside of being against this strategy is that it's boring....very boring. Very sensible and very conservative and very boring. I would really love to have some great little speculative money-spinning gearing thing going on that earns me bucket loads of money while I'm out driving my Porsche. And maybe that is really happening for some people. But the people I know with the flashiest lifestyles, who make you really believe that such a scheme is possible are doing it all on debt, not spare cash.

I still feel boring.


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## rainyday (29 Jul 2003)

*Re: The joy of debt*

Thanks all for your considered contributions (Hey Elanfd, do you think you can resist the 'leftie' jibe in future - Attack the opinion, not the person please)

Here's some additional points in no particular sequence.

- I didn't notice any 0% offers in the store. I'm also quite certain that there was no discussion of APR's or rates between the couple & the sales guy. The only issue was 'when can we get this beauty home'?

- a €1m pension fund at 65 will be totally exhausted by 30 years of nursing home costs (est. €600 per week). That ignores any additional medical costs, travel costs etc. It doesn't sound like a recipe for a guarantee of a comfortable retirement to me.

- CashFlow - I don't understand your point about insurance? Are you recommending payment protection insurance to cover themselves against 'unknowns'? But such insurances are generally very expensive, and only cover payments for a limited period (e.g. 12 months). Still a lot of exposure there, I think?


I really wonder if those who will choose to load themselves with debt for life's little luxuries in their 30's will have any spare cash/assets when they come to retirement age.


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## daltonr (30 Jul 2003)

*Re: The joy of debt*



> I really wonder if those who will choose to load themselves with debt for life's little luxuries in their 30's will have any spare cash/assets when they come to retirement age.



It seems to be a great social Taboo, but I think a huge percentage of people secretly feel that they are carrying too much debt, and don't have sufficient savings, investments, and pension arrangements.

I know when I started working debt was just a natural thing. Credit Cards, Loans for whatever.  Luckily I caught myself before it became a problem but if I hadn't happened to read the articles and books that I did when I did, I'd have been really screwed.

It's amazing that in school we learn the maths behind compound interest but are never taught basic financial literacy. We should be teaching kids about saving and investing, and basic entrepreneurship.  

The couple that Rainyday saw buying the TV on store credit who may not have even checked the APR (they would not have been unusual).  Did they even know the extortionate rates that stores charge?  These same people probably bought a car with a balloon payment.

It's very very easy to get to a point where you have some luxuries that you've become bored of, and 70% or more of your monthly income is going out in repayments years after you bought them.

If they cop themselves on and commit themselves to paying it down most people can be debt free in 5 years or less.  But those that don't cop themselves on will carry and add to that debt for years.  All other essentials like pension, savings, investments etc. will get squeezed to make repayments.

There's an old adage that the worst thing you can do for a person in debt is give them a payrise, because it tends to send them deeper into dept.

The banks don't help.  If you've been running a credit card balance close to it's limit for a few months, that might be a sign that you're having trouble.  What do the banks do?
Increase your limit without you asking for it, and inform you that they've done it to be helpful.

-Rd


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## Tommy (30 Jul 2003)

*Re: The joy of debt*

Hi Rainyday,

Although I agree 100% with your sentiments on this particular topic, to say that...



> a €1m pension fund at 65 will be totally exhausted by 30 years of nursing home costs


... isn't correct. 

The fund will continue to grow (subject to the usual caveats re: risk etc) even as drawdowns commence.

e.g take a €1m pension with a €30K drawdown in 2003. If invested in a fund producing 3% net, the €970K after drawdown will yield €29,100 - almost as much as the drawdown itself.


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## XXXAnother PersonXXX (30 Jul 2003)

*.*

I have an exciting life, and have no consumer debt!

The (capitalist) media makes people think that they need all that consumer stuff, such as massive TVs. I think a massive TV would actually decrease the quality of my life.

The main thing that puts me off consumer debt, it knowing that each item I pay, adds another shackle of capitalism. Dixon's Prisoners!

I went kayaking last weekend. Cost €15, and I didn't get into debt for it. Each to their own I suppose.


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## daltonr (30 Jul 2003)

*Capitalist Media*



> The (capitalist) media makes people think that they need all that consumer stuff,



Yeah those people in ads always look so damn happy don't they?  Have you ever noticed that electrical appliances don't have messy cables etc, in ads?

People don't see the way stores, advertisers and credit institutions are engaged in a very slick scheme to make sure you not only buy stuff you don't need, but pay as much as possible for it too.  And go on paying for it for as long as possible.

Have you seen the latest Borrowing [broken link removed] for the UK?
It's a little bit scary.

-Rd

"Given a choice between wealth and poverty,
 I'd choose wealth, if only for financial reasons."
          -Woodey Allen


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## Dickens (30 Jul 2003)

*Living within one's means*



> _"Weekly Income £1, Weekly Expenditure 19/6d, result happiness.
> 
> Weekly Income £1, Weekly Expenditure 20s/6d, result misery and jail."_


 Macawber in David Copperfield


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## IsleOfMan (30 Jul 2003)

*You never know whats around the corner.*

I was made redundant from my job at age 47. Thankfully I had no debt other than my mortgage which was under control. Over the years whenever I received bonuses or pay rises etc. I always made a capital payment off my mortgage. The best thing I ever did. 
I never employed a gardener to cut my grass or a window cleaner to clean my windows. I knew where to park my car so I wouldn't have to pay parking charges. I shopped around each year for the best deal on car and house insurance. When changing my car I got several trade in quotes before buying. I never smoked.
Yet I enjoy my self to the fullest. I get as much enjoyment of making up a picnic and heading for the hills as someone who spends 100 Euro on a meal.
I won't Judge the person who purchased the flat screen T.V. because maybe they also do the above things and are careful in other ways. Maybe they enjoy waching T.V. after a hard days work. Maybe it's their only extravagance. I never thought I would be made redundant but I am vert glad I was financially prepared for it.


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## XXXAnother PersonXXX (20 Aug 2003)

*!*

I was looking at the internet and came across this:


so maybe you're jealous  

What happened to this board format? I think it looks better.


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## ClubMan (20 Aug 2003)

*Re: !*

*What happened to this board format? I think it looks better.*

Due to problems with outages/unreliability AAM was moved from the host.ie/UBB based platform to the current _ezBoard_ platform a while back although the archives were retained in place. I guess look & feel is largely a subjective personal issue but the reliability of _ezBoard_ definitely outweighs any perceived look & feel drawbacks. Looking back on the archives makes me feel so old sometimes... :\


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## darag (20 Aug 2003)

*Re: !*

The problem with ezboard is that the search facility is
absolutely terrible and they don't automatically archive
threads so good advice can be lost etc.


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## XXXAnother PersonXXX (20 Aug 2003)

*.*

Sounds like the problem was with host.ie rather than UBB. We use some American hosting company, and they very, very rarely go down.


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## ClubMan (20 Aug 2003)

*Re: .*

host.ie had reliability problems at the time including performing unilateral upgrades without warning which were not always successful leading to unexpected downtime. _UBB_ was also a bit heavyweight with some of the underlying Perl GCI scripts taking a long time to run. Taken together, these problems forced the transition to _ezBoard_ although I can't remember why/how _ezBoard_ in particular was chosen. Maybe _UBB_ upgrades in the meantime have solved some of these problems. The search option on _UBB_ used to be poor too. _ezBoard's_ search facilities are also poor in my experience. I often find using Google's advanced search facility restricted to _pub145.ezboard.com_ often yields better results although this URL also hosts _ezBoards_ other than AAM and sometimes the URLs refer to the wrong specific page of a topic (possibly due to _Google_ caching of old links?) necessitating some hacking around to reconstruct the correct URL. Overall, bar some minor exceptions and notwithstanding the poor search facilities, _ezBoard_ has proven to be more reliable, responsive and easier to manage than the host.ie/_UBB_ setup. In an ideal world a dedicated server with the best bulletin board software available (whatever that might be these days) would be the best solution but that would probably cost a lot more money than is available (from _Brendan's_ own pocket by the way) for maintaining the site right now.


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## car (21 Aug 2003)

*problems*

for the last couple of weeks Im getting a lot of pages unavailable on AAM.  Seems to be happening when I backpage, a click on refresh does the trick to bring the page up but Im only getting it with AAM.  Is there a problem with connections maybe?


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## ClubMan (21 Aug 2003)

*Re: problems*

Haven't noticed any such problems myself on various internet connections (dial-up, leased line, DSL etc.). What sort of internet connection are you using? Do you have any similar problems with any other sites that you visit? Are you connecting through a proxy server? Do you get a specific error (page) when this happens?


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