Ignorance is Scary

[TromboneAl]

I had to bite my tongue while talking to my neighbor.

My neighbor is a super-nice guy and a friend. He's the one who commutes 600 miles to Sacramento (there and back once per week). He's a nurse. He's the one that has two twenty-something kids living at home, and who still has a big hole by his garage after starting a big drainage project which was totally unnecessary.

He does the commute in a huge pickup truck.

I was walking by his house, and see a new truck. It's even bigger than the old one. "So you got a new truck?" I asked.

"Yes, I was able to get this new one, and I traded in my old truck, and it didn't cost me a penny!" he said.

"The new one cost less that the old?" I asked. I really thought that's what he meant.

"Oh, no. The dealer just set it up that I didn't have to put any new money down. It's rare that they can do that. I still had about half the payments to go on the old truck."

"Did the old one break down?"

"No, but it has over 100,000 miles on it now, and it's past the warranty. I worry that things will start breaking."

I was very good and didn't say anything. I just can't understand his thinking.

Another example: A year ago, this family spent $4,000 to get a redwood wall-hanging sculpture thing. It was custom made. It's still sitting in their garage!

I just find it scary that people are like this. We have some other friends who are always spending and borrowing. They went to Europe for six months. Now they're going to get some extra money by cleaning houses. They are both 69 years old. They just bought a Prius to "save money."

Both these families have the attitude that "Oh, we're in so much debt, but everyone is these days."

 

[Walt34]

Some friends of SIL and her hubby are ~$500k in debt and can no longer borrow any more since they've hit their credit limit. She's a retired math teacher and has gone so far as to get a car title loan to go on some luxury trip. He's a highly skilled carpenter in demand so one would think he can do at least basic math.

But they will wait until it is hours before the electricity is turned off before they pay the bill, driving to the local office to pay it. Go figure.

 

[Looking4Ward]

It's people like that who keep the economy moving for the rest of us.

 

[zinger1457]

Sounds like a good title and topic for your next book!

 

[TromboneAl]

Okay, now I got started, and I can't stop.

Exactly ten years ago, my sister got a new teaching job that paid twice as much as her old one. She asked me for help in saving money because she had zero savings. We came up with a good plan that involved automatic investments in a Vanguard target fund. She was determined to not spend all of the additional new money that she'd be taking in.

We implemented the plan and set up the automatic investments.

After one month she changed her mind. In the last ten years she spent all the money she earned and saved nothing.

Now she's lost her job and has no savings and no job prospects, and not much social security (she never worked much). If she'd followed the plan, she'd at least have $80,000 at this point.

She's asked me for help in setting up a web site for giving Theatre Workshops. I'm helping her, but I know that if she ran the numbers, they would show that she would probably earn less than $1 an hour with that enterprise.

She's 69.

 

[Amethyst]

I wonder if your sister may qualify for public assistance?

 

[ejman]

If the LBYM philosophy that most ER.org members follow became commonplace I'm afraid the economy would collapse and our passive investment income would evaporate. I am very grateful to all the expend every dime plus borrow to the hilt types that allowed me to follow my ER muse

 

[pb4uski]

I have a good friend who is a really great guy but isn't financially sophisticated. Years ago, he got a brand new truck as well. He was thrilled in that he was able to trade-in his old truck (which was very nice and in great shape since he takes real good care of his things) for a new truck and his payments stayed the same.

I then asked him how many payments he had left on the old truck. Then I asked him how many payments he had on the new truck. You could virtually see the light bulb go off in his head as he realized that the transaction resulted in him having to make many more payments. He now plans to run the "new" truck as long as he can so I am pleased that he now sees the light.

 

[travelover]

............... I am very grateful to all the expend every dime plus borrow to the hilt types that allowed me to follow my ER muse

Me, too! Now if I could just get rid of parasitic relatives, I'd be all set.

 

[Bikerdude]

It's people like that who keep the economy moving for the rest of us.

More likely "the rest of us" will be paying their living expenses when they get old.

 

[bjorn2bwild]

My SIL(62) is a millionaire in Iraqi Dinar.
She went so far as to make an appointment with a financial advisor in preparation for the inevitable revaluation. After informing DW that she would need to borrow some money for airfare to Atlanta in order to buy more dinar, I sent her a few links including one to ebay where she could buy all she wanted at the same price...... crickets.

 

[Bryan Barnfellow]

I was in a Macy's department store a few years back and overheard two women in their twenties talking about some clothes that were on sale. They spent about 10 minutes trying desperately (and not succeeding) to figure out how much a sweater would cost that was on sale for 15% off the $50 original price. It was one of those funny/sad moments.


-BB

 

[mystang52]

The [-]stupidity[/-] naivete of so many consumers regarding an item's cost is amazing, frustrating to us LBYM'ers, and when it involves friends/family can be depressing.
I have a couple of friends who make very good incomes, yet barely get by paycheck to paycheck. They often talk about cost of a purchase in terms of X dollars per month vs its actual cost. One of them is thrilled that something was on sale, yet doesn't get it that paying 18% credit card interest isn't exactly a good "sale item."
Like TromboneAl, I stay mum.

 

[jon-nyc]

Okay, now I got started, and I can't stop.

Exactly ten years ago, my sister got a new teaching job that paid twice as much as her old one. She asked me for help in saving money because she had zero savings. We came up with a good plan that involved automatic investments in a Vanguard target fund. She was determined to not spend all of the additional new money that she'd be taking in.

We implemented the plan and set up the automatic investments.

After one month she changed her mind. In the last ten years she spent all the money she earned and saved nothing.

Now she's lost her job and has no savings and no job prospects, and not much social security (she never worked much). If she'd followed the plan, she'd at least have $80,000 at this point.

She's asked me for help in setting up a web site for giving Theatre Workshops. I'm helping her, but I know that if she ran the numbers, they would show that she would probably earn less than $1 an hour with that enterprise.

She's 69.

Ugh. I am so lucky that the sister i have who is just like this ended up working for a county sheriffs office which gets her a pension.

 

[MRG]

The neighbors on east side. He's a mail carrier, she does part time medical coding. Every 1-2 years there's a brand new 3/4 ton diesel pickup. Now I understand someone with a camper or real use for that price truck. She just drives to get groceries. He just bought a new 4 door Jeep Rubicon. I'm glad they have six car garage keeps some of the other projects out of sight.

Sent from my SAMSUNG-SGH-I337 using Early Retirement Forum mobile app

 

[Walt34]

I have a couple of friends who make very good incomes, yet barely get by paycheck to paycheck. They often talk about cost of a purchase in terms of X dollars per month vs its actual cost. One of them is thrilled that something was on sale, yet doesn't get it that paying 18% credit card interest isn't exactly a good "sale item."
Like TromboneAl, I stay mum.

DW's SIL is like that. By himself her brother managed money okay. Not great, but okay. He got married about 12 years ago and she is the one I refer to as "Spendarina" - everything has to be bought on credit since she is a paycheck-to-paycheck spender. I don't think she has ever kept a car long enough to replace the tires, let alone pay it off.

She talks about retiring to Sarasota, FL and having a convertible, going out to restaurants, etc. but I don't see how that is going to happen.

Like the others, I keep quiet about it.

 

[LOL!]

These stories are making me jealous. Everybody else has figured out how to drive new trucks and cars without paying for them. What am I doing wrong?

 

[FANOFJESUS]

My father worked with a guy that bought a new car every year. I asked my father how did he do that? He said he sacrificed in every other area of life. That is when he told me a car is to get you from one point to another that's it. He also told me to keep a car as long as I could.

 

[pb4uski]

I was in a Macy's department store a few years back and overheard two women in their twenties talking about some clothes that were on sale. They spent about 10 minutes trying desperately (and not succeeding) to figure out how much a sweater would cost that was on sale for 15% off the $50 original price. It was one of those funny/sad moments. ...

Math is hard.

 

[Bryan Barnfellow]

These stories are making me jealous. Everybody else has figured out how to drive new trucks and cars without paying for them. What am I doing wrong?

When I used to live in Maine, I once saw a huge all black truck with tinted windows and the vanity license plate, "FELONY". So, perhaps we have discovered one method BTW, I gave him lots of room and lagged behind as we both moved on the green light. Message received!

-BB

 

[Sue J]

There's one in every family.

Mine is my 32 year old nephew, my sister's son. When my Dad gave up driving in 2012 he gave his 2001 Honda Civic to my nephew, who needed a car. The nephew works as a grocery store checker and bagger, making maybe $16,000/year after taxes. He does fine on that as he is single and lives simply.

Last Sept. he took his car in to the dealer for some brake work. The car had 60,000 miles on it and this dealer knew this car's entire history since that's where my Dad did all of his maintenance.

The dealer's service guy told my nephew that the car needed major work, at least $2500 worth. Instead of repairing it he could get $2500 in trade in and put that down on a lease on a new Civic. The payments would only be $200/mo for 3 years.

So my nephew decided that he had to have a new car, it wasn't worth fixing the old one and he'd like to do the lease. Now, his income doesn't get him very far with the financing so he needed a co-signer. My sister's husband (nephew's step-dad) agreed to co-sign the lease.

So now this 32 year old, making $16,000 in take-home pay is driving a new, $20,000 car. The $200/mo stretches him to the edges of his budget and leaves him no breathing room. Or the ability to save anything for when this lease ends in 3 years and he has to turn in the car.

My sister is explaining all this to me, like it's great news and I said, "A lease is the most expensive way to drive a car. There are a lot of cars out there between a 2001 Civic and $20,000 2014 Civic. Why is he leasing a new car?" Her answer, "Oh, you have to have the new technology! It's got a back-up camera and GPS. He works hard and deserves to drive new instead of used."

The sad part about this is that I saw the car posted for sale at the dealer's site. They were asking $7000.

What's going to happen in 3 years when the lease is up? He'll turn in the car, get another new one and just keep making payments, forever. That's what sophisticated people do in their world. Everybody has a car payment, you have to have the newest technology, you deserve to drive a new car!

 

[timwalsh300]

I wonder if it's not ignorance, but rather self-delusion. People just want the shiny new car or truck. They know the salesman is deluding them with talk of trade-in values and monthly payments, but they are thankful because he provides a way for them to justify the purchase to themselves and others. They can repeat all the details, sounding sophisticated, without ever having to face the true cost.

 

[aja8888]

There's one in every family.

Mine is my 32 year old nephew, my sister's son. When my Dad gave up driving in 2012 he gave his 2001 Honda Civic to my nephew, who needed a car. The nephew works as a grocery store checker and bagger, making maybe $16,000/year after taxes. He does fine on that as he is single and lives simply.

Last Sept. he took his car in to the dealer for some brake work. The car had 60,000 miles on it and this dealer knew this car's entire history since that's where my Dad did all of his maintenance.

The dealer's service guy told my nephew that the car needed major work, at least $2500 worth. Instead of repairing it he could get $2500 in trade in and put that down on a lease on a new Civic. The payments would only be $200/mo for 3 years.

So my nephew decided that he had to have a new car, it wasn't worth fixing the old one and he'd like to do the lease. Now, his income doesn't get him very far with the financing so he needed a co-signer. My sister's husband (nephew's step-dad) agreed to co-sign the lease.

So now this 32 year old, making $16,000 in take-home pay is driving a new, $20,000 car. The $200/mo stretches him to the edges of his budget and leaves him no breathing room. Or the ability to save anything for when this lease ends in 3 years and he has to turn in the car.

My sister is explaining all this to me, like it's great news and I said, "A lease is the most expensive way to drive a car. There are a lot of cars out there between a 2001 Civic and $20,000 2014 Civic. Why is he leasing a new car?" Her answer, "Oh, you have to have the new technology! It's got a back-up camera and GPS. He works hard and deserves to drive new instead of used."

The sad part about this is that I saw the car posted for sale at the dealer's site. They were asking $7000.

What's going to happen in 3 years when the lease is up? He'll turn in the car, get another new one and just keep making payments, forever. That's what sophisticated people do in their world. Everybody has a car payment, you have to have the newest technology, you deserve to drive a new car!

$2500 ESTIMATED repairs to a 13 year old car is an old trick by the dealers to unsophisticated owners (I've seen it happen: 1999 Saturn, 100K miles, Est maintenance $4,000).

Sure hope he doesn't go over the mileage limit on the lease and that it's in "new" condition when turned in or he will be in for additional costs.

 

[Rick_Head]

Math is hard.

Math is easy, arithmetic is hard.

 

[Sue J]

$2500 ESTIMATED repairs to a 13 year old car is an old trick by the dealers to unsophisticated owners (I've seen it happen: 1999 Saturn, 100K miles, Est maintenance $4,000).

Sure hope he doesn't go over the mileage limit on the lease and that it's in "new" condition when turned in or he will be in for additional costs.

Yep, this 32 year old is very innocent and immature. I'm thinking the minute he showed up he was an easy mark to even an amateur car salesman. I know car dealers are there to sell cars, but this is the last person who should be driving a leased, new car. I doubt he will come close to the mileage limit. He has a short commute to work and can't afford to go anywhere else.

I'm also surprised that my BIL co-signed for him. I hope he realizes that HE is now leasing a car and if his step-son is late on a payment that HE is late on a payment.

He had a decent used car with very low mileage for it's age. It just needed periodic maintenance and an occasional repair. If you can't afford to maintain what you already own you shouldn't be leasing a new vehicle.