How **NOT** to FIRE

[haha]

It is impossible for me to be angry at people who seem to be making poor decisions. I make plenty myself, but usually about things other than money.

I do not want to participate in picking up their bills, which I know in a mass statist economy like ours will happen to some extent. Still, I think it is unattractive to condemn them.

Ha

 

[GR111]

This country must be in desperate need of education. I have neighbors who live the high debt life, but I can’t think of anything more stressful. I’ll take my simple, more humble life any day. If we did a better job teaching our children to live within their means it would alleviate a lot of long term grief. Easier said than done I guess.

 

[jazz4cash]

They have mental health issues which are exaggerated by their debt level. Vicious cycle. If they could put the expense on a credit card, they’d be divorced. Sad. Kids will suffer.

 

[Milton]

[There is a] desperate need of education.

Education is fine, but it's no panacea.

Concepts like LBYM, putting something aside for a 'rainy day', and retiring debt as quickly as possible, are all quite simple, and indeed little more than 'common sense'. Most people know what to do (and what not to do), but have trouble consistently putting theory into practice.

It's similar to healthy living: limit food consumption and get reasonable sleep and exercise. Pretty much everyone knows this simple formula, but nevertheless there is an obesity epidemic because so many of us are weak-willed.

This country ...

The USA is the poster child for a high-consumption, debt-fueled lifestyle; but it is certainly not unique in that respect. One thing that America could and should do to bring about positive change is to eliminate the mortgage tax deduction and other debt incentives. And all governments should lead by example, rather than deliberately running up national debts through an endless series of deficit budgets.

If they could put the expense on a credit card, they’d be divorced.

Yes, that comment was ... strange. Ditto the remark that "we have good life insurance. We’re better off dead." I can't really imagine living like that.

 

[TwoByFour]

I think that article was tongue in cheek. Nobody can be that clueless. Of course I grew up with parents who lived through the Depression and heard endless stories about it, so had a healthy respect for spending wisely, so maybe this is how people are raised these days.

 

[Katsmeow]

Of course I grew up with parents who lived through the Depression and heard endless stories about it, so had a healthy respect for spending wisely, so maybe this is how people are raised these days.

From my own experience (which may be different from the couple in the story) I think a few things that mattered to our admittedly poor decisions:

1. We were high income people so I knew we were in debt but most of it was at 0% interest for a long time. I felt that we could pay the money back later. I felt that we needed to spend X now and it would put us in debt. But, it was OK because we could pay back the money at no or very low interest. To some extent that was actually true. Once we decided to pay down our credit card debt (more than twice that of the people in the story) we did it in only a few years. And, some stuff we spent that was kid related was stuff that we couldn't actually defer until later. (That said, there was plenty we spent that was purely discretionary and could have waited).

2. My parents were raised in the Depression and I heart about it endlessly from my mom. She was very, very, very frugal. And, honestly, I resented it at times. When I eventually got out of school and was making a good salary -- well, I had a lot of pent up demand. I think in some ways my mom's frugalness backfired a bit.

 

[Koolau]

I think these folks actually know that fixing their financial problems is simple. Simple, but not easy. They need a moratorium on spending. They need to pay more than minimum on CC debt. They need to sell out and move to a small rental (in an area with good schools.) Tom needs to work more bar tending jobs (using proceeds to pay off CC debt.) Forget the Whole Foods and eat "healthy" from the local Costco or Sams (or whatever big discount store is available.) The kids (if old enough) need to get PT jobs and pay most of their own OOP expenses.

I guess I do have some sympathy - sympathy that they spend a lot and have no joy in their lives. Sympathy that they don't recognize where joy comes from. Sympathy that their kids will most likely follow in their footsteps. Sympathy that FIRE is not even a blip on their RADAR.

My guess is that they will continue until bankruptcy is their only way out. Sad that they have the tools (income, plus some assets) to escape, but they probably will not do so. YMMV

 

[TwoByFour]

DW and I had student loans but we paid them down aggressively when we started our careers. In 35 years we have not had a balance on our CCs, so no interest there. Cars we saved for and paid cash. Our houses have been our only debt and we paid that off when we retired. But we are not misers - we fly business class, we buy what we want, we travel. We just avoid debt like the plague.

 

[Milton]

I think that article was tongue in cheek. Nobody can be that clueless.

It certainly reads like an apocryphal catalogue of stupid financial decisions, doesn't it?

On the other hand, such tales generally end with the clueless person (or couple) finally seeing the error of their ways and vowing change. Here, there seems to be a deliberate plan to "free-load through life", as Sunset accurately characterized it (post #11).

Further, Katsmeow has candidly admitted that indeed people can be that clueless, although happily she was able to get things under control (post #21).

 

[Maenad]

We were high income people so I knew we were in debt but most of it was at 0% interest for a long time. I felt that we could pay the money back later.

This hits on the unfortunate truth that our species seems really bad at taking care of the future, in general. There's such a pattern of enjoying today at the expense of tomorrow, in so many ways, that I think we need to evolve out of that before we can really do better.

 

[Rianne]

I get the feeling of "oh well" "whatever" "debt? no big deal." Everything so nonchalant. Like floating through life, day by day, I love sushi, got to have my $10 smoothie. I was like that in my early 20's. As soon as I had rent, utilities, food, car etc on my own, all my credit was my responsibility. Parents not there to back me up. The concept of finances changed dramatically. And I have a cheap husband.

 

[JoeWras]

I think that article was tongue in cheek. Nobody can be that clueless. Of course I grew up with parents who lived through the Depression and heard endless stories about it, so had a healthy respect for spending wisely, so maybe this is how people are raised these days.

Maybe to us it is tongue in cheek. But I think this kind of article should be a wake up to a lot of people.

Advertising works. To me, they are victims of advertising.

You have the Nordstrom card, USE IT!

Your neighbor has the house, YOU SHOULD TOO!

Your neighbor has the Jaguar, not fair that you drive that "old" Corolla! So, you NEED a NEW car too!

 

[jollystomper]

I think that article was tongue in cheek. Nobody can be that clueless.

Perhaps, but I believe there are many more people in the U.S. that are closer to the state described in the article, than are closer to the state of those of us actively working towards FIRE or who have FRIED.

 

[ProspectiveBum]

I feel a bit physically ill after reading that. When I was young, and just out on my own, I got into a bit of debt trouble (less than $5K total). My income wasn’t enough to pay my bills and pay the minimums on what I owed. It was HORRIBLE. I can’t imagine living like these folks.

Compounding doesn’t only work for investments, it works for bad decisions, too. Building a house that’s bigger than they need, in an area with inadequate public schools? Presumably, if they weren’t shelling out $15K per year in private school fees, they could pay down their credit card debt fairly quickly, even without making any other lifestyle changes. I suppose the problem for these folks is that they’d take that “extra cash” and use it to upgrade their vehicles, or some other frivolous expense.

It’s sort of the financial equivalent of those shows about someone weighing 900 lbs. Horrifying to watch, but you come to realize that it doesn’t happen in a vacuum. There are always multiple enablers who are helping to perpetuate and even worsen the problem.

 

[splitwdw]

Perhaps, but I believe there are many more people in the U.S. that are closer to the state described in the article, than are closer to the state of those of us actively working towards FIRE or who have FRIED.

+1
How many times do you see people at work with their Starbucks coffee and buy their lunch every day and tell you they don't make enough to save.

 

[hausfrau]

I was reading this article to my husband and he kept saying "I've heard enough," but then I kept saying, "wait, it gets worse."


This story just makes me kind of sad though. It seems like they might have done OK if they buckled down and paid off those student loans before they moved to the next one. The credit card debt is ridiculous too. I'm not sure bankruptcy would really help them much. It sounds like they would just end up in the same place.

 

[Milton]

As soon as I had rent, utilities, food, car etc on my own, all my credit was my responsibility. Parents not there to back me up.

Not true of "Kate" and "Tom", though.

 

[clifp]

+1
How many times do you see people at work with their Starbucks coffee and buy their lunch every day and tell you they don't make enough to save.

My 2018 rant against silly spending, especially by millennials, is meal delivery. I'm certainly guilty of eating out plenty, either fast food, or some Asian restaurant. But I'm stunned by the number of folks who have meals delivered 2-4 times a week. The $3-5 meal you could make at home, (even prepackaged at Costco) is the $6-10 at fast food, $15-20 at a fast casual, suddenly become $25-$35 by the time you pay delivery charges, and tip.

 

[JoeWras]

My 2018 rant against silly spending, especially by millennials, [-]is meal delivery[/-].

... is push delivery of all kinds of crap you don't need or don't need at their recommended frequency.

Snacks. Clothes. Meals. Shaving cream. Medicines. Filters. And the list goes on...

 

[Dtail]

I can understand this couple. DH and I were this couple...but on steroids. We made more money than this couple actually. On the other hand, at one time, our credit card debt was more than twice theirs.

I wouldn't say I am sympathetic to them. I wasn't sympathetic to myself. I knew a lot of it was our bad choices. But, I can understand it. Yes, we lived above our means. And, we had great means (over $300k a year income toward the end). We did have 3 kids and our kids had a lot things that needed a lot of expense. One child had weekly therapy for years. Another child was in a very expensive therapeutic school and then private school for years (unusually, I was delighted when he got to college because our annual tuition costs went down). Some of these needs resulted in some ancillary costs that were very expensive but I could never square the circle to find a way out. Child related costs for these non-typical things were about $80k a year for about 6 years. This was over and above the "normal" child related costs.

I am not sorry about spending that money. That said -- we didn't adjust our other spending to better allow for it. We made enough money that we could have handled this much better had we adjusted all of our other spending. But, we didn't. We went on expensive vacations. We ate out a lot. We went shopping every weekend. We didn't really spend a lot of money for what I would consider ostentatious stuff. We spend way less for a house than our income would have qualified us for. We had nice cars but not insanely high priced and always kept them for a long time. It was more the little things that added up. We could have handled them fine if we didn't have those extra child related expenses. But we did have them and we didn't adjust everything else to compensate.


Could we have managed without getting into debt at all? I am not sure. There were a couple of years that due to child related stuff were really high in cost and earlier on (before our income was that high) maybe we would have gone in debt even without the discretionary spending. But, we certainly could have minimized the debt to a lot less than it was.

That was a long time ago now. We eventually got out of debt. We never missed a payment and had great credit. This was a time when it was easy to get 0% credit card interest by doing a no fee balance transfer. So I just switched the debt around a lot. I rationalized we would have the debt now but would be able to pay it back later.

But -- it got more difficult. Credit card companies started getting rid of the no fee 0% deals. We were starting to have to pay interest. The minimum payments were eating us alive. We had to put new spending on a credit card because our income was going to making minimum payments. At the time we had a house that had a fair amount of equity in it. I proposed to DH that we sell it and use some of the equity to pay off a good part of the debt. We did that, paying off about half the credit cards as I recall.

We lived in a rental for about 6 months then bought another house. With our monthly debt much smaller it was easier to pay off the debt. My rule was that any credit card usage in a month had to be paid off that month. By then our income was at the higher end so that helped a lot. We cut out a lot of the frivolous spending. We did continue with what we felt was the necessary child related spending. It took 2 or 3 years but we paid off all the debt.

Oh -- on the retirement front -- I wasn't too worried about that. DH had always contributed to his 401k for many years. Also he worked for a megacorp where he could either take a pension or lump sum. I hadn't had a 401k for a lot of my career but in recent years had had one so I also had retirement funds. All of that money was going to be available. Basically we did have savings, just all pre-tax.

It has been over 10 years since we paid off the debt. We have never had problems with credit cards since then. We pay them off monthly. One thing about the debt pay down though was that we got used to living on a lot less than the income we had then.

Bolded - these aspects sound like the DGF and I. We did however reduce our expenses by 60% and moved to FLA with the realization that I wasn't going to find meaningful work again.

 

[jazz4cash]

I was reading this article to my husband and he kept saying "I've heard enough," but then I kept saying, "wait, it gets worse."


This story just makes me kind of sad though. It seems like they might have done OK if they buckled down and paid off those student loans before they moved to the next one. The credit card debt is ridiculous too. I'm not sure bankruptcy would really help them much. It sounds like they would just end up in the same place.

Agree with all of the above. In addition, I believe student loan debt is not automatically discharged in bankruptcy. It takes an additional proceeding to demonstrate undue hardship to wipe them out.

 

[footenote]

Commentary on "Debt: A Love Story":
https://slate.com/business/2018/11/tom-kate-personal-finance-diary-capitalism-credit-sad.html

Author started out skeptical of the interview:

"To be entirely honest, I didn’t really believe the Kate and Tom story was real when I first read it. It was just too … much. ... But every time I looked into a specific problem that seemed a little implausible, it turned out that, in fact, it was within the legal and technical realm of possibility."

If you've worked in financial services, you know his conclusion is correct: every financial vehicle (from student loans to credit cards to leasing cars) is set up to profit from Tom and Kate's behaviors.

 

[Katsmeow]

Just to give an idea of how skewed my thinking was one time. I remember one day getting a new cash advance offer in the mail. There was no fee to use it and it was zero percent interest. When I showed to DH, I said "we have money." I immediately saw it as something to spend.

Of course, I knew it wasn't really money. It was debt. But, it meant I could go get X right then. By that time we were spending a lot of money on debt just to meet minimum payments. We weren't living a particularly extravagant lifestyle. A lot of our spending was going to the somewhat non-typical needs of our kids. Most of the rest of it was going to meeting minimum payments. At one time, the minimum payments were something like $3500 a month. So, we didn't live like people with a high income. We had very little disposable income.

So if I got a new cash advance offer like that I immediately saw it as a way to get some of those things that I could have paid cash for if I wasn't paying $3500 a month in minimum payments.

No -- I would not do that now. That episode was a long time ago and I don't think that way now.

I do think one thing gets missed with a lot of the comments. Many people find it hard to understand how someone relatively high income can end up in debt. I understand it. When someone low income ends up in debt that is far more understandable. They may have taken on debt to pay for things that were really necessary at the time. With high income people, that is less likely to be true.

But -- as a high income person -- I was always confident I could pay the debt. I wasn't worried that I wouldn't be able to make those $3500 a month minimum payment. I saw it as basically shifting stuff to now that I felt was a priority now with the intent to pay for it later. If I had been paying 15% interest I wouldn't have done it. But, our debt was zero or low interest so it didn't bother me.

The part that I did miss was the fact that debt would take up so much of my income that it would make it hard for me to dig out since I got to a point where I had to put stuff on credit cards because so much of my income was going to debt and other fixed obligations. The big thing that ultimately allowed us to break through that was that we had a lot of equity in our house so we could sell it and use some of that equity to reduce debt giving breathing room so I didn't need to create more debt and could focus on reducing debt.

 

[GravitySucks]

Ever get the feeling we see these articles because we're being prepared for something?

Sorry, need to find a better ground source for my tinfoil hat.

 

[daylatedollarshort]

They need to sell out and move to a small rental (in an area with good schools.)

We knew a family who rented in an expensive area (high rent due to the trendy younger, childless set) but had poorly rated public schools. They were cramped in a small apartment and paying through the nose for both rent and private schools. They could have bought or rented a more suburban house big enough for their family in a nice neighborhood with good public schools and transportation for much lower housing expenses per month, plus no tuition payments.

We never quite figured out why they lived where they did and then complained about the cramped space and high cost of private schools. It was like they lived there when they were single and never re-evaluated where to live after they got married and had kids. Their financial / housing / education issues seemed to have a pretty obvious solution to someone on the outside looking in.