Economy Why are Americans so bad with handling money?

[SandisLL]

Problems with loans are in all countries.
U.S is notable only cos huge students loans mountains....

1. Companies, be these mobile phones sellers or car sellers etc etc etc aren't dumb.

They are using excellent psychological techniques etc.

For example if they see client who is paying debts smoothly and always in time....
They are selling you phone or car and when you almost paid all this debt off, are calling and offering to purchase next stuff they are selling... more modern car, phone etc...


We in mortgage bubble 2004-2007 had some banks offering to increase credit card limit from 3 monthly salaries to 4 monthly salaries and additionally not to remowe owerdraft limit from debit card's accounts.
I.e to get 5 monthly salaries loan on debet card with owedraft + credit card....
IF you will sign for mortgage loan.

Plus all these shops offering to pay for purchase in installments not immediately....

We too do have shit with ppl obsessed with taking loans...
While students loans in europe are problem, it is little problem because huge taxes paid for everything are financing cheap or free unis....

In the same Switzerland most prestigious unis are....cheapest end and you should compete for place in Uni/ College.
Most expensive are ....sorry , institutions for not enough capable students and everyone does knows this realpolitik.

 

[fingercuffs]

First of all, dont give me that shit how people are struggling with basic needs so they have to use credit cards just to make ends meet. I know and YOU know that's bullshit. People are buying things they don't need and are borrowing money at a super high interest rate to buy that thing they don't need... when they already owe tens of thousands of dollars with a 25% interest rate on credit card debt

I know plenty of people that are horrible with money. I think over half of everyone I know do not know how to save. This girl I know who has been crying about money problems ever since I met her just bought a brand new car... over $45k with a super high interest rate. She told me she's too embarrassed to tell me what her interest rate was. And she's already DROWNING in credit card debt BEFORE she bought the car. It's not just me. We all know a LOT of people who just spend, spend, spend.

Americans now owe over a TRILLION dollars in credit card debt

Silly example but an example. I used to watch Bar Rescue. You'd see a chick get fired after earning fuck all and having to pay for her kids...peeling out in a really nice new car.

Americans LOVE credit without thinking they will have to pay for it.

When I lived in the UK and Holland I didn't see that happen. I had a couple of lovely cars in the UK and love mine here but they were no more than 400 UKP there and they're paid off here.

 

[SandisLL]

I don't pay 25% interest rate for credit card but this most likely is because I have long term credit history and I never had used full limit plus always had paid considerably more than had been scheduled as minimal monthly payment ( more than 2x monthly payment than had been excepted in contract )
I actually get credit card cos then it was prestigious stuff and like some proof to be " normal person " and was stuff required by some companies providing services.
Otherwise I always had ppl who might lend me some money even without paperwork....
Just cos I always had paid before term I had promised....
I don't think that I'm ideal person and still during 20+ years you are capable to earn some reputation
...

 

[scoopj]

Why do idiots like yourself think you know everything about 350 million people?.
It's like me askin why all Europeans have a stick up their ass.

Problem with that is I actually know Europeans and have seen first hand that it's not true.

Maybe you should talk to some Americans, but maybe you should lose the fuckin attitude first.

When @StonedLemur doesnt end his post with “sir”, you know you done goofed.

 

[BForrester]

Low IQ people gravitate to high price cars. I know a guy who is whining about how he'll never own a home, who is at the same time looking to buy a $85000 car. People really take the Fast and Furious movies to heart.

I think high priced cars are a psy-op by the car industry, constantly associating high price cars with being cool, getting girls, having success, etc.

Cars are such a colossal waste of money. Our household income is around $150k, we're DINKs, and we have a 2008 Toyota Carolla and a 2022 Subaru Impreza parked in the garage. I'd still be driving my '09 Civic if it hadn't been totaled a few years ago.

 

[BForrester]

1 trillion in credit card debt for 300M+ people doesn't seem that had when one single organization in the US is over 30 trillion in debt.

It's a bit different. Consumers have a finite amount of time in which to repay debt. Governments have essentially an infinite amount of time.

 

[Jack V Savage]

My big question is why are Americans so judgy about how other people spend their money or manage their finances? People are richer than they've ever been, and they're using their money in the way they think will make them happy, and if it leads to problems for some people down the line, they'll have to deal with it. Some people have more of a preference for security and wealth building and others have more of a preference for living it up while they can, and neither is inherently right.

 

[ineverpost]

Because Uncle Sam does the same thing. The only difference is that voters can effectively be "margin called" and have to actually pay back their debts (or give up their assets). This is part of a culture that only lives in the here and now, and doesn't care about the future. We see that in everything. I am not saying this is only an American phenomenon but it sure is apparent here.

 

[Possum Jenkins]

I honestly can't believe people have car payments, they are so expensive.
Buy a cheap 5k car in college or when you are starting out. Little later, pay cash for a 10k car. Then buy a 20 - 40k truck or car as you get older

I've never had a car note. All cash purchases.

Sounds crazy to drop $10-20k on the spot but your savings accumulate pretty fast when you don't have a damn car note.

 

[mkess101]

My big question is why are Americans so judgy about how other people spend their money or manage their finances? People are richer than they've ever been, and they're using their money in the way they think will make them happy, and if it leads to problems for some people down the line, they'll have to deal with it. Some people have more of a preference for security and wealth building and others have more of a preference for living it up while they can, and neither is inherently right.

Not saying I necessarily agree, but for some it's what they feel is hidden costs to them that they'll incur when the ones who go deep into debt end up defaulting. Again, some of this is due to people not really understanding how the financial system handles defaults, etc. And some is just pettiness and the internal struggle some may have of responsibility vs "keeping up with the Jones's".

In the end, the whole system works better if everyone was somewhere in the middle of the miserly and the "spend it all and then some!" crowd. Our economy obviously needs spenders to function. But it doesn't need a massive amount of default or people barely living paycheck to paycheck. Those things of course have a ton of other factors (outside just someone's attitude about money) that play into where someone is on that spectrum, but ideally everyone having a solid balance is what's best. Obviously the human element and how different people are makes that an impossibility.

 

[Jack V Savage]

Not saying I necessarily agree, but for some it's what they feel is hidden costs to them that they'll incur when the ones who go deep into debt end up defaulting. Again, some of this is due to people not really understanding how the financial system handles defaults, etc. And some is just pettiness and the internal struggle some may have of responsibility vs "keeping up with the Jones's".

Yeah, on some level, negative affective responses toward behaviors serve to steer people tempted in that direction away. "I feel bad about overspending, and it really angers me to see others do it even worse." But the constant drumbeat of it in one thread just comes off as authoritarian to me.

In the end, the whole system works better if everyone was somewhere in the middle of the miserly and the "spend it all and then some!" crowd. Our economy obviously needs spenders to function. But it doesn't need a massive amount of default or people barely living paycheck to paycheck. Those things of course have a ton of other factors (outside just someone's attitude about money) that play into where someone is on that spectrum, but ideally everyone having a solid balance is what's best. Obviously the human element and how different people are makes that an impossibility.

I think our economy is subordinate to the people. If we had a system that depended on people behaving in ways that they don't behave, it wouldn't work. But yeah, we have a system that incentives investment rather than hoarding, which means building for the future. But ultimately, the reason we make stuff is so we can use it.

 

[SandisLL]

Because Uncle Sam does the same thing. The only difference is that voters can effectively be "margin called" and have to actually pay back their debts (or give up their assets). This is part of a culture that only lives in the here and now, and doesn't care about the future. We see that in everything. I am not saying this is only an American phenomenon but it sure is apparent here.

U really think that for example ppl in europe doesn't have to pay their loans etc and are just poor and dumb idiots becauase usually low tuition fees cos " nice " tax for everything?

Dumb ofc.... sure.
Plus we at least are able to admit that we were stupid. .

 

[BForrester]

My big question is why are Americans so judgy about how other people spend their money or manage their finances? People are richer than they've ever been, and they're using their money in the way they think will make them happy, and if it leads to problems for some people down the line, they'll have to deal with it. Some people have more of a preference for security and wealth building and others have more of a preference for living it up while they can, and neither is inherently right.

The problem comes when other people's fiscal irresponsibility hurts the rest of us. While blame can be shared with financial institutions and their lending practices, a large share of the Great Recession's blame falls onto individuals who were financially illiterate in obtaining home loans they eventually couldn't afford.

 

[86'd]

The problem comes when other people's fiscal irresponsibility hurts the rest of us. While blame can be shared with financial institutions and their lending practices, a large share of the Great Recession's blame falls onto individuals who were financially illiterate in obtaining home loans they eventually couldn't afford.

I disagree with that. You have to put the blame on the engineering controls that allowed that.

A bunch of highly cognitive functioning people duped a bunch of low cognitive functioning people to take one and/or multiple mortgages that they knew they could not afford. If stricter lending policies had been in place the great mortgage recession would’ve never happened.

We don’t blame retards for being retarded.

 

[gspieler]

The problem comes when other people's fiscal irresponsibility hurts the rest of us. While blame can be shared with financial institutions and their lending practices, a large share of the Great Recession's blame falls onto individuals who were financially illiterate in obtaining home loans they eventually couldn't afford.

Banks gave out loans to people they knew were highly likely to eventually default on, then bought the properties for pennies on the dollar. People being irresponsible and buying shit they can't afford certainly factors into the equation, but the lion's share of the blame are on the financial institutions(and politicians who championed deregulation), whose unethical practices precipitated it.

 

[86'd]

Banks gave out loans to people they knew were highly likely to eventually default on, then bought the properties for pennies on the dollar. People being irresponsible and buying hit they can't afford certainly factors into the equation, but the lion's share of the blame are on the financial institutions(and politicians who championed deregulation), whose unethical practices precipitated it.

Right , they knew exactly what they were doing and did so anyway and then when they lost money they used the government to receive bailouts all while most likely demonizing and feeling superior to welfare recipients.

 

[blaseblase]

Unregulated capitalism. Our entire system revolves around advertising and selling shit to you. And most people are idiots. Take a stupid population and put them under the control of a corporatized, selfish government and you get a bunch of sheep who don't know how to save money.

 

[tenniswhiz]

Credit card debt- $10,000

Interest rate 24.99%

Minimum payment- $208.33/month

At this rate, it would take 43 years to pay off the debt. The person would have paid nearly $100,000 in interest over this time, plus the original $10,000 principal.

It can happen to someone very easily

 

[Jack V Savage]

The problem comes when other people's fiscal irresponsibility hurts the rest of us. While blame can be shared with financial institutions and their lending practices, a large share of the Great Recession's blame falls onto individuals who were financially illiterate in obtaining home loans they eventually couldn't afford.

Others have responded to this, but I'd also add that it's 100% a matter of mispricing default rates as opposed to default rates rising above a certain level (and rising default rates were in turn a result of falling prices). Default rates could have been much higher than they actually were with no negative impact if debt wasn't badly mispriced and banks didn't have highly leveraged bets against default rates rising. But even if you acknowledge that your specific example wasn't good, you'd probably push the general point that a strong preference for current consumption and a willingness to take on a lot of risk can cause societal problems that extend beyond the individuals making those decisions, and thus that there is value in culture pressure going the other way. But I'd say that any large-scale preference change in that area--very much including a preference for saving/future consumption (which is basically the definition of a recession--creates the need for adjustments, with bad outcomes before they are made. The current level is not a problem (look at the state of the economy today). I think that the "systemic problems" position is more of a rationalization for an irrational or prerational feeling than a real basis for people people upset about others being spendier than they'd like.

 

[Andy Capp]

I disagree with that. You have to put the blame on the engineering controls that allowed that.

A bunch of highly cognitive functioning people duped a bunch of low cognitive functioning people to take one and/or multiple mortgages that they knew they could not afford. If stricter lending policies had been in place the great mortgage recession would’ve never happened.

We don’t blame retards for being retarded.

There is a massive difference between being dumb and being un-educated. There are plenty of smart poor people whether you, judging by your shitty remark, think that's true or not. Even so, you make a good point that with pressure tactics and sales pitches full of encouraging phrases people are easily lured into unmanageable debt. It can be practically coercive.

All the power is in the hands of the lenders while consumers are bombarded with jargon and numbers and buried in paperwork. In some ways it's gotten even worse now with the shortage of housing inventory everywhere. You have to move fast to have any chance of closing a deal and moving fast means you can easily get sucked in to a bad deal without realizing it until it's far too late.