Interesting article, and sadly, most of it is simply common sense. We have become a culture of instant gratification and brand-name idolatry. It boggles my mind to see someone making little more than minimum wage sporting an $800 handbag or designer shoes. Very few people are willing to save up for something because it's too easy to reach for the credit card and worry about paying for it later on. Unfortunately, they don't realize how much extra they are paying for that item due to the compounding interest on the credit card balances.
My husband and I retired debt free 7 years ago, and built a brand new home that we paid cash for. We have 2 cars, one is 4 years old, one is 2 years old - both paid for. We have money in savings & IRAs. We travel when we want, and live on 2 pensions from work & his Social Security, which total about 25% of our previous combined salaries. We use credit cards, but pay off the balance every month.
We buy only when things are on sale, and we buy quality items, but we make sure we're really paying for the quality and not the brand name. We actually have a competition to see who can find the lowest prices for big-ticket items.
A friend of mine has the theory that if he can afford the down payment, he can afford the item. He has a big house with almost no furniture, a fancy car, and lives paycheck to paycheck, praying he won't be laid off from his job. I have several retired neighbors who have huge mortgages, new sportscars - along with the big car payments, and spend money like there's no tomorrow. I just don't get it, because I know they can only afford the minimum payments on their credit cards.
Sadly, schools don't teach financial responsibility and budgeting, and many people don't learn either from their parents, who are also struggling.
- 5/19/2012 6:01:23 PM