Living beyond means - the thought process

[TylerM4]

I've known a few people now who've struggled financially. People who shouldn't have if (in my mind) they made good decisions. The mental and thought process leading up to these hard times fascinated me. I thought it would be neat to share and to see if anyone else has seen other examples.

Scenario #1:
Retired couple. They were in good shape heading into retirement. They'd received a nice inheritance. No debt, decent nest egg, and owned a nice piece of property worth more than your average home. Plus they had small pensions and one was collecting disability. They should have been able to enjoy a modest retirement. However, they lived beyond their means. Kept taking mortgages out against their house and went to shadier lenders when regular banks wouldn't give them more. Eventually the payments exceeded their capacity to pay. Market turned and bank foreclosed on them. They were still under 70yo. Property sold at auction and they got nothing - I think even the banks took a loss. Anyway - I was fascinated by a conversation I had with them while they were nearing the end of the foreclosure process. They told me they were taking a trip to Mexico! It floored me. I pried a little at that point and asked why they were taking a trip to mexico when they were about to loose their home. The response basically boiled down to "Everyone else takes a vacation to somewhere hot every year." They felt justified spending the money because everyone else does. They also felt they were being fiscally responsibly by going to Mexico instead of someplace more expensive like Hawaii. Meanwhile, I hadn't taken a vacation like that in years and could have done so without borrowing.

Scenario #2:
Similar story - want it all except a different twist here. They recognize they can't afford nice new things. So they buy nice old things. Big old house with old roof, appliances, pool, HVAC, plumbing, etc. Old fancy vehicles with high KM but it's got leather and navigation. Old RV. Old toys (motorcycles, sleds, etc). The repair/maintenance bills are killing them with debt. They feel they're being fiscally responsible by buying old/used but don't seem to calculate the cost of repair/maintenance into the formula. They also feel that repairs are emergency spending so it's justified (instead of not fixing the RV or pool for example) to borrow money.

Anyway, the thought process in both of these scenarios has fascinated me. Was wondering if anyone else has seen other scenarios that they'd be willing to share.

[RustyCrayon]

These people are everywhere. I can't wrap my head around any of it.

I know one couple who have 3 lines of credit, all maxed out. They are constantly buying stuff, taking vacations and doing renos on their home. They live paycheque to paycheque. Every few months they say that they need to stop spending money, cut back on all the vacations and shopping. Then the following week they start on another expensive reno or book another trip. It's amazing.

A sad one:
Lovely older couple who moved here from Alberta, bought a nice house to enjoy their retirement. Decided to put it in their kid's name so they could have the place when they pass away. They adopted a dog from the local shelter, enjoyed gardening and seemed to be enjoying their lives. A few years later, out of nowhere their house is foreclosed on. Seems their kids bought a nice house of their own, as well as a bunch of new toys, took vacations and purchased a few rental properties. They got in way over their head. So the bank stepped in and took everything, including the parent's home. The nice couple had to pack up and move in with their kids...The same kids who caused them to lose their home. They both had to go out and get jobs. The husband suffered a heart attack a few months later and died. His widow currently works at a thrift shop in Edmonton and lives in a small apartment.

[Bsuds]

There is/was a retired older Lady a few blocks from us who had her house put in her son's name for the same reason.

He turned around and sold it and told her she had to move.

Don't do it! Put it in both names not just theirs!

[Graham Adder]

Ya know, I hate to say this because so many people immediately head to "conspiracy theorist" rather than look at this topic with open eyes and minds analytically.
The system we live under was designed for this very purpose.
You are the outsider if you are not in debt.
The financial system relies on debt driven funds.
Your scenarios are real, and calculated.
It's unfortunate, but many people follow these leads and find themselves broken at later stages of life.

[perspicacious]

It's called... 'keeping up with the Jones, Smith's or anyone else who appears to be having the time of their life with no financial issues. I also sums it up in being impatient and wanting the immediate gratification of getting something rather than saving for it first . Problem is, generally when you get the thing you want it doesn't make you happy anymore and you want more... Kind of like shopping to fill a void. We are all guilty of it at some time in our life.

Dad taught me, you can make $10k a year and save $5k or make $100k and spend it all plus have credit cards, lines of credit, loans, etc etc. The person with the lower paying job has less stress, probably happy in their simple life of living within their means.

[Even Steven]

I don't think there's a thought process. People like this don't think, they just do what feels good.

I can't say I'm immune to this, both me and my wife been working extra hard this past two-three months, and as a consequence been spending hugely on take out and restaurants. Just feels good not to cook or go shopping, you just go to your favourite joint and eat yummy foods. But the other day I did the total for what we spent on restaurants, and we gotta get this under control. Too much money.

[Lady tehMa]

People want, people buy. "I deserve . . ." so they go into debt to indulge themselves.

Our own history hasn't been perfect (who has?) but we've wised up. Living with cracked windows until we can afford to replace them. Replaced the roof ourselves. Replaced the hot water tank when it needed doing - pay as you go. I have a little account that I save in for things we need to spend on. After son's grad is done, it becomes the "window/bathroom/ceiling" account. Putting the money aside now. Sure, would be nice to have a vacation somewhere, but I balk at the cost involved.

I spend money on things like my garden, but that gives back in food and a place of refuge and peace.

[jimmy4321]

Think of it this way.
If not for financial institutions making money on interest, late payments, insurance and annual fees they'd have too figure out a way to screw YOU (those who are more responsible with their cash).
...and i bet everyone of you are whining about bank charges already - They never lose.

[perspicacious]

I don't pay any bank fees.... Yay me!

[Silverstarqueen]

It's a combination of things that lead to debt.
My dad taught me, if you can't pay for something, you can't afford it. That was the sum total of his financial advice to me, and if everyone just followed that ( I did), they would have not problem.
Also people see TV ads etc everywhere that show them the lifestyle they think they should be entitled to, fancy house, new car, toys, vacations, clothes, entertainment. And they can't believe that they can't do they same as all these actors in the adverts, or the Joneses next door.
Also there's the easy easy credit, for new cars, homes, furniture, no one saves for anything anymore.
The ultimate, is the "Reverse Mortgage" idea, where you take older people who may actually be living within their means and turn them into poor people by encouraging them to live the high life taking the money out of their home. I call it the cardboard box program. because that's what they will be living in when they get older and want to move out of their home into a smaller apartment.

[lesliepaul]

One sure way to bury yourself is to use a credit card FOR EVERYTHING!!! Buy a pack of gum.........credit card......."I need those points to travel the world". I could care less about "points"..........its the availability of others money that I can use for free for up to 3-7 weeks. In 40 years of having several credit cards, I have paid interest MAYBE for a TOTAL of 12 months. I have what the bank would call an "A-Plus" or whatever credit score BUT in reality, I am their WORST customer. Most of my neighbors have that winter tan and fake smile but they all look like they were kicked in the gut at the end of the month.

[Dizzy1]

One sure way to bury yourself is to use a credit card FOR EVERYTHING!!! Buy a pack of gum.........credit card......."I need those points to travel the world". I could care less about "points"..........its the availability of others money that I can use for free for up to 3-7 weeks. In 40 years of having several credit cards, I have paid interest MAYBE for a TOTAL of 12 months. I have what the bank would call an "A-Plus" or whatever credit score BUT in reality, I am their WORST customer. Most of my neighbors have that winter tan and fake smile but they all look like they were kicked in the gut at the end of the month.

As long you don't carry a balance, there's nothing wrong with using a credit card to pay for everything and anything - its the decision not to pay it off at the end of the month, or buying more than you can afford to pay off at the end of the month is what gets most people.

It all depends on the CC as well, some are better than others when you compare fees and rewards.

[lesliepaul]

As long you don't carry a balance, there's nothing wrong with using a credit card to pay for everything and anything - its the decision not to pay it off at the end of the month, or buying more than you can afford to pay off at the end of the month is what gets most people.

It all depends on the CC as well, some are better than others when you compare fees and rewards.

[/quote]


The MAJORITY do not pay it off monthly.........and in a lot of situations with these morons........the "card" keeps them afloat, so they think. Have zero sympathy for them. The credit card companies love Kelowna and all of the "living beyond their means" wannabees.

[GordonH]

I guess some out there see our governments can operate way over there means, why can't I. Well, dumb the bank (first off government does not borrow from same banks you do) is not about to come after the government. They sure as hell will go after average jill &/or joe, hence your as

learn good money management skills while under your parents home, or you will be schooled the hard way

[Dizzy1]

The MAJORITY do not pay it off monthly.

Did I state otherwise?