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Why aren't people more financially responsible?

Established Contributor

Re: Why aren't people more financially responsible?


@mainemade wrote:

I never knew it growing up because my parents were good at hiding it, but they weren't the most responsible financially. In high school I took a class about personal finance and it was very basic, but somehow it got me into being financially responsible and credit etc. Now credit is almost a hobby for me. I am 19 now with a top tier credit score and I got my first credit card a month after I turned 18 and I rememeber talking to my dad about it as I was coming up on my 18th birthday and he was almost angry/dissapointed when I mentioned that I wanted to get a credit card and I was confused, today I understand why because my parents had terrible financial habits and my siblings who are significantly older than me made bad financial decisions when they first turned 18 and my dad had to suffer through it and fix it. I knew personally that I was more than capable of having a credit card. I've been working at a credit union for about a year now, and it's so weird seeing all these people that just barely scraping by... which is more expected however, I see way too many people treat credit cards as "extra" money and the crazy high balances people have and then watching them make that minimum payment every month has me so confused. The highest credit card balance I've seen personally is like $45k with a 800 or so minimum payment and I guess what I'm getting at is why is this so common. Thoughts and opinions on this?


I would say that there is not 1 definition of "financially responsible", as such not all "financially irresponsible" people actually are. Likewise, not all "financially responsible" people actually are.   This makes the subject hard to address without first attempting to come to a common definition of "financial responsibility.

Message 11 of 46
Established Contributor

Re: Why aren't people more financially responsible?


@Kree wrote:

I disagree. Reason is a perfectly acceptable word in this context.  Reasons are causal; excuses are correlations, or ficticious. However causal relationships are also correlations, so we can use Reason as a blanket term, and without knowing the specifics of a scenario it would be rude to the speaker to define their statement as an excuse without knowing the full context.

 

For example,  "My business failed because my employees stole from me."  could be a reason because the statement is true. I've read stories about CFOs embezzling millions of dollars and by the time the deed was found out, the business was unsalvagable.  The statement could be an excuse because it is just a correlation.  Yes the cashier took 5 dollar out of the register every shift, but the theft, even over years, would only amount to a small percentage of the companies total gross.  The statement could also be a ficticious excuse.  No employees actually stole from the company but the owner did not want to admit to the real cause.

 


When it comes to financial matters, I would concede your point with the caveat that using the word "excuse" is also accurate in any case where the individual provides a "reason" for their financial situation that does not include any self-blame, even without the full context of a situation, because the person has at least some control, and thus responsibility and ownership, of their financial situation. We cannot simultaneously own/be in control of something while also not accepting responsibility for it should it go bad.

 

If it's your company and your employees stole from you in enough value and/or over a long enough time that it bankrupted your business, that's also on you for not managing your business better as it is on them for stealing. CEOs often resign over things they may have had no direct control or even knowledge of, but it's still on them because they were at the helm. Ignorantia juris non excusat is just as applicable to financial matters as it is to the law.

 

 

 

 

Message 12 of 46
Regular Contributor

Re: Why aren't people more financially responsible?

I like the fact that the OP had a class in high school teaching finance. In my opinion, this should be a course in every school.
Message 13 of 46
Contributor

Re: Why aren't people more financially responsible?

My parents have always been good with money regardless of how much or how little comes in the door. They always instilled living below one's means and constantly saving for retirement and a rainy day. Did the advice always stick? Nope. I made my mistakes with money when I was young, and cleaned it up when I was young.

 

I know people who make $24k a year and those who make $124k a year or more. Both ends of the financial spectrum doing stupid with money. Only difference is the person making $124k a year can hide the stupid a little bit better. But at some point that house of cards will fall too.

 

I live below my means. I hate payments, period. Refuse to be a slave to the lender. To me a "life happens" moment would be needing to fund a organ transplant. I don't sweat $600 car repairs. Those aren't life happens moments to me.

 

2008 / 2009 confirmed what I already knew. A lot of people who looked like they had their shyt together, really didn't. Everything in their lives was on payments. They felt like they had to live in a certain neighborhood or live in a certain school district etc. New cars all the time. You get the idea........

 

When times were good, a lot of people assumed I didn't have or make much money. They found out wrong when I still went on vacation, all the while their homes were being foreclosed on, cars repossessed, etc. 

 

My all time favorite excuse I heard..........but I lost my job. My response was.........what did you do with all your money when times were good?

Message 14 of 46
Established Contributor

Re: Why aren't people more financially responsible?

As pointed out previously, the need for instant gratification and keeping up with the Joneses is what largely drives our hyperconsumerism culture. Couple that with poor to non-existent financial literacy education and you have a recipe for disaster.

 

I'm also fortunate my parents have been really good with money and always lived below their means. I've also recently come to appreciate the experience of growing up in relative poverty up until around 15. Doesn't mean I didn't do stupid things when I was young though -- I actually started revolving debt albeit at "0% APR" at just 12 lol. Neighborhood mom and pop game store would routinely allow us to take home a console/game with only a fraction of the payment as long as we provided them our phone numbers. Sounds real nice now but in hindsight it definitely did not promote financial responsibility and could've gone downhill in a jiffy. (The owners were nice people and I truly believe they meant well but kids and instant gratification just do not mix) Thankfully I cleaned up my act in my teen years and never bought another thing from without being able to PIF. Anyway...

 


@TheVig wrote:

I live below my means. I hate payments, period. Refuse to be a slave to the lender. To me a "life happens" moment would be needing to fund a organ transplant. I don't sweat $600 car repairs. Those aren't life happens moments to me.

 

...

 

My all time favorite excuse I heard..........but I lost my job. My response was.........what did you do with all your money when times were good?


Yeah having 12+ months of expenses saved up really saved my @$$ when I got laid off last January, especially for a place like the Bay Area where the cost of living can only be described as insane.



7/10/18:

Message 15 of 46
Moderator

Re: Why aren't people more financially responsible?


@iced wrote: 

By many, I mean most. 40% of Americans can't cover a $400 emergency expense from savings. 25% have $0 in savings. 51% are making no contributions to a retirement plan at all (even with a pension, which is rare these days, one should be saving something). Any way you slice it, at least half this country is unprepared for their future and/or aren't even trying to prepare. I bet most of those same people have newer smartphones, TVs, designer clothing, and possibly even a nice car or two, though.

 

 


Can't disagree with the rest of your comments at all but I'd caution being a little careful on statistics as a lot of people don't have an employer-provided retirement avenue... case in point, I accepted an all-inclusive W2 rate contract, no benefits, and I'm stuck without anything I can do except dump the contribution limit into a Traditional or Roth IRA.  

 

Zip, zero, nada.  I didn't realize it was this hampering of an employment bit when talking retirement accounts and if they look to extend it I'm going to convert it over to C2C and start stuffing money into a tax-advantaged account.

 

Likewise, some of the other stats I don't have a savings account because they're financially lame, and when I'm really managing my finances I don't keep much in my checking accounts either and if the statisticians are looking at this alone, they're missing the big picture frankly.

 

Credit fundamentally changed how I managed money, but if you took the snapshot of my bank accounts and my credit report, one would think I'm living month to month and even underwater, unless one had the actual transaction record from Chase, or a copy of my tax transcript... neither of which is available in the public domain.

 

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Message 16 of 46
Valued Contributor

Re: Why aren't people more financially responsible?

There is no 1 hard fast rule for why people get in credit trouble, as some face issues beyond their control...illness, job loss, etc. But...By far, the biggest cause is people have not learned to say no to themselves, when faced with the instant gratification of getting things they want now. It became very simple for me to control my credit, once I learned to control myself. I had to set hard fast rules for myself, and always stick to them. Rules like...if I can not pay for it with cash, I can't use a card for it either. Before there were such a thing as credit cards, the previous generations had to live off of what they earned at all times, and they survived. It was called living within their means, and someone who successfully manages their credit today, will usually do the same. Credit cards are good for SUB's, rewards, and extended warranties or other perks, but people should not let a piece of plastic cause themselves to spend money they have not yet earned for wants. I use credit cards, and make money off of their use...every single year, I make 500-1000 bucks. I never pay a penny of interest, and only pay AF on cards that I will more than make up for in rewards or SUB's. If you are not making a profit off of credit cards...well...you are using them wrong, or can not yet qualify for the right cards.




TU fico08=816 06/27/18
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EQ fico bankcard08=845 06/27/18
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Message 17 of 46
Established Contributor

Re: Why aren't people more financially responsible?


@sarge12 wrote:

There is no 1 hard fast rule for why people get in credit trouble, as some face issues beyond their control...illness, job loss, etc. But...By far, the biggest cause is people have not learned to say no to themselves, when faced with the instant gratification of getting things they want now. It became very simple for me to control my credit, once I learned to control myself. I had to set hard fast rules for myself, and always stick to them. Rules like...if I can not pay for it with cash, I can't use a card for it either. Before there were such a thing as credit cards, the previous generations had to live off of what they earned at all times, and they survived. It was called living within their means, and someone who successfully manages their credit today, will usually do the same. Credit cards are good for SUB's, rewards, and extended warranties or other perks, but people should not let a piece of plastic cause themselves to spend money they have not yet earned for wants. I use credit cards, and make money off of their use...every single year, I make 500-1000 bucks. I never pay a penny of interest, and only pay AF on cards that I will more than make up for in rewards or SUB's. If you are not making a profit off of credit cards...well...you are using them wrong, or can not yet qualify for the right cards.


So true. Unless it's a car or house or some unexpectedly large medical bill, that's the rule I go by as well.

 

I find just keeping track of expenses immensely helpful too. Don't even have to create a budget, just record everything in a spreadsheet. Seeing just how fast the charges from thoughtless spending add up is enough of a psychological deterrent for me.



7/10/18:

Message 18 of 46
Valued Contributor

Re: Why aren't people more financially responsible?


@Revelate wrote:

@iced wrote: 

By many, I mean most. 40% of Americans can't cover a $400 emergency expense from savings. 25% have $0 in savings. 51% are making no contributions to a retirement plan at all (even with a pension, which is rare these days, one should be saving something). Any way you slice it, at least half this country is unprepared for their future and/or aren't even trying to prepare. I bet most of those same people have newer smartphones, TVs, designer clothing, and possibly even a nice car or two, though.

 

 


Can't disagree with the rest of your comments at all but I'd caution being a little careful on statistics as a lot of people don't have an employer-provided retirement avenue... case in point, I accepted an all-inclusive W2 rate contract, no benefits, and I'm stuck without anything I can do except dump the contribution limit into a Traditional or Roth IRA.  

 

Zip, zero, nada.  I didn't realize it was this hampering of an employment bit when talking retirement accounts and if they look to extend it I'm going to convert it over to C2C and start stuffing money into a tax-advantaged account.

 

Likewise, some of the other stats I don't have a savings account because they're financially lame, and when I'm really managing my finances I don't keep much in my checking accounts either and if the statisticians are looking at this alone, they're missing the big picture frankly.

 

Credit fundamentally changed how I managed money, but if you took the snapshot of my bank accounts and my credit report, one would think I'm living month to month and even underwater, unless one had the actual transaction record from Chase, or a copy of my tax transcript... neither of which is available in the public domain.

 


Yes Revelate...you can't just look at someones ordinary bank accounts, or even tax returns. If you looked at mine, it looks like I am barely meeting my bills, and that is on purpose. The 420,000 dollars I have access to in 401k and retirement are both tax deferred, so I withdraw only what I need to. With less than 30,000 dollars total debt including my mortgage, and 25,080 a year in SSDI, and being 60 years old, I think the 420k is enough to get by fine.




TU fico08=816 06/27/18
EX fico08=796 07/15/18
EQ fico08=822 06/27/18
EX fico09=810 07/04/18
EQ fico bankcard08=845 06/27/18
Garden since 07/02/18
Message 19 of 46
Established Contributor

Re: Why aren't people more financially responsible?


@sarge12 wrote:

@Revelate wrote:

@iced wrote: 

By many, I mean most. 40% of Americans can't cover a $400 emergency expense from savings. 25% have $0 in savings. 51% are making no contributions to a retirement plan at all (even with a pension, which is rare these days, one should be saving something). Any way you slice it, at least half this country is unprepared for their future and/or aren't even trying to prepare. I bet most of those same people have newer smartphones, TVs, designer clothing, and possibly even a nice car or two, though.

 

 


Can't disagree with the rest of your comments at all but I'd caution being a little careful on statistics as a lot of people don't have an employer-provided retirement avenue... case in point, I accepted an all-inclusive W2 rate contract, no benefits, and I'm stuck without anything I can do except dump the contribution limit into a Traditional or Roth IRA.  

 

Zip, zero, nada.  I didn't realize it was this hampering of an employment bit when talking retirement accounts and if they look to extend it I'm going to convert it over to C2C and start stuffing money into a tax-advantaged account.

 

Likewise, some of the other stats I don't have a savings account because they're financially lame, and when I'm really managing my finances I don't keep much in my checking accounts either and if the statisticians are looking at this alone, they're missing the big picture frankly.

 

Credit fundamentally changed how I managed money, but if you took the snapshot of my bank accounts and my credit report, one would think I'm living month to month and even underwater, unless one had the actual transaction record from Chase, or a copy of my tax transcript... neither of which is available in the public domain.

 


Yes Revelate...you can't just look at someones ordinary bank accounts, or even tax returns. If you looked at mine, it looks like I am barely meeting my bills, and that is on purpose. The 420,000 dollars I have access to in 401k and retirement are both tax deferred, so I withdraw only what I need to. With less than 30,000 dollars total debt including my mortgage, and 25,080 a year in SSDI, and being 60 years old, I think the 420k is enough to get by fine.


I think you both might be reading too specific a context into some of the stats. Not contributing to a retirement account doesn't necessarily mean an employer-sponsored 401k or 403b - it can be any retirement account, including personal IRAs. Those numbers aren't mine (and more than one source has cited such numbers), but it tells the same story: people aren't saving enough - or anything, in some cases - for retirement. If someone doesn't have an employer-sponsored 401k, that's no reason not to still contribute to an IRA. Even those with pensions should be putting more aside.

 

Like retirement, savings doesn't have to mean a traditional savings accounts. The research questionaires that go around to people usually ask questions like "if you had to pay $400 for an emergency today, do you have the ability to do so without borrowing it?" and not "do you have $400 in a savings account?" As such, one should really think of such a stat as indicative of whether or not someone has the ability to handle an emergency debt more than how their savings are stored. In all honesty, I've yet to see any research into exactly how people who do save distribute their savings across savings accounts, brokerages, IRAs, or any other vehicle for saving.

 

Also, tip of the cap to you sarge. I'm on track for more than twice the SS income you are and 10x the savings, and still lose sleep at night wondering how I'm going to get by fine in retirement. To be able to do it on so little shows how disciplined your budgeting is.

Message 20 of 46