It struck me that I've never read this one, but I've been skimming over Wikipedia and I may read it.
Seems like there's an overabundance of UAWs on this forum. I used to be a UAW myself, but I think that after the bankruptcy, I became more of a PAW.
"Car shopping habits
According to the authors, a common UAW drives a current model car, purchased new, and may have financed it on credit. PAWs rarely purchase new model cars and are less likely to own foreign or luxury vehicles. An example from the book details a UAW that spent roughly 60 hours researching, negotiating and purchasing a new car. In the end, while the car was purchased "near dealer cost," in the long run the UAW's time and money could have been more efficiently spent creating wealth rather than collecting possessions notorious for depreciating in value. The authors contrast the story with a PAW who decided that the pride of owning a brand new car wasn't worth the $20,000 price difference."
Remember that these were 1996 prices too, but the concept is the same.
Many people waste lot of time thinking they're doing "research" and then get in the ring with a salesman, lose badly, then come here to discuss their "fantastic loan" on something that's out there rotting and rusting this very minute, and by the time they pay it off (counting the interest), they'll lose 70% of what they paid if they sell it.
Wrestling a car salesman is like eating the beer and cheetos diet then convincing yourself that you're going to win against an Olympic Gold Medallist because you saw Rocky II.
"The difference between UAWs and PAWs is wealth. Wealth is usually obtained through investment strategies that maximize unrealized (nontaxable) income and minimizes realized (taxable) income. UAWs tend to spend more time on purchasing a car than on looking at appreciating investments. Appreciating investments such as a 401k or an Individual Retirement Account (IRA) constitute tax-deferred growth and produce an unrealized income for the individual holder. Some UAWs do hold a 401k or an IRA but with a low portfolio value. UAWs usually have the belief that in order to comply with the “Better Than” or “Better Off” theories, they need to maximize realized income."
I usually figure out how to legally deduct our way to a minimal federal income tax bill, and it's not hard. I'm sort of ashamed that I let it get to $400 last year. (after the tax refund)
Many years, I've gotten it down to zero, or lower.
There's plenty of quirks in the tax code. It's worth it to comb over everything you could be doing better, and buying a new car isn't one of those things. Fully funding your 401(k) is.
"Maximized realized income minimizes unrealized income, increases taxes paid, and produces low portfolio values. Certainly there are some UAWs that invest in the stock market and are very active traders, but most don't."
Translation: They could have a good retirement account balance, but instead they're out hitting potholes in a car that's spewing their money out the tailpipe.
"When children are brought up in a high consumption, UAW lifestyle, they are more likely to become UAWs themselves. More often than not, the children of high income UAWs become more devout believers in the UAW system than their parents. The children grow accustomed to extreme luxury and believe that they too must possess the same luxury as their parents, even if their income is much less."
Instilling their own incorrect values into the children, thus dooming their children and getting their kids hooked on Mr. FICO and the car fleece on the BMW (Been to Most Workshops) themselves.
"Economic Outpatient Care (EOC) is a term used to express when an affluent parent provides money to an adult child. Besides offspring observations resulting in UAW children, EOC is a contributing factor to the passing on of the UAW belief. Offspring who receive EOC have 98% of the annual income compared to their counterparts who are not recipients of EOC. In comparison, they also have 57% of the net worth. EOC gives recipients a false sense of financial security. For this reason they purchase homes in upscale neighborhoods that exceed the recommended value according to their incomes. Thirty percent of American families live in homes valued at $300,000, yet only earn an annual income of $60,000. These homes then demand nice cars for the driveway, nice furniture for the living room, and a nice plasma TV to complement the furniture. These offspring also purchase and consume the EOC rather than invest it. If a dose of EOC is given on a regular basis, the EOC can actually be absorbed into the individual's perceived annual income. Expenditures are then calculated with the anticipation of a regularly scheduled dose of EOC."
These are 1996 figures, but the concept is again, still the same.
A guy called into Ramsey saying he won $22 million in the lottery and hadn't even told his kids because "I don't want them to grow up and become waiters....you know waiting for their parents to die so they get a bunch of money....I want them to make something of themselves."
Very few parents with money instill good values into their children such as teaching them to value living a debt-free life, or to enjoy their life instead of working for a $600 pair of pants from Saks. EOC is dangerous because something given has no value. Their children will simply spend it and come back and ask for more.
My aunt thought she was doing my cousins a favor by leaving them half a million dollars each in life insurance money when she died in a car accident. Within 5 years they were broke and had nothing. They couldn't even remember what they spent it on. One of them is desperately trying to figure out if there is a way to file bankruptcy a third time. The same one that used some of the life insurance to buy her husband a $60,000 pickup truck, then they paid some person out in the country to work on it, and all the dashboard lights came on and the dealership took photos of where the guy had done electrical work with stereo wiring.
There's no substitute for life skills and frugality. God help her, now she has a baby after the doctors told her she'd never get pregnant. No telling what that'll cost or what her eccentricities and money mismanagement and hardships will do to the child.
There is no reason to be poorer than Job's turkey in Indiana on $160,000 a year, nevertheless, she persisted.
Most millionaires that got there themselves say that the most they've ever spent on a pair of jeans was maybe $50, and the majority of them drive a Toyota or a Honda or something and it's fairly old. They understand that you don't "make money from an auto loan" when you spend $80,000 and five years later you'll get $20,000 if you sell it, and lose $60,000.
They didn't become a millionaire by losing $60,000 every five years on a cycle of car loans with interest and worrying about FICO scores.
"Income is a poor indicator of well-being. On the other hand, wealth is a good indicator of the financial independency or financial dependency of individuals. Unfortunately society has an almost unlimited number of ways to consume income and limited ways to save income; therefore, individuals are more prone to spend than save. That eventually results in an adoption of a UAW lifestyle."
The second sentence is probably the favorite thing I've read so far. There's a way to spend income everywhere you look. It's better to put on the horse blinders than figure out how to make more later, with interest.
There's a million ways to lose a car in 6-7 years, lose all the money and get a letter saying "We have your car and we are going to sue you."
Fun times.
They sell it at a car auction and get almost nothing, turn around and sue for like $15,000 or something. It's the most ridiculous thing ever, then you still need to figure out what you're going to drive while they're suing you and nobody else will loan you money.
A thousand dollars a month on a car, same time 30 days from now....72 or 84 times in a row.... 