Clues that someone isn't financially savvy?

[bjl584]

4) Holding the firm belief that everybody's got car loans and credit card debt, and to not have them is: a) weird; b) bad for your credit score; c) a sign you can't afford the "good things" in life.
-- No kidding... I've had this conversation with someone.

to add to that:

Don't deprive yourself of a nice car. You only live once! You could easily afford the payment!

[cypher1]

to add to that:

Don't deprive yourself of a nice car. You only live once! You could easily afford the payment!

To add even more:

I tend to hear from others "But we work so hard for our money, we deserve that new car now." Fair enough, but I'll take it without a monthly car payment.

[Bades]

Just because someone goes shopping randomally because you're a Macy's cardholder and they are offering 40% one weekend doesn't mean you're not finacially savvy.

If you can afford to randomally shop here and there when there are big sales then good for you. Even when I have been to these said sales, I just don't buy worthless things. Good Example - I could always use more dress shirts for work, or more undershirts it seems. There have been times I've walked out of those sales because there was nothign I really wanted

To me the ultimate clue is PRIORITIES: when you see someone you know complain about their CC debt, student loans, car payments, and they are racking up bar tabs on the weekends or talking about installing a new car audio system...

[fe2o3ez]

1. Borrowing money from your 401k for anything other than an absolute emergency. And even then...

2. Interest only mortgages. (especially if held until the "interest-only" time period expires, and the holder is not prepared for a large increase in payments)

3. A classic from the recent recession: "I've lost almost everything from my investments. I might as well pull out what's left and put it into something more safe." You don't lose anything (other than market value) unless you sell!!

4. Using an ATM at a casino.

[disneysteve]

4. Using an ATM at a casino.

Is that because of a big service charge? I go to the casino regularly but always bring cash with me so I never took note of what the ATM was charging.

[Mjenn]

Just watched friends plow thru 100000 dollars they borrowed in a home equity loan because they were tired of always 'wanting' things and just decided to go and get them.

But I do want to comment on the living paycheck to paycheck. Often times DH or I might cut down spending a lot at the end of the month. This isn't because we don't HAVE the money, but because we run a pretty tight budget, depositing our savings immediately into separate accounts and only spending the money we plan to spend each month. Sometimes we do cut it close, and once and awhile if there is an emergency we dig into one of our savings to cover things, but I could image in it might look to the outside world the we are running 'to cash a check' or waiting until 'pay day' for something, and that is because we are - but not for the same reasons.

So maybe not all of these comments are necessarily bad planners?

[disneysteve]

Often times DH or I might cut down spending a lot at the end of the month. This isn't because we don't HAVE the money, but because we run a pretty tight budget, depositing our savings immediately into separate accounts and only spending the money we plan to spend each month. Sometimes we do cut it close

I know exactly what you mean. There are times when I've felt like I was living paycheck to paycheck. I knew I wasn't, of course, since 25% of our income goes to savings, but there have been those months where a big expense came up like a car repair or a vacation and I had to wait until I deposited my next paycheck before I could pay the credit card bill. It wasn't because we had no money. We had plenty of money. It just didn't happen to be in the checking account right at that moment.

[fe2o3ez]

Is that because of a big service charge? I go to the casino regularly but always bring cash with me so I never took note of what the ATM was charging.

The key to your comment is that you "always bring cash" with you, and I am guessing you have set a limit for the amount of money you will be willing to gamble, based on the amount you brought with you.

Certainly, the service charges in casinos are high, but the truly irresponsible part comes in giving into the emotion of the experience. Gambling can be fun, but the best approach is to bring with you the amount that you are willing to lose, and when it is gone, go home!

That's my thought on it, anyhow.

[fe2o3ez]

There are times when I've felt like I was living paycheck to paycheck. I knew I wasn't, of course...

I really don't mind that feeling at all. It feels controlled, as if every dollar has a purpose and my hard work is resulting in a direct impact on our quality of life.

There is minimal stress, since we know that we are covered by our savings in the event of an emergency, yet there must be increased awareness of how much is spent in the various areas of the budget, so as to not 'set us back' against future paychecks. It avoids the perception that there is extra money sitting around in the bank account - just like cash, we would find a way to use it, and then wonder what happened to it.

[photo]

Just watched friends plow thru 100000 dollars they borrowed in a home equity loan because they were tired of always 'wanting' things and just decided to go and get them.

Is it true that if bankruptcy is declared, the home cannot be taken away? If so, then it almost seems prudent to go out and get a big mortgage (but not such a gigantic one that you can't make payments so it won't be foreclosed).

[kork13]

But I do want to comment on the living paycheck to paycheck. Often times DH or I might cut down spending a lot at the end of the month. This isn't because we don't HAVE the money, but because we run a pretty tight budget, depositing our savings immediately into separate accounts and only spending the money we plan to spend each month. Sometimes we do cut it close, and once and awhile if there is an emergency we dig into one of our savings to cover things

I'm absolutely the same way... I try to keep about $1k extra (but no more) in my checking account (above expected cashflow), and send everything else to savings. Honestly, I often underestimate my cashflow, so I do find I occasionally have to return money from savings to cover something. When it happens, it's typically the credit card bills, since those are all paid out a day or two before I'm paid each month. But I'm okay with that, because I stay on top of it, and the extra isn't being spent... it's going to my "general" savings, and it's available as required. And I know that if I don't manage my cashflow for some reason for a month or two, I'll still have a positive balance, because even between the automatic savings withdrawals and expense payments, I almost always have an extra $100-$200 in the cashflow. And if all else fails, free, automatic overdraft protection from my bank, which draws from my savings account if the checking account somehow runs dry.

There's a significant difference, though, between living paycheck to paycheck due to excessive saving vs. paycheck to paycheck due to excessive spending.

[ecoadapt]

Going shopping because the store is having a big sale even though they freely admit they don't need anything.

Lol, this got me thinking. You have a point there. And I've known a lot of people around me who do this!

[myrdale]

Listening to coworker talk about cussing out the folks down at the power department because they cut off his lights then having to go back and set up a payment plan for a $400 power bill.

Hearing stories about the same person (who is salaried) borrow money from the hourly guys who work under him until pay day.

A couple I know actually brag about how many maxed out credit cards they had, it was in the double digits.

Listening to family member describe going to the casino as an "alternative income".

Hearing family members plan to purchase $100k house but then take out loan for a new truck while on government WIC program.

[thekid]

Alot of the ones relating to expenses have been covered here, but I also find many clues on the investement/income side. Most notably taking on too much risk, pulling out in downturns, investing short term money in stock based MFs, etc. or conversily taking on too little (like having all investments in CDs or savings accounts).

[disneysteve]

Listening to coworker talk about cussing out the folks down at the power department because they cut off his lights then having to go back and set up a payment plan for a $400 power bill.

Yes. Blaming others for their financial problems is a big sign that they aren't savvy. It is always someone else's fault. It is the power company's fault that his lights got turned off, not his fault for not paying the bill. It is the credit card company's fault for charging a late fee, not his fault for paying late. It is the bank's fault for charging a big bounced check fee, not his fault for writing a check that he didn't have the money to cover.

It boils down to a lack of personal responsibility.