Should We Still Be Spending Money And Having Fun While Deep In Consumer Debt?

Anthony Weiner Speaking At Rally In NYC

Anthony Weiner too stubborn to quit. NYC 2013.

During the depths of the financial crisis, one of the proposals I sent to the Obama administration was to institute spending curbs based on high school or college grade point averages. It didn’t matter whether you went to Community College or UC Berkeley since everybody’s circumstances are different. What matters is how well you did in school to justify want based spending as opposed to need based spending.

For example, if you were a D+ student (sub 2.0 GPA out of 4.0) you are only allowed to buy generic clothing and ride public transportation to work for the rest of your life. No car or lollipops for you. If you were a B student, then suddenly that new $20,000 Honda Civic is available to you after the dealer scans your ID to check the government GPA database. If you are an A student, then you are free to buy whatever you want because logic dictates that if you are smart enough to study hard in school then you are smart enough to practice good financial habits.

I was shocked Obama never acknowledged my letter because my proposal would only help the government expand their authority (think PRISM) over the people of this great nation. We voted for Big Government and I wanted to support the cause as much as possible as I figured out a way to go John Galt. Although Washington DC stayed silent, fellow patriotic Americans voiced their opinions in the comments section of the post, Tax Rates Based On Work Ethic Shall Fix The World. It’s all about creating incentives.

Just imagine a world where everything is rational. Imagine everybody reading their mortgage contracts before signing so that they are aware of their financial obligations instead of blaming others when they can’t pay. Imagine if everybody adopted the attitude of not deserving something until worked for? Now imagine a country where everybody is middle class and pitches in to support our country. There would be no socioeconomic warfare, just equality. We can always dream right?

DO WHAT YOU WANT WITH YOUR FINANCES, JUST DON’T HURT OTHERS

Gambling Your Way To Prosperity At Lucky Chances Casino

Lucky Chances Casino Poker RoomOn the way home from dropping my friend off at the airport, I took a 10 minute detour to Lucky Chances Casino.  Lucky Chances Casino is located in the foggy city of Colma in South San Francisco.  If you love to play poker, blackjack, and paigow, this place is for you.

I go about once a quarter on average to play $1-2 no-limit poker.  I used to be hooked on the game three years ago, but after one too many bad beats on the river, and the launch of Financial Samurai, I no longer crave playing.  In fact, before this visit, I hadn’t been in over 18 months.

The one thing that always piqued my curiosity was how every time I went, no matter what time during the day, I would always see the same 10-15 people there!  At first, I thought that perhaps they were all gambling addicts who just couldn’t stay away.  Sometimes I’d go in the morning.  Other times I’d go at 1:30pm like this time, and other times I’d head over at midnight and they’d always be there!  What gives?!

MONEY FLOWS FREELY

The Irresponsibility Of Borrowing Money To Borrow More Money

Swans With Their Babies In San FranciscoIf you want to know what’s wrong with people’s personal finances, just observe those who are willing to borrow money in order to borrow more money!  One example is using a credit card you can’t pay off in full each month, for a downpayment on a car.  Since the limit for credit card use for buying at the car dealership is usually $3,000, and given most downpayments on vehicles range from $0 to $3,000 to buy or lease, using the credit card is a tantalizing proposition.

Forget the fact that these car buyers don’t make 10X the value of the car in annual salary.  They can’t even pay cash for the car or come up with even 10% of the value of the car as a downpayment!  Look, I know more than anyone how alluring it is to buy a nice car.  I used to be a car addict with 7 different cars in as many years.  It’s just irresponsibile of consumers to use their credit card for a downpayment when they don’t have a healthy savings account balance to match the entire value of the car before purchase.

BANK OF MOM AND DAD FOR REAL ESTATE

Corporate Greed By PG&E Killed My Friend’s Family And My Credit Score

PG&E San Bruno Gas Explosion

Pacific Gas & Electric (PG&E), your San Bruno gas pipeline blast killed my friend’s wife of over 20 years and his daughter in 2010.  Thousands of people depend on you for energy to heat their homes and cook their food.  How can you let this negligence happen?  Is this a case of profits before safety?  What the hell.

We have been silently grieving for the past two years, and we were healing until I get a notification from my refinance bank that you guys screwed me on my credit score due to a $7 late payment from 2009 which was never sent to my correct address.

The $7 late payment, as later explained to me was due to a “landlord service continuation fee” where I take over all PG&E charges between the time my tenants vacate the property and when a new tenant arrives.  News to me guys.

PG&E TOO LAZY TO DO THE RIGHT THING

Greedy Banker or Thoughtful Banker?

Turkish BacklavaMy friend is leaving his job of the past five years to work on his own start-up.  When he got an e-mail solicitation from his mortgage officer about whether she could come by his office with a set of boxed lunches for him and his colleagues, he told her “no thank you” because he was leaving.  He purposefully kept his plans vague and hoped she’d just leave him alone as he attends to his new life.

Instead, she came back with the following response,

I am sorry to hear that? When you land at another organization, please let me know.  Also, let me know if I can help through the transition. Since you are still on payroll, I always suggest putting a Line of Credit in place. And if you need a brokerage account to rollover your 401K, we can certainly assist.”

Pretty thoughtful right?  Or is it?  My friend responded,

Thanks.  It’s actually voluntary.  Doing my own thing.  I’ve got enough saved up for the next 8 years, so I don’t think I need a HELOC, unless the rates are super low.  Even then, I don’t need it because I have the cash.”

Seems like a nice way of saying he’s fine and does not need the banker’s help.  Instead, the banker comes back and says,

“I always suggest putting a line in place even if you have cash on hand. Especially since you are still on payroll as it makes the process much easier. I recommend investing your liquid savings in higher yields within your comfort zone and instead put a home equity line in place for say $100,000 to act as your emergency line.  If you need it it is there for you, if you don’t great it does not cost you anything.

At this point, my friend is starting to get annoyed.  He’s been polite about saying “no thank you” twice now, and yet the banker keeps on pushing.  She recommends my friend use his 8 years of excess liquidity to invest in riskier assets, so he can borrow money from the bank via his home to keep liquid!?!  This seems to make no sense.

“Sure, give me a risk free 4% yielding security and I’ll take out as big a Line of Credit as you want!”

No response from the banker yet, and it’s been a week………

Recommendation

Shop around for a mortgage. LendingTree Mortgage offers some of the lowest refinance and new mortgage rates because they have a huge network of lenders to provide mortgage loans, home equity loans, and home equity lines of credit. If you’re looking to buy a new home, consider using LendingTree to get multiple offer comparisons in a matter of minutes. When banks compete, you win.

Regards,

Sam

Photo: Turkish Delight & Backlava in Istanbul, 2014.  Someone ate more than half.  SD.