Sunday, August 5, 2012

Loans and debt?

Taking loans and having debts part of today's society, or at least that's what I seem to observe around me. People loan money for stuff, they use up their credit card to buy stuff they can't pay on-the-spot. I don't see why people do this; If you can't buy it with the money you currently have right now, then don't buy it. Of course some might think, "Well, I need to buy food! I can't wait!". Well that's what having a budget means. Also known as not spending your paycheck on useless stuff.

I think one of the exceptions would be student loans in the US, because the tuition price is so high that they can't exactly save up, assuming they are paid minimum wage at a part-time job, while attending high school. Unless they take a break from school to save up. Which isn't really efficient considering the jobs a young student with no experience can get, unless he (his parents) has good relations with high-placed people.

Anyway, if you look at common things, like clothing, food, entertainment, means of travel (car, transit, bike, walking), people don't seem to prioritize things, hence they spend a fair chunk of money on stuff that is low-ranked on Maslow's hierarchy of needs (link:'s_hierarchy_of_needs) and when time comes when they actually NEED to buy something, like food, or a subway pass, or new clothes, or pay the rent, they have to go in the red. Of course this example isn't quite strong; what is 50$ outstanding on your credit card.

I rather abide by the principle that if I can't pay the item on-the-spot with cold-hard cash, then I can't afford it, I won't use my credit card. At one extreme, if you are completely broke, that means you can't buy anything, including food, which is bad. But it's a progressive thing, you start thinking like that when you have some money, let's say at the store, you've got 20$, well you won't buy that new t-shirt or CD, keep that money, and when you go do the groceries, you'll have that 20$ to spend, so you won't be in a bind when buying what you really need. I've saved up money, so I can buy stuff that I want, but I always compare the price with stuff like my hourly salary, to see what kind of effort this item is worth.

Anyway, this might be a bit incoherent to read, but the main idea is that debts and loans shouldn't be a normal part of your life; if you're having financial difficulties, I think that planning out a budget should come first, and not taking a loan, because nothing is free in this world, and a loan certainly isn't. And I don't mean  having to pay off the loan. I mean the interests and other small-print things that come with "free money", those things will cost you money. It's not a friendly-friendly agreement; the bank wants more money than it lent you.

Take my money,


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