Tuesday, February 21, 2012

Why Your Dirty Little Secret Isn't.


EVERYONE has a credit card crises once in their life.  But few people admit to it.

I have been away for a few days visiting friends.  I was pontificating as usual (can you believe that?) about credit card debt.

Yes, I do tend to prattle on.  One of my friends called me a "Pompous Know-It-All"  - so you can only imagine what my enemies say.

But I would rather be accused of that, than to be a meek know-nothing.  Yes, the meek shall inherit the earth, but what they meant by that was the dirt, not the planet (something got lost in translation from Aramaic.)  And being ignorant never really works out, trust me.  And the only way to LEARN is to exchange ideas and listen if someone can challenge them.

Anyway, I was going on about credit card debt and how I postulated that the entire system is rigged from the get-go to get "consumers" (what others call human beings) who are not very smart or sophisticated about finances (that is ALL of us) to bite onto the credit card deals, thinking we are being smart little monkeys, when in fact, we have put our hands into a well-laid trap.

And many folks spend YEARS clawing their way out of these pits, and many times, fall back in.

Funny thing, though, is that after I gave this little speech, several people came up to me later and said, "Well, I'm glad to hear someone else say it, because a few years ago, the wife and I got ourselves into a bit of a pickle with some credit card debt...."

And so on and so on and so on.  Everyone has a horror story to tell about credit card problems they have had.  How they got into intractable high-interest debt and had to spend years living on raman noodles to pay it all off.

Well, everyone except those folks who have yet to get into credit card trouble.  And those folks comment here regularly, with cheerful updates, "Well, so far I've paid off the balance every month, so it all works out pretty good!"

So far.

It is like the old adage about motorcyclists - there are those who have been in an accident, and those who are going to get into one.  No one escapes the inevitable.

Again, the best way to avoid credit card trouble is to have only one card with a low interest rate and a low limit (do NOT let them raise it!) and use it sparingly and yes, pay it off every month.  When you do slip up (and you WILL, they count on it, and it is human nature) you will be able to pay off the balance, as it will not be very high (low limit) and the interest will not kill you (low rate).  Higher rates, when applied as revolving charges, can escalate interest payments to the point where you are barely paying off any principle at all.

It is a lethal trap.   Dancing around the edge of it to collect bonus miles or cashback dividends is a very, very dangerous game.  One slip-up, and you are over the edge, so to speak.  And that slip-up might come as a result of something beyond your control - medical problem, car repair, divorce, or in my case, unexpected huge tax bill.

And sound financial planning is not a matter of trying to use trickery or "deals" to get ahead, but to plan not only for ordinary financial situations, but also the "worst case scenarios" - such as not getting a paycheck for six months, for example.

But getting back to our topic, what I realized, hearing the same story, over and over again, from people, is that what we think of as our "Dirty Little Secrets" are not dirty, they are not little, and they should not be secrets.

Why is this?  Let's explore:

They are not Dirty:  Human beings are prone to failure.  I estimate, on a good day, the average human operates at an efficiency rate of about 1-2% tops.  We are horribly vain, easily distracted, lazy, and prone to every sort of weakness.  It is part and parcel of being human, so get over it.

So, it follows that we all will make horrible financial mistakes - even Warren Buffet.  Even Donald Trump.  Especially Donald Trump, who has been to bankruptcy court so many times, they've named a courthouse after him.  Remember the Trump Shuttle?  The Trump Princess?  We all fail, so get over it.  And as "The Donald" has aptly illustrated, there is life after failure - playing a Billionaire on Television, for example.

Never fear failure.  But never fail to learn from it.

So, you  should never be ashamed of your faults or misdeeds or mistakes.  You are human.  God forgives you.  But to keep doing the same stupid thing over and over again just pisses God off, and he will let you know this, in a big way.

Shame is the key to preventing you from learning from your mistakes.  We all like to "put out of our mind" the mistakes we made in the past.  Or we externalize our mistakes by blaming them on others.  That new car I bought wasn't a mistake I made, right?  No, it was a crappy car, that's why it depreciated so quickly!

No, that is not the answer.  The car was what it was. I made the mistake of buying it and deciding that a want was a need.  To "put it out of my mind" would be the worst thing to do - as to do so would allow me to be enticed into yet another crappy new-car deal.

So I remember this shameful event, and every time I drive by a new-car dealer, I remember what scumbags these people are (used car dealers too, especially!) and vow not to go in.  No deals there, period.

Our pride forces us to try to forget our mistakes - to hide our dirty laundry - and thus forget that we even made such mistakes.  This is the worst thing you can do.

And everyone makes the same mistakes, so there is no shame in admitting them to yourself, or to others, as we shall see.

They are Not Little:  That car I bought for $25,000 and sold five years later for $8000 (after "upgrading" it with another $5000 of parts) was not some small mistake.  That amount of money represents, over time, enough to live on, for two to three years, in retirement.  This is not a trivial amount of money.

Multiply that by the number of mistakes most people make, and, well, you understand why a lot of people today are facing retirement on Social Security and nothing else.  And I've seen it - it sucks.  You can't afford to go anywhere, or do anything.  If your car breaks - you're stuck, because chances are, you can't afford another car or to have the one you have, repaired.   You spend your "golden years" counting pennies and clipping coupons and listening to your friends tell you all about their trip to Italy.

Financial foul-ups can put you into debt for years, even decades, and you will end up as a virtual salary slave trying to earn money to pay off debts.  This is serious business, and to shrug off a $20,000 loss as "oh, well, that was a stupid move!" is not a good idea.  If you do that, you live in denial about the value of money and the impact of financial errors.

Again, you are going to make mistakes, that is a given.  But don't trivialize them and then go on to make them again and again.

Most people do just this - for example, they buy a brand-new car every three years, and wonder why they are broke and living "paycheck to paycheck" all the time.

They Shouldn't Be Secret:  The financial industry, like any good con artist, relies on the silence of the mark to perpetuate their frauds.  If a sucker gets conned by a Patent Medicine salesman, chances are, he won't tell anyone, out of shame.  So the Patent Medicine man can sell more of his toxic junk to others, as they haven't been warned.

And this is true in finances.  No one wants to say, "Gee, I was a chump when I refinanced my house - I added over $5000 to the balance of my mortgage just in fees and points, and then tacked on $20,000 in credit card debt!  DUMB!"

Because, if you say that, people will ridicule you, even thought they did the same thing.  Men in particular are all wound up by their penises and testosterone, to be "providers" and posit themselves as financially astute and responsible people.  Men are the worst at this game - they go out and buy a Camaro or a Jet Ski, to try to show off their apparent wealth, while secretly destroying their real wealth.  And they would never, ever admit to their pals that they made stupid financial mistakes.  It would be like admitting, in High School, that you were still a virgin!

And it is funny, but people sometimes get uncomfortable when I talk frankly about finances.  You can talk frankly about sex all day long - they have no problem with that.  But speak specifically (not in the generalities favored by the paid financial gurus) and they squirm in their seats.  Because you are making them remember their own "Dirty Little Secret" that they hoped no one would find out about - and they could forget, themselves.

But if we don't learn from our own mistakes - and can't learn from others - then how the heck will we learn at all?  We won't - and we can't.  There are only three ways to learn, and when you shut down the two most obvious ones, well, chances are, the third ain't gonna work for you.

So, what does this all mean?

1. It means, don't be ashamed to be human, and to make mistakes.  It happens. 
2.  And if you are young and yet to make huge mistakes, don't assume you are immune.  Every Wunderkind has a massive failure ahead of them, which is why I always say, "fail early, fail often." 
3.  LEARN from mistakes - it the best thing you can salvage from them. 
4.  Don't repeat mistakes again and again.  Don't assume that the next new car deal will be better or "this time for sure!" you've found the perfect credit card - or MLM scheme.
5.  TELL OTHERS - it is embarrassing, yes, but it is also a sign of courage, when you can lay bare you own misdeeds and warn others about it.  They may thank you for it later.  Or they may ridicule you and call you a fool.  Don't sweat it.  Most fools are lauded as visionaries, and most intelligent people are called fools - at least initially.

Because, when you get right down to it, your Dirty Little Secrets are hardly dirty, hardly little, and should not be kept secret.

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