Monday, June 4, 2012

Leave Your Pen At Home!

Whenever you Sign a loan agreement, chances are, it is not in your best interests.

Today, people are whining a lot about debt - their student loans, their upside down mortgages, their car leases, their onerous credit card debt.

But one thing they fail to realize is that they willingly signed up for these deals and thus have themselves to blame, in whole or part, for the outcome.   And many of these bad deals were for wants not needs.   In other words, "the man" exploited your own weaknesses and used them against you.   Your desire to have a fancy car and show off is used to lock you into an onerous lease.  Your desire for granite counter-tops to impress your friends is used to destroy you, financially.   Your desire for an "education" that will guarantee you a high-paying job is used to make you a debt-slave for life.

Now, I know what some of you are going to say.  "Well, Gee, how else could I get an education, if I didn't borrow the money?"  And that comment always amazes me, as you would think that college-bound students would be clever enough to figure this out.  If you can't "afford" college, there are other ways around it, but it requires some hard work and discipline.

Hard work means getting a job.  Discipline means doing without a fancy car when you are young.   And yet many people fall into both traps.  For example, some military friends of mine reported that they joined up to "save money for college!" but failed to actually save any.   The siren song of the used car dealer, with a lot full of used Mustangs and Camaros was too strong for them.   So after five years of service, they have nothing - literally nothing - to show for it, but a wrecked Camaro.

That was a few years back.   At least today there are G.I. benefits, even if you weren't able to save up any money.

The other thing that puzzles me about the "I can't afford college" comment is that you would think these kids would see what is going on in the world today and realize that borrowing $100,000 for a Liberal Arts degree is sort of pointless.   You will end up heavily in debt, with no job prospects, other than in the service industry.

Why would you sign on the dotted line for that crummy deal?  Yet many do.

It is like a charming young woman I met today, who was waiting tables at the local bistro.  She said she left her service job waiting tables to go to Atlanta and get a Bachelor's degree.  Four years later, well, she is waiting tables again.   I can only hope she doesn't have a lot of student loans.

The same is true for Credit Cards - people get into horrendous trouble with them, but everyone I know says "That won't happen to me!" - even the people who did get into trouble with credit cards in the past.

Or crazy mortgages.   Why would you sign up for a mortgage that has a monthly payment nearly twice the going rent for the same house?  Why would you sign a mortgage document that has no fixed rate and actually increases its balance over time?

Yet people did this - a LOT of people did this, over the last decade.  As many as 1/3 of our nation is "underwater" on their homes - and wishing they left their pen at home, when they signed the loan docs on those now-cracked granite counter-tops.

Yes, a lot of trouble can be saved just by not playing the game at all.  Or if you do play, take it deadly seriously and think long and hard before you borrow tens or hundreds of thousands of dollars.

Leases are raw deals as well.   Yet about one-in-five new car sales are leases.   Yes, you read that right, leases are actually sales of cars, not merely "renting" them.   You are buying the car with a contract that the car company promises to buy it back at a later date.   And most of these deals are onerous and expensive - the most expensive way to drive a car, in terms of cost per mile and overall costs.

But you can avoid leasing rip-offs, or indeed, all dealer rip-offs, simply by leaving your pen at home.  Don't sign on the dotted line.  Find a late model used car from an individual owner and pay cash for it.  It literally would cut your car ownership costs in half.

Leave your pen at home.   It is a metaphor for just not playing games that are "heads we win, tails you lose."

They can't nick you, if you refuse to play!

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