“Deserves got nothing to do with it.” – Unforgiven
Actually not my favorite Clint Eastwood movie. That would be Outlaw Josey Wales, or ANYTHING he did in the 1970’s. But I do know my limitations . . . .
When it comes to my life, I’ve made mistakes, like convincing George W. Bush to attack Iraq. I should have remembered – never get involved in a land war in Asia. But those mistakes aren’t the ones we’re discussing today. Today . . . we’re discussing the Seven Deadly Financial Sins, at least after I put on some spooky music to scare you into never sinning. Oh, I did discuss the Actual Seven Deadly Sins, and you can read that post here (The seven deadly sins and society. How do they fit together?).
We’ll start with the worst sin:
Debt
Is debt a sin or the result of sinning? I’m not going to sit and argue it – these aren’t really sins you go to Actual Hell for anyway. You just go to Financial Hell. So, I’m calling Debt a sin. And I’m calling it a result of sin. It’s the “Y” of Sin – sometimes a vowel, sometimes not.
Debt is really, really bad for individuals.
Why?
With debt, you get what you want, now. Like a brand new Corvette®, or a rare 1621 A.D. PEZ® dispenser originally whittled by Galileo while he was in prison for stealing cable television. I’m sure that was the best deal I’ve ever made, only had to pay $500 for it!
But now you have the object of your desire. And you have to pay for it. That’s not a problem. You only borrowed $50,000 for the Corvette™, right. You’ll pay (for a seven year loan) about $680 a month at 4% interest. Not bad!
But of that, your first payment will contain around $170 in interest, money that you’re paying the bank, every month. $1,800 in interest in the first year. The total interest you’d pay in this situation is $7,400 over the life of the loan.
Now let’s say you buy a house for the average price in the country, $200,000. Your payment on a 30 year loan would be a little more than $1000 for principle and interest, with a whopping $750 of that being interest in the first month. In the first year? About $8,800 in interest payments alone.
Sure, you have a house and a car, but you’re paying nearly $1000 a MONTH just to borrow the money in the early parts of the loan.
How much income would be required to fund this? Your tax rates will vary, but I’ll assume your tax rate leaves you with about 70% of your money after you’ve paid all of your taxes.
$17,000 in pre-tax income would be required . . . just for your interest payments. Toss in the principle, the taxes and insurance?
$50,000 in pre-tax income to pay for taxes, insurance, and the full payments. Some people work a whole week and don’t make that much money!
If you make the median family income of $59,000, you have the princely sum of $9,000 before taxes ($6,300 after taxes) a year to buy absolutely everything else in your life.
“Sovereign ingredient for a happy marriage: Pay cash or do without. Interest charges not only eat up a household budget; awareness of debt eats up domestic felicity.” – Robert A. Heinlein
Is there a place for debt? Sure. Businesses use it to expand. Families use it to create a reason to divorce. Or buy a really cool PEZ® dispenser.
The least bad debt? Mortgage debt.
Worse? Credit cards.
Worst? Student loan debt or money you owe to mobsters. But I repeat myself.
Have I sinned? Yes, I have. But that day in January of 2001 when I paid off my last non-mortgage debt except for student loans?
Priceless. And marriage harmony went up 41.7% that day.
Fear
Had I continually invested all of my spare cash into the market, say in a nice S&P 500 fund? The cash that’s sitting in the bank, gathering only a little interest?
I’d be retired today. Smoking nice cigars and drinking good scotch. With an airplane. A cheap one, but an airplane.
Dang.
I’ve successfully predicted 11 of the last three recessions. That may not be the most useful talent I have. I will note that I at least come by it honestly. One set of great-great-grandparents decided that they wanted to get out of Germany because they saw the increasing militarism in society and figured that war was coming, so they’d get out before it got bad.
They left Germany in 1880, 34 years before World War I and assimilated the heck out of themselves – one of them was Eisenhower’s grade school teacher – how American was that?
I’ve said before that being right too early is the same as being wrong, but in this case? I have all of my cash. And my great-great-grandparents avoided the mess that was post World War I Germany, where, I hear, the Internet was horrible.
Greed
Okay, I did play with some great stocks during the teens. Several of them doubled within a month of me buying them. And I kept riding some of them right into the ground. I turned $20,000 into $40,000 into $5,000. Which will be a great tax write off, when I finally sell it. Will someone please cue the sound of a forehead repeatedly hitting a desk?
Waste
In a recent post, I mentioned that the most expensive food is the food you don’t eat. I’ve done the math: when we go out to eat at Taco Bell®, we spend around $40. How much steak does $40 buy? A lot. How much steak gets wasted around the Casa Wilder?
Zero.
And we can’t eat steak every day. I mean we could, but we can’t. But when we have to throw out food, I feel horrible. Maybe it was the way that Great Grandma McWilder would talk about how fortunate we were to NOT BE STARVING when I wasn’t finishing lunch.
And Great Grandma McWilder came through the Depression on the “nearly having to eat your shoes” side, so she knew how to put a guilt on you. And waste was the sin that she preached against daily. In her house, it if had any use? She’d save it and use it. Thankfully she didn’t die in her sleep and eat me (Sleep Deprivation, Health, Zombies, and B-Movies).
That would have been one big waste of an amazing blogger . . . .
Lust
I think the most evil word in the English language is “deserve.”
- “You deserve a nice car.”
- “You deserve health care that someone else pays for.”
- “You deserve that stereo – you work so hard.”
When raising my kids, I wouldn’t allow them to use that word. When you do, you create a foundation for your desire for an item, which in Actual Sin terms would be Lust.
Needs
Modern life has increased the level of needs that we have in an amazing fashion. If you look at the following list:
- Electricity
- Internet
- Phone Service
- Mobile Phones
- Natural Gas
- Multiple Cars for a House
- Cars
- PEZ®
- Air Conditioning
- Netflix©
- Facebook™
- Faster Than Light Travel
- Wireless Keyboards
None of those things were invented before last Thursday.
Okay, they were here last Thursday. But how many on them didn’t exist before 1990? Before 1950? Before 1900?
These things aren’t needs. They’re nice – some of them amazingly nice. You can live amazingly well without them, as humanity did forever before 1900.
Reassess your needs** – not only of the services above, but of anything that doesn’t make your life better. Half the games that are available on the smart phone are designed to sell you or sell something to you. Either way? You lose. Except for Candy Crush®. That’s just fun*.
*I have never played Candy Crush™.
**If you don’t want to have electricity and your wife disagrees, it would amuse me if you used me as a source. It would NOT amuse me if she came to my house to complain.
Sloth
I’d write more about this . . . but I’m just not feeling it.
Just kidding.
Don’t ignore your money or financial situation if you’re lazy, like me. I put in place systems so I wouldn’t forget to pay bills monthly.
It’s a secret, but I’ll tell you because, you know, we’re cool, right?
It’s a calendar.
Pay your bills on time.
Otherwise?
You get what you deserve, which will be penalties, fees, and interest. You can use deserve in this case. Because you deserve it.
Sinner.
