Monday, August 25, 2008

Earn, Pay, Get - In That Order

A couple of years ago I was in the market for a new cell phone. It was great to shop online and to read all kinds of reviews. But even with all of that information, nothing quite beats holding a phone in your hand and giving it a whirl. There are some things that require actually trying something out before you know whether it will work for you. For example, I never buy footwear online because I really don’t know whether it will fit right and my feet are pretty unforgiving.

After narrowing my phone choices through online shopping, I wanted to have a hands-on experience with several models. It was Saturday evening. The only place I could accomplish my goal was at the mall. I hate going to the mall. Rarely is there anything at a mall that I want that I can’t get at a better price elsewhere.

Visiting the mall on any Saturday evening makes me feel like they just opened the gates of the asylum and all of its residents came to the mall. Among the masses of humanity the flow up and down the concourses are more examples of bizarreness than you can find at a Marilyn Manson concert.

As we stood at the booth for the cell phone provider considering our options, a young couple in their mid 20s walked up along with their toddler son. Their cherubic faced little bundle of activity had earrings that matched his father’s, just not gauged as large. At least the tot didn’t have tattoos matching those of his parents. The apparel this trio wore was pricey, as were their various jewelry accoutrements.

The tot’s mom stepped up to the counter and showed a great deal of interest in a particular phone model. She and the salesman eventually began discussing calling plans. She then dropped a question that the salesman almost seemed to be anticipating. “What kind of financing options are available if you have filed bankruptcy?”

At that point, the salesman became rather blunt. “There are no financing options available. The only thing you can do is pay full price for the phone up front and use a prepaid calling plan.” The woman spent a few more minutes trying to schmooze the guy and wrangle some other kind of arrangement from him. It was clear that she had had some practice at this. He said he’d like to help, but that the company simply no longer provided any other options.

It pained me to see a family that young that had already gotten into such dire financial straits that they had filed bankruptcy. Of course, I have no clue as to the reasons behind their bankruptcy. For all I know, they could have encountered severe and unexpected medical expenses. But the cost of their personal effects and their behavior at the phone counter belied some habits that commonly lead to financial problems. It was clear that they hadn’t learned their lesson yet, which means that they will likely suffer financially for many, many years.

Some of the best lessons we can teach our children are that it doesn’t matter how much you want or think you deserve something; it only matters that you can afford to pay for it. If you can’t afford it but still want it, find a way to honestly earn the means to buy it. And then don’t buy it until you have the means in hand to do so. Avoid debt. And finally, don’t spend everything you have. Put something aside in savings.

Following these principles necessarily means that there will be missed opportunities. But it also means that you will consistently have financial peace of mind. Hopefully if severe problems arise, your discipline will have led you to take steps to mitigate the financial impact. But if that is insufficient, there are thankfully some avenues available.

Years ago, I was working as a loan collector at a bank when a man walked in and said that he wanted to pay his debt. I checked his account and found no debt. He explained that he was involved in construction and had ended up filing bankruptcy three years earlier when the client on a major job failed to pay him. He he ended up defaulting on some debts. But now he had just closed on a major project and wanted to repay all of his former debts.

We researched the bank’s records and found that the bank had charged off the account due to the bankruptcy. We had to get our boss involved, but eventually they found a way that the man could repay his debt with interest. That, my friends, is integrity. The bank never expected to see this money and was doing nothing to collect it. But this man still felt obliged to make good on his debt.

So if you ever find yourself unexpectedly in financial default, I’d suggest that you find a way to demonstrate your integrity as did this man. Even if it does nothing for your creditors, it will do loads for your character. The money you spend to do this will be a comparative bargain.

11 comments:

Chris said...

Thanks for writing this. I had a similar experience recently when I was shopping for a particular used piece of electronics that sells new for between $400 and $500. I found a seller online offering his used one for $300 or so and contacted him via email. He responded that he needed to sell quick in order to cover rent. Now the thing that surprised me was that his reply email was sent from his iPhone. It seemed odd to me that this fellow would have all these fancy electronic gizmos and yet not be able to cover his rent. Perhaps he encountered hard times and was dumping everything including the iPhone, but I don't really think that is the case. I think he simply developed a sizable appetite for fancy toys.

That said, I think this is a malady that we can observe at various levels of our society, all the way from individuals on up to the federal government. We have become accustomed to having something because we want it, regardless of whether we can afford it in the moment. Very few people actually plan and save for anything anymore. We just feel entitled to the best of everything. I think this will be a primary component in our eventual downfall as a nation.

Just and Holy said...

Great post. The story at the end about the guy paying off his debts is inspiring. Thanks for writing.

Reach Upward said...

Chris, thanks for that interesting example. While it would be good for everyone in the nation to follow the simple principles suggested in my post, recent numbers show that we're moving the other direction, steadily incurring more consumer debt per person. And yes, we run the federal government (and many state governments) the same way.

Cameron said...

If not for the Republican ant-poor policies of the last 40 years...

Sorry, I just can't finish it with a straight face.

Reach Upward said...

Um ... is that an inside joke?

Cameron said...

Sorry, just playing the Democracy Lover role there.

Reach Upward said...

Good imitation.

Democracy Lover said...

Gee Cameron, I didn't know the Republicans had anything to do with this particular case. They did work hard to make personal bankruptcy more difficult, and they did eliminate the usury laws and all meaningful regulation on the financial industry, but I really can't find any connection to this incident.

However, I would say that although the man himself may feel a great deal better for having done this, it is rather doubtful that his integrity will reap any rewards on his credit rating or the likelihood of his getting another loan when he needs one. Sometimes you just have to do the right thing even when you don't have to and there's nothing to gain from it. Wasn't that the point here?

Reach Upward said...

Thanks for making the point.

That One Guy said...

Apparently, you go to the same mall I do....

Reach Upward said...

:)