Is consumption an addiction?

I understand taking on mortgage debt to purchase a home because the debt is offset by the value of the home in a normal real estate market.  In a normal market, it is an excellent investment.

However, the market became grossly overvalued this decade, making what is happening now in the market inevitable.  Some say the market will not be fairly priced until the sale to rent price drops back toward the historical average.

What is it about human psychology that makes a healthy person not under the distress of a hardship spend more than they have?  There is absolutely no investment value in consumption, and practically everything except real estate and true collectibles lose half their value or more in the first year of ownership. 

Are people swayed by jealousy of others?  Jealous of what?  That people can drive themselves into debt?

While it certainly makes the problem worse, advertising and the cultural bias that promotes spending beyond one's means is just more of the noise in life we have to filter out every day. 

This is a matter of personal choice and self esteem that we can control.  People are worth so much more than the "stuff" they surround themselves with.

One minor point.  When a person does only spend what they can afford, they are silly these days NOT to use a rewards credit card instead of cash, checks or debit card for every expenditure where a credit card is accepted. 

Credit card issuers are so convinced that people will not pay off their balance in full each month that they provide all kinds of incentives to use their credit card,  These include buyer protection on purchases, limited liability to $50 if the card is lost or stolen (you are out of luck if you lose or someone steals your cash), and automatic cash back on purchases. 

I had a card that paid 5% cash back on all supermarket purchases for several years until they realized "hey, we're losing too much from these clowns that never pay us interest" so they cut it back to 2%.

Nothing else such as cash, checks, or a debit card pays me to use it and provides free insurance with its use.  

The key is the mindset that you never use it when there is not money in the bank to cover the purchases being made.  As an added bonus, the dollars in the "float" between the time of purchase and the time the balance is paid from your bank account each month is earning interest in the bank.

by csnet (0 articles, 2 quicklinks, 2 diaries, 85 comments) on Thursday, January 3, 2008 at 2:33:02 PM
 

YOU CAN SAVE MORE

by paying in cash and negotiating a discount for the amount the merchant would have to pay the credit card company for accepting the credit card.  This isn't practical in all situations, but works well in a lot of them if you have the courage to just speak up and make the suggestion.  Of course, a cash payment may also make the transaction "off the books" for the seller, so your first offer should be lower than the credit card's transaction fee.

by W.M.L. (0 articles, 0 quicklinks, 0 diaries, 387 comments) on Friday, January 4, 2008 at 12:01:32 AM
 

Good tip

Very true, when people on the spot can make a decision like that they often will be glad to do so.  

Also any group that traditionally bills may be open to discounts.  We get a 10% discount from our dentist by paying on the spot, saving them credit card fees or needing to send a bill.

The credit card works well in places where discounts are not generally given for using cash such as large grocery markets.

by csnet (0 articles, 2 quicklinks, 2 diaries, 85 comments) on Friday, January 4, 2008 at 1:57:02 AM
 

Mortgage scams--the new crack industry

peddling pure, unadulterated fiscal crack--You got that right.Our addiction to financial stupidity allows the credit industry to shake, bake, simmer and fry us, over and over again. Keeping the American public math impaired and fiscally illiterate's gotta be a full time job for somebody. Between the consumption-addicted citizen and the corrupted credit industry, we're spending ourselves into fiscal slavery faster than a foreign country can buy up all of our bogus paper.

by M. Davis (47 articles, 2 quicklinks, 14 diaries, 154 comments) on Thursday, January 3, 2008 at 2:45:17 PM