Friday, November 4

Frugal vs. Always Broke, Part 2

I was recently asked by Social Security to be the Representative Payee for an acquaintance of mine who is also a tenant.  We've known each other going on 15 years and I was seen as a trustworthy option.  I agreed to do it but now I’m regretting that choice because it puts me in a moral dilemma:  how he wants to spend his money versus how I think it should be spent.  It’s important to realize that a Representative Payee is appointed when the recipient of Social Security funds is deemed unfit to manage his own money.  I was given a booklet with guidelines for how to manage this money, including a guide to prioritizing how the money is spent.  It’s essentially a Maslow's Hierarchy of Needs, government-style.

The problem is that my friend has made some really bad decisions over the last couple of years.  Instead of saving up and paying cash for new bedroom furniture, he is leasing furniture from Aaron’s.  Aaron’s is a loan shark fronting as a furniture store.  The interest rate he pays on his lease-to-own furniture is 20% per month, or the equivalent of 242% per year.  He didn’t stop there.  When he and his girlfriend needed money for cigarettes one month, she convinced him to pawn the TV that he was leasing.  They received $200 in proceeds but have to pay $40 per month in interest.  In other words, they still owe $200 after eight months of paying $40 in interest.  So they’ve paid $320 and still owe the $200.

Why do people inflict pain on themselves?  I’ve decided that it must be a chemical imbalance.  Those who can delay gratification versus those who are “pleasure seekers” and have to have something NOW.  Pleasure seekers don’t consider the long term pain associated with the momentary and fleeting pleasure derived from their actions.  They wind up in this endless cycle of greater and greater debt.  Then they file for bankruptcy and make the rest of us pay for their mistakes… but I’ll save that for another day!

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