Until a few years ago, my parents were the most frugal people I knew. Then my dad read the classic life-altering book Rich Dad Poor Dad. My parents leveraged the money they'd been saving and started expanding their lives. Now they're on their sixth rental property, looking to retire much earlier than expected.
In the last few years, they've developed the well-deserved (and annoying to my puritan traveler's ideas) habit of going to beach resorts. They've discovered a cheat code. Each resort they go to, they sign up for a 90-minute timeshare presentation, for some sort of awesome discount, perk, or free thing.
They enter the room on the warpath, telling the poor presenter that they are only there for their free tickets to the ATV-based dolphin show (or whatever the free perk is).
"We are NOT, under any circumstances, going to buy a timeshare" they'll say. The poor, unsuspecting salesman rubs his hands together, laughs maniacally, and shouts "we'll see about that!" (I imagine).Â
For context, my mother is a math tutor. My father is a former social studies teacher, whose encounter with the dark side of politics left him so skeptical that his belief of the crookedness of all politicians (and people who are trying to sell you things) is the stuff of family legend.Â
This is where the fun begins. The sales-person parades their inflated facts and cherry-picked figures in front of my parents on a screen, and my parents start asking questions until they find the lie. Since they know that the salesman's tactic is to sucker in boozed-up people on vacation, they ask their questions loudly, to ensure that nobody in that room is flushed into financial catastrophe.
They ask to see the contract, then read aloud the clause that says something to the effect of "your children's children's children may exit this contract only by banding together to sacrifice the most liked of their number on an altar made of solid gold at midnight in exactly 100 years."Â
Once my parents make sure the room is under their control, they commit the unforgivable sin:Â
They loudly and publicly do the math. This is always my favorite part of the story, and I've heard quite a few versions from their different vacations by now. After listening patiently to how much would be owed upfront or yearly for how long, my mother always grabs a pen and paper, and starts writing down figures. When the clerk stops talking, she shows him how many tens to hundreds of thousands of dollars would be sucked into a black hole if they signed anything, showing that this is not, in fact, an asset like the brochures claim.
Then begins the fun part, where my parents patiently wait out the rest of the obligated time before they get free stuff, while the salesperson stammers out some nonsense to try to save this sunken session.Â
I was very lucky to grow up with these two as my parents. Because they were shrewd and frugal with their money, they were in a perfect position to expand outward and acquire assets once they encountered good information. They hadn't scaled their life to live right at their financial limit.Â
In one of my favorite moments of the movie adaptation of Michael Lewis's fantastic book The Big Short, one of the traders (presumably being offered the trade of the century) calls the man who offered the trade and says “how exactly are you f*@#ing us? The banker who offered the trade, played masterfully by Ryan Gosling, proceeds to explain exactly how he's going to f*&@ them when the trade is over. The trader decides that his upside in taking the deal outweighs how the banker is going to f*$% them afterward.Â
In any interaction where the person on the other side of the desk/room/blimp is asking you for money, this is the attitude to approach with.
Because this is the harsh reality:
No one in the consumer finance industry is out to do you (the consumer) a favor.
If you are taking out something on credit, they are going to try to f*@$ you. They are in this industry to f$%@ you, because it is profitable to f*&@ you because the company they work for is built on f*@#ing people like you for as long as they can.Â
How do they get away with it? How do they sleep at night? The same way other people get away with things they're not supposed to do. Because they can. Because no one stops them. The people making money write the rules.
The unfortunate reality is that some degree of financial security is a base requirement to build a happy life in this society (unless you're able to fake your death and live entirely off-grid).Â
The only type of debt you should take on voluntarily in any situation short of an emergency is a mortgage on a house that is going up in value, leveraged by renters or Airbnb. That is an asset, a word that is often misused by silver-tongued snake oil salesmen. A timeshare is not an asset. A financed new car is never an asset.Â
Approach every situation involving finance with relentless skepticism. If you've somehow been dragged into a timeshare presentation or a potential new-car-buying situation, show up prepared.Â
Learn how to use a compound interest calculator. Ask "how exactly are you f*$#ing me? " Then do the math. Find out how they are trying to f&@$ you, then get out of there before you end up in a debt emergency.
If you are currently in a debt emergency, find a service where people compete for you, like Credible. Get Personal Capital and make sure you know exactly what your money situation is. Read Your Money or Your Life. Or Rich Dad, Poor Dad.
Security and sanity are better than shiny and shallow. It's their job to lie to you. It's your job to find the lie.
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