Why are people proud of being stupid?

Sometimes it’s just ridiculous. People are taking pride in their stupidity and ignorance.

I came across this article a while ago, and was considering whether to write a post about it, or not. I decided to write.

The article is about a couple who as a principle are not smart about their finances. Well, they think they’re. It’s called being smart-a$$ really.

Here’s the quote from the article (published at CNNMoney on 02/03/2011):

“My husband and I have never had a credit card during the 37 years we have been married. We pay cash up front for everything. We do not have or want 401(k) accounts and the like. We keep our money in savings accounts and CDs.
We don’t have cell phones. Our only monthly bills are for utilities and satellite TV. Everything we have is paid for. I think we are doing great. Would you agree? — Diane L., Buffalo, New York.”

Well, Diane, I would not.

Let’s take a look at what they’re missing:

1. No credit cards: No convenience of not balancing your checkbooks every day, no convenience of not paying for checks, no convenience of getting miles, rewards and cash-backs, no convenience of online shopping. You see, they don’t accept cash on the Internet. Bummer.

2. Paying cash upfront can sometimes be a bad decision. For example, it’s smarter to get a 0% auto loan when buying a car, then pay in cash. Even if it’s a 2.99% auto loan, still smarter than paying cash. If you take a loan it doesn’t mean you have to buy something you would otherwise not buy, it just means you can put your money to work. Average return in a “safe” bonds-indexed fund is ~5% a year. So why not take a loan for 2.99% and earn 2% on the money? Why pay cash?

3. No 401K – no retirement savings, no tax benefits, no employer (pre-tax!) matching. Pure waste of money + less safety net at the retirement. The only reason I can think of for people not to save for their retirement is that they can’t buy enough food for themselves right now. That’s the only reason. One of the major benefits of the 401K/IRA’s is that the money is locked and kept safe for you from you. People who don’t understand it are not smart.

4. No cellphones – in a modern word it’s a problem. A land line costs $20-40 anyway (depends on the service), for $30+ you can have a reasonable mobile plan with nation-wide calling and text. What happens if there’s an emergency? You’re stuck with your car? Need an urgent medical attention? When was the last time you’ve seen a pay phone on the street? They’re disappearing very very fast, and those that are still out there – are broken. Are you sure you want to live without a mobile phone? Land line would be the first one to go (and I don’t have a land line), but definitely not a mobile.

5. But they have satellite TV. Why? What for? If they’re saving every penny – then satellite TV is a luxury without any doubt.

6. They are doing great. Can’t argue with a feeling. But they could do much better. They’re just not smart enough.

This is an example of a very common case: people who think that being financially stupid is the “bon ton”. It shows mostly ignorance and some arrogance. People who think in stereotypes (like “Credit cards are bad because the drive me into debts”, or “I don’t want the government to tell me when to save for the retirement, I don’t need 401K”, or “cell phones are a waste of money, I only use my home phone anyway”) are not thinking effectively. Thinking in a preset pattern is a recipe for failure.

As a consumer, you have to be smart. You have to critically analyze every piece of information you have, and decide for yourself whether the benefits worth the price and the effort. If you have a tool that can drive you into debts, but can benefit you if used differently – don’t avoid just because the abuse of the tool may harm you. Don’t abuse the tool, use it smartly and benefit.

The people that wrote that letter to CNN are stupid. You can learn from their mistakes, and not make them yourself

Your Little Advisor.

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One Response to Why are people proud of being stupid?

  1. klaus says:

    But time is money. Wasting time figuring out how to use a cell phone, wasting time arguing with insurance sellers, credit card sellers, wasting time shopping for and figuring out how to work a plasma screen tv, is ultimately a waste of money. Instead, I spend my time learning science and computer science instead of learning about credit cards and cell phones. Then, I can be the person who makes money off of stupid sheeple like you.

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