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If You’re Broke, Act Like It

empty pocketsI have an acquaintance who is going through some tough financial times right now. She tells me her job doesn’t make her very much money, and her car was recently totaled in an accident. She is, in her words, “broke.” To afford the monthly payment for a new(er) car, she had to move to a considerably cheaper apartment, though apparently her parents are still helping her out with rent and the car payment. I feel for her, but at the same time, I wish I could shake some sense into her. She’s made several financial missteps up to this point, and though she’s slowly getting better, she still has a lot of progress to make.

Despite my advice to the contrary, she bought a late model used car (I believe a 2010 or 2011) rather than a much older model. I was peeved by her insistence on buying such a new car when her finances were in such poor shape, but I saw glimmers of hope when she was willing to relocate to a cheaper apartment and shop around aggressively for the best car insurance rates. But I lost it a little yesterday when I saw her boasting about her frugal ways on Facebook because of her “bargain” purchase of a $300+ dress for 60% off. 60% off is great, don’t get me wrong. But there’s nothing “bargain” about a dress that still costs $120+, plus tax and shipping & handling. She’s making good progress in some areas, but she still doesn’t quite understand the kind of sacrifices you need to make when you’re broke.

There are a lot of different things going on with her situation, so let me try and break it all down into a few actionable items. Unfortunately, it’s too late for her to fix some of her mistakes, but hopefully others can learn from them.

when someone damages your property, you are entitled to compensation

I would have thought this would be obvious, but apparently it’s not.

When she was in her car accident, she didn’t bother to get the other driver’s insurance information and file a claim because she thought the damage was too minimal and her car worth too little for it to be worth the effort. She was in for a shock when she brought the car into the shop and learned there was damage to the frame and the car was totaled. If you’re swimming in money and your car worth $3000 gets damaged, maybe you don’t care too much. But if you’re barely scraping by and your $3000 car gets damaged, you had better file a claim! If you can’t afford to either fix or replace your car and you could be entitled to compensation, why would you not do everything in your power to get that compensation?

Her parents appear to be very well off (though I don’t know any details of their finances), so perhaps damage to a car worth $3000 is something they would shrug off, and she learned this behavior from them. But she must acknowledge that she is not in the same financial position as her parents, and $3000 means a hell of a lot more to her than it does to them.

if you can’t afford to pay for a car with cash, you better be able to afford the monthly payments

If you need to borrow money from your parents to cover the monthly payments on your car, you should be using a bicycle or public transportation, or buying a significantly cheaper car.

I get it, you don’t want your car to look like a piece of junk. Ok, I’ll be honest, I don’t get it. My old car looked like a complete piece of crap before my fiancé spent 3 hours cleaning it one day. I just don’t give two hoots what my car looks like. But I acknowledge that other people do. But if the cars that meet your aesthetic standards come with a monthly payment that you can’t afford, there are no two ways about it; you cannot afford those cars.

I am trying not to judge my acquaintance too harshly on her car choice because it’s possible her parents told her they would rather help her pay for a later model car than have her driving a 15 year old car that she could afford on her own. But as a general rule, the ideal situation is that you can pay for the car in cash. If that’s not possible, it’s an absolute requirement that you can comfortably afford the monthly payments. If you’re not able to do so, you should not own a car.

just because it’s on sale doesn’t mean it’s a bargain

When money is tight, you absolutely have to look for sales and discounts and use coupons. But just because you can purchase something for less than its sticker price doesn’t mean it’s a good deal. Instead of spending $120 on a designer dress, she could have easily found a beautiful, well made dress at a discount store such as Marshalls, Target, or TJ Maxx for a quarter to a third of the price.

My acquaintance is going to need to rethink her biases toward the “finer” things in life. Looking for deals is a great sign that she’s at least aware she should be seeking out lower cost options, but she seems to believe that designer goods are inherently better than low cost, generic goods, and she will not settle for the generic version. She wants the lowest cost possible, but only within her category of products. Shopping at a place like TJ Maxx would be an unacceptable downgrade for her. This is a mindset that just has to be fixed. One day if she’s making oodles of money, she can shop at J. Crew and Nordstrom. But until then, she has to accept the fact that she cannot afford those stores. Once she accepts that and starts shopping at the discount stores, she’ll probably realize that their clothes are just as nice and wonder why she ever thought spending $120 on a dress was acceptable.

if you’re receiving Financial assistance, you should be cutting your spending down to the absolute minimum

If I were my acquaintance’s parents and I saw her Facebook post about buying a $120 dress while I was helping her with her rent and car payments, that would be the end of my assistance. She’s sending the clear message that she doesn’t actually need all the help they’re giving her, but she’s taking it anyway and spending her money on extravagances.

If a friend or family member is helping you financially, please for the love of God, show them some gratitude, only ask for what you truly need, don’t spend money on extravagances, and definitely don’t flaunt the fact that you’re doing so publicly! If she thought her parents would be proud that she scored such a great “deal” on the dress, she’s likely in for a rude awakening.

final thoughts

It seems like a lot of my acquaintance’s poor habits may come from the fact that her parents seem to have plenty of money and continue to help her financially, so she has this mindset that money will always be there for her. There’s nothing wrong with accepting help from your parents when you’re young and not making much money, but at some point you have to take responsibility for your life and realize that your parents can’t support you forever.

When your parents have the attitude of “what’s mine is yours,” it’s easy to assume that will continue indefinitely, but I have a feeling her parents aren’t all too thrilled that they’re still supporting their 26 year old daughter. When you’re under your parents roof, they may be happy to foot all your bills. But once you’re working and living on your own, it’s time to accept that your parents’ money isn’t your money anymore.

You never got to see your parents when they were in their 20′s, so you only know them as 60 year olds who have enough money that they don’t have to work three jobs just to get by. But very likely, when they were in their 20′s they were picking up extra shifts and pinching pennies, and that is what you need to do too.  You can’t assume that you can continue living the sweet life your parents gave you thanks to all their hard work. Now it’s time for you to put in the hard work and build the sweet life for yourself.

9 Responses to If You’re Broke, Act Like It

  1. Are you saying she didn’t follow my 1/10th rule of car buying where she can only buy a car worth 1/10th her annual income?!

    Perhaps she has a trust fund, or expects a large inheritance yeah?

    I believe everything is rational. She wouldn’t spend the money if she didn’t have the money. It might not be from her, but she has to have it, otherwise she can’t buy it!

    All is good!

    Sam

    • Gen Y Finance Journey

      She most certainly did not follow your 1/10 rule. I think she may have been closer to 40% or 50%.

      I’ve never heard her mention a trust fund, and from the things she says I find it very unlikely that she has one, but an inheritance is certainly an option.

      I do think perhaps you’re giving people too much credit though. There are plenty of people out there spending money they don’t have because they refuse to settle for less.

      • I just don’t think anybody pokes their eyeballs with sharp needles. Hence, she wouldn’t commit financial destruction unless she really enjoyed it!

  2. How old is she? The parents helping her part makes me very uneasy.

    • Gen Y Finance Journey

      She’s almost 27. What kills me is that she’s a pretty smart girl, she has all the skills she needs to be making enough money to live on.

  3. Oh wow. I can’t imagine my parents still helping me when I was an adult (they would if I were desperate, but I’d be mortified). I feel like they raised me and now it’s my turn to help them out.

    • Gen Y Finance Journey

      I’m the same as you. My parents will help me out with the occasional big expense (even though I tell them not to), but I couldn’t imagine accepting help from them just to make my rent. There’s got to be a sense of personal responsibility.

  4. Hmm – I always take the car thing with a grain of salt; the maintenance on an older car can be a killer. I know this well.

    Kind of unbelieveable (naive?) about how she dealt with the insurance thing. You can pretty much guarantee that no matter how much/little you think a little ding can cost, it’ll be about 5x as expensive as that. I bet she’ll know better next time.

    • Gen Y Finance Journey

      Yea, I’m willing to let the car go because as I said, I don’t know if her parents offered to help so she could get a newer car.

      But yea, I can’t believe she didn’t get the guy’s insurance information. I once neglected to get the insurance information from a guy who put a dent into one of my rear doors in a parking lot, but that’s because it still opened and latched closed just fine and I had no intention of getting it fixed since my car had 160k miles at the time and I just didn’t care about cosmetic damage. If you’re planning on getting the damage fixed, it’s just plain dumb to not get the other driver’s insurance information. I certainly hope she learned her lesson.

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