Live Frugally or Die Broke

The Most Dangerous Financial Practices



I was reminiscing about my days as a bank teller and some of the odd occurrences I observed at my teller window. I remember one individual that approached me who needed money right then and there. He had nothing in any of his accounts and was wondering what he could do. Well the frugal person in me wanted to explain it was probably best if he sold something or went to a pawn shop. I mean I obviously can’t give him money, if he doesn’t have any. Of course the bankers swarming around me like flies whispered, “Not so fast, let’s take a look here.”

We were able to give him a cash advance, otherwise known as a pay day loan. I had him sign a piece of paper and then conducted the transaction. I noticed above the terms he signed, the interest rate was 110% and took effect almost immediately.

Car Title Loans

Another very common occurrence was all the individuals who approached us with car title loans. I saw this daily and it was gut wrenching. The majority of these individuals didn’t even have bank accounts. They were simply cashing the checks at our bank because they were drawn on us. I was curious how these work so I did a little investigating.

Here is how a car title loan works. You agree to sign over the title of your car, if you do not pay the lender back. Within one month you must repay the loan with interest. Interest could vary between 29% and 100% depending on how quickly the loan was paid back. If you don’t pay the money back, you simply have your car repossessed. These car title loan companies would make bank deposits that would make your jaw drop. They truly made a killing off of others misfortunes.

Stupid People With Money

As awful as the banks are, you have to remember that there is a market for these types of lending practices. There are individuals out there who are willing and able to pay exorbitant interest rates. It could be because their financial situation is so dire and/or they have no financial alternatives. Either way, don’t ever let yourself fall victim to any of these lending tactics. I even tried to talk to some individuals about other alternatives.

The bottom line is, if you are coming into advance cash or cash a check using your car as collateral, most bank tellers will look at you like you with pity. That is truly the bottom of the barrel and you are most likely at rock bottom financially. I am against overly regulating banks, because it’s a consumers fault if they get suckered into credit cards and other financial products without knowing the risks. I do however think that car title loans and cash advances should be banned. In fact I think they probably will be very soon, given the war drums the current administration is beating.

How The Mighty Have Fallen

A few days ago I noticed a YouTube clip about Lenny Dykstra. Lenny was a former baseball player who left the game to become a financial guru. Even big names, like Jim Cramer, said that Lenny Dykstra was a financial genius. At the height of his glory days, he was worth about $50 million. Apparently he tumbled fast, because his wealth evaporated in the course of a year. He has now been foreclosed on and sued by about every person that has ever crossed his path. So what happened and what can we learn from this?

How The Mighty Fell

It’s not just Lenny Dykstra. The entire American psyche has adopted this lifestyle of spend like there is no tomorrow. It’s a lot like a drug addiction when it comes to money. People become so intoxicated by the spending it overwhelms their senses. When you really start shelling out money, it’s easy to lose track of how quickly out of hand things get. It reaches an epidemic, when people attempt to rationalize how they are entitled to such lifestyles.

In the video above, you’ll notice Lenny is sitting in his foreclosed house and justifying all of his problems with the reporter. He even pulls out a picture of a German Shepherd that he is absolutely fixated on. His mumblings leave us concluded that he is either drunk or on some sort of drugs. The fact he is obsessing over a $10,000 dog shows just how far gone he is. It looks like Lenny has absolutely hit rock bottom. I would like people to take note of just how quickly this lifestyle flipped around. The great financial whiz, who was thought to be worth millions, vanished and the empty husk that was once a legend is all that remains.

The Aftermath

We all know people like this and they are absolutely addicted to credit. They justify the new houses and cars they purchase by muttering the crazy justifications that Lenny did. “This dog is a world champ, I wouldn’t want any other dog,” is the crazy talk I mean. The main issue I have is that these type of people don’t learn their lesson. I’m not sure if there is a financial shock from going through bankruptcy. Maybe that’s why I never hear people mention how they would like to live more frugally after gluttonous spending. They blame others for their misfortunes. Watch Lenny blasting Washington Mutual (the mortgage holders) and the other “crooks” who took his money.

In the video above, Don Harrold tries to figure out just what happened here. Again, during this interview, Lenny is pointing fingers at the lenders. Blaming others is the most common scapegoat for those filing bankruptcy. It shows that we still need to find a way to teach people to live within their means. I find it amazing that the ones that overspend can so quickly ruin the lives of those who don’t.