Personal debt and overspending: How important is delayed gratification?

[Quantum]

We've all heard about how people overspend and then get into personal debt. Does the lack of the ability to delay gratification play a significant part in overspending? Furthermore, in the book, The Millionaire Next Door, the millionaire next door is generally found to be frugal.

If so, then how can we build up our ability to delay gratification? What has worked for you?

What other personal traits, habits, or behaviors contribute to successfully managing personal finances?

[Joanna]

The really easy way to delay gratification is to read the very fine print on any credit card application and truly comprehend the real rate of interest you are paying for any item you purchase on that card without paying off the entire amount by the due date. Anyone who purchases an item on credit, paying off just the minimum amount each month is a SUCKER of the highest order.

[Tara Woods Turner]

Get Out of Debt Hell: I did it, and so can you

[Tara Woods Turner]

I want to point out that being poor is very expensive so we have to be careful not to judge too harshly.

[Joanna]

Tara, I'm not sure if you are directing that comment at me, about being harsh, but, in any event, in my opinion one way to get poorer is to use revolving credit. There's no way round it, I've seen it happen.

[Tara Woods Turner]

Joanna wrote: "Tara, I'm not sure if you are directing that comment at me, about being harsh, but, in any event, in my opinion one way to get poorer is to use revolving credit. There's no way round it, I've seen ..."

I completely agree with you on each of your points but just wanted to open the dialogue about choices, economic disparity and predatory lending. Sorry for being vague!

[Quantum]

the situation that i'm thinking about in particular is when some people bought expensive luxury items (for example, boats) using their equity line of credit from their expensive house for which they had low mortgage payments and then they lost their job and couldn't afford the mortgage any longer--and, here i'm thinking of the financial crisis and out-of-control housing market--and then the housing market tanked and they had to sell at a loss.

is that one example of lack of the ability to delay gratification or are there also other factors involved. maybe lack of risk management? or the prevalence of easy sub-prime home loans being too enticing?

[Joanna]

There is nothing that makes my blood boil more (sorry for cliche) than predatory lending. Despite what I said in my first message on this thread about Suckers and credit cards, there are so many people who just do not understand things like that, and even if they read the fine print do not understand what it will mean.
Just as in the years leading up to the housing bubble burst everyone was told they could afford a house and the mortgage because house prices were going up and you could always re-finance blah blah blah.
Disgusting and disgraceful. Especially when it was mortgage brokers and banks who were spinning the lies.

[Joanna]

Just to add to that, Tara: not absolving all from personal responsibility and all that but when you haven't had the best education in the world, and you have nicely-dressed brokers and financial managers advising you to sign on the dotted line, I understand it's difficult to know who to trust

[Nik]

Joanna wrote: "There is nothing that makes my blood boil more (sorry for cliche) than predatory lending. Despite what I said in my first message on this thread about Suckers and credit cards, there are so many pe..."

Agree with Joanna. I think the use of debit cards instead of 'credit' would be more prudent for many....

[Nik]

Alex G wrote: "the millionaire next door is generally found to be frugal...."

My own experience with many shows that they often are, but I'm not sure even stingy (as a hyperbolic of frugal) is necessarily a negative feature may be better than overspending.
Now life is not about becoming a millionaire, imo, but about being happy (unless one's path to happiness lies through enrichment).
I advocate for the balance between delaying and gratifying -:)

[Jen Pattison]

Tara wrote: "Get Out of Debt Hell: I did it, and so can you"

Thanks Tara! :)

I believe that the behaviours for sensible money management are often learned in childhood; being taught to save and to wait for things that you want. Waiting does give you much more of a sense of appreciation. I didn't have any of that as a child, I also had the misfortune of living through the 80s flood of easy credit and struggled with debt for years. If you've never been burdened with debt, it's hard to understand the psychological misery and pain it causes.

I've never been happier since I became debt-free. Like many other people, I spent years buying a load of things that I didn't need. It's delaying for me, as I will never borrow again unless for a house purchase.

Alex G wrote: "...the millionaire next door is generally found to be frugal."

Oh yes, many rich people that I have met through the years have been reluctant to part with their cash!