How to Talk Your Way into Debt

May 30, 2007

Some people go into debt by buying too much house. Others spend too much on their credit cards. I met a guy today at the UPS store who managed to go into debt by simply talking too much.

Cell Phone Debt
He signed up with Verizon for cell phone service then two cell phones, hundreds of overage minutes, and three months later he was staring at a cell phone bill of almost $1,000! The guy told Verizon he didn’t have the money and offered to pay $200 every month. Verizon countered they wanted $250 every other week or it was off to the collections agent.

Debt Collector
The broke chatterbox thought Verizon was bluffing and held his ground. Several weeks later a letter came in the mail, his account had been turned over to a collections agent and they wanted their money NOW.

Ridiculous Car Loan
Of course while this was going on, the poor guy wrecks his car and needs a new one to drive to work. Unfortunately, his credit is ruined due to his battle with the collections agency and the best interest rate he could get on a car was 20%!

Financial Priorities
This poor guy is a money black hole. Working at UPS for $8 an hour and paying chunks of it to car loans and cell phone debt is definitely not the optimal way to manage your finances. He does have a plan to pay off the cell phone debt and re-finance his car loan but he figures it will take him almost a year.

In my opinion, he just doesn’t have his financial priorities straight. What phone conversation could be worth a $1000 bill and a 20% interest loan? I’d like to help the poor guy out. I think next time I’m in the UPS store I’ll bring it up again. What advice can I give him that might sink in? How can I approach the subject without sounding like a nosy know it all?

Ben

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Ben

Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn’t like the other kids… His addiction to personal finance has paid off for his family and now he’s helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.


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Comments

11 Responses to How to Talk Your Way into Debt

  • Karen

    Not to mention that now his car insurance rate will probably go up. Many insurance companies are using credit scores as an indicator of responsibility. Which translates to high credit score=more responsible=lower risk=lower insurance premiums.
    It won’t hit him right away, but next renewal he could be in for a surprise!

  • Kevin

    Number one rule of debt:

    YES, they will come for their money.

    I can’t believe the number of people that get in over their head and decide to ignore the problem in the belief that the people they owe will ignore it too.

    Your FICO score is of paramount importance to your financial well-being. When you don’t have much (say you’re just starting out) it is VERY EASY to screw up your score and VERY HARD to fix it if you do.

    You MUST MUST MUST pay your debts!

    This guy screwed up. Verizon was willing to cut him a little slack. Yeah, it was still going to be tough, but $250 every other week is a LOT easier than the $1000 that he agreed to pay immediately when he ran up the bill. Now he still has to pay, is getting harangued by debt collectors AND has damaged his credit score.

    He has a tough road ahead of him.

  • Moneymonk

    Get rid of the phone and sell the car! catch the bus and use a pay phone, sorry but it makes no sense hanging on and making the debt bigger

  • Ben

    J, I agree, car costs can really eat away at your paycheck. Between car payments, gasoline, insurance, & maintenance cars are money pits.

  • J at Home Finance Freedom

    I posted an article to elaborate my above comment (click name link). Thank you.

  • J at Home Finance Freedom

    One option is to take a break from car ownership (including insurance, unless he’d have a renewal problem later), get rides to work, and pay cash for a cheap car in a few months. Whether you can tell him is another matter.

  • KMC

    Don’t bother talking to this guy. I don’t think there’s any way for you to tell someone how to manage money. People have to learn, most often the hard way. I sure did.

  • reader

    Look on the positive side. He must have a lot of friends to talk to to generate such a huge phone bill. LOL. If he is a young person, hopefully he will learn his financial lessons the hard way and not to make the same mistakes again. Regardless of his age, I doubt he welcomes any advice. Don’t ask me how I know.

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