What are the biggest financial traps in our current society?

Hi All,

I believe there are so many financial traps these days some of them are deliberately designed.

For instance, I wouldn't visit a bank for a loan to purchase clothes, food, etc, but banks created a convenience of using credit cards rather than a loan.

Please share your thoughts and insights for better financial freedom

Few of the financial traps:

Credit cards/ Buy now pay later services
Car loans/ Personal loans/ Pay day loans
Home loans
Student loans

Although these products are helpful at times, but if we have too many financial liabilities that will undermine our freedom to make our own career/ life style choices.


    • +3

      If MMT is right, we should see taxes rising soon across the world to limit inflation, right?

      • Yes.

        • +101

          Sorry for the hijack, but the biggest financial trap in Australia is stagnation.

          The majority of workers (80% ?) usually work at their jobs, without charting a course for their future. Many will be promoted internally, or via starting with new companies. But in the long run, you won't be thriving as you could imagine. This play-it-safe mentality is actually ingrained into us during our schooling period, so it is hard to shake. And even worse, it is actually in our Human DNA (ie "evolutionary risk aversion"). Only the minority (20% ?) of people risk it, and they are rewarded… and the reward is not proportional to the risk. Those who have nothing, everything will be taken from them, whilst those who have everything will be given more. Nature forms it's own hierarchies, without the aid of government structures.

          By repeating the same or predictable pattern, most people in the workforce end up in stagnation. Our responsibilities don't change much, and our wages remain stuck. Not only that, it robs our society of potential innovations we could have developed. It makes us less efficient.

          Your income is your single most powerful wealth creation tool. That's a fact.
          If you make it your persona, habit, and lifestyle to strive to learn more, develop more, you usually end up earning more AND quicker. Much faster than any stock or land investment (on average). It's very simple to buy an appreciating property, and make investments in bonds, shares, and crypto. It's also fairly easy to avoid making well-known blunders (gambling, drugs, alcohol, etc). It is stupidly easy to cut your spending to little/nothing. Those aren't the solution.

          It is very difficult to increase your earning to great/huge figures. That's the key.
          In life, if you do what is easy your life will be hard. But if you do what is hard, your life will be easy. So… Focus on your income. That is literally the best way on how you can get out from a financial trap.

          • mic drop*
          • -6

            @Kangal: I bought Bitcoin in 2011 and am working hard at being a doctor. I agree with your sentiment but it was a misplaced set of statements to my binary answer.

            • hands mic back
            • @Gradesbrah: So sad how the folks here value your education! I feel ashamed!

              • +2

                @payless69: Not sure if you are being sarcastic.

                Ultimately the question asked if as per MMT that inflation should be responded to by increasing taxation. The answer is yes, anyone can watch the 10s of hours lectures from the founding professors of the theory, South Australia University has a good one with Prof Stephanie Kelton, along with a Bloomberg discussion https://youtu.be/7sd-ElKMbPI

                The theory is as they explain, they wrote it, and it is clearly described in the context of countries with local monetary supply, along with key considerations of trade deficits, commodity based economies, and mechanisms to control inflation. A strong argument could be made that Australian spending has characteristics of MMT however due to poorly controlled injection mechanisms the money has caused pockets of inflation without strengthening the economy to a point tax rises will be tolerated.

                In response to an MMT specific discussion I was told to invest in myself and my wage is my most powerful tool of wealth creation. Mathematically this is not possibly true, as compounding a salary faster than a share of an economy would indicate several massive inefficiencies. All the world’s wealthiest have achieved this through investment, not a salary. Then there was the comment on DNA coding for professional risk aversion. DNA codes for historically selected traits, most of which occurred before Adam Smith so the parallel drawn is unscientific, Dawkins has challenged the blaming of DNA for social trends many a time.

          • +2

            @Kangal: I would heartily applaud all above if only I might add that your heart (read: motivation if you must) be in the right place.

            For in one's self as in the world, if you have no destination any path will see you there

          • +3

            @Kangal: @Kangal, yeah but no. Taking risks can be costly, just because of change. I've done that for the last 30 years and while i agree with your idea that staying in a subpar unsatisfactory job is mindboggling, geographic changes, studies all that costs big bucks nowadays

            I dont find aus so inactive and inert as where i grew up (i think i would have shot myself by now)

            • +4

              @juki: Just as an update:

              —My heart's in the right place when I share this. It is a timeless advice, that I am giving away for free. If you get smarter, wiser, freer, richer… I get nothing. But in a roundabout way that progress is advantageous for me and our society.
              —I'm not advocating an infinite search into wealth, where it becomes your only purpose in life. Most people realise this anyway, once they hit a comfortable wealth level. I think the quoted figure is like USD $100k/year, and after that you don't get "more happyness".
              —I don't think you should compromise your morality and values to become rich. If you think it is not possible to be wealthy otherwise, then you're mistaken. Hoarding money and possessions can be a zero-sum game, but being "rich" is different than being "wealthy", which is a positive-sum game. Most middle-class people are wealthier than king's from 200-years ago.
              —When talking about risk, it is about a balance with safety. The mantra is about getting out of your comfort zone, actually embrace discomfort. Be active and not passive. We can't avoid pain, suffering is optional.
              —NOT-taking risks can be much more costly or risky. People always rationalise staying in a particular role/company/field by saying "the devil I know is better than the devil I don't"… Well, don't be too sure about that.
              —One interesting thing about mountain climbing is that technically it can be ascended from all 360' angles. But some routes are much much more efficient than others. If you find yourself stuck halfway up the mountain, many times the best action is to climb back down, and start from a new course, and you will be able to ascend it faster, easier, and safer. That's what I am digging at for the majority of people in the workforce, who end up stagnating, and their primary tool for wealth creation becomes blunted. It's an easy path to get into the financial trap.
              —As another analogy, if I gave you 10 hours to cut a big tree, and gave you a blunt axe, youll probably run out of time trying. Or if you're talented/athlete, you might fell it in 8 hours with the blunt axe. Or you could take the blunt axe and invest 2 hours to sharpen it proper, then you could cut that tree down in 4 hours. For instance, Gradesbrah from above is following this same philosophy, wether he realises it or not, by working hard and working early to becoming a (medical?) doctor, he is ensuring that he has a skill that is in-demand, scarce, and greatly reduces his likelihood of falling into financial trap.

              *hands mic to next person *

          • +13


            Your income is your single most powerful wealth creation tool. That's a fact.
            If you make it your persona, habit, and lifestyle to strive to learn more, develop more, you usually end up earning more AND quicker.

            You also risk becoming boring, burnt out and a hermit.

            By linking your personal worth to your work worth you put your mental health at significant risk over time. When things at work don't work out they have a far greater impact on your mental health than they really should.

            Making your life totally about earning an income is short-sighted. Make conscious decisions about your career, position yourself to develop and grow, but don't make it you.

            I say this from a place of experience. I've seen and been on both sides. I successfully started my own company at 24, working relentlessly until my early 30's, earning huge money, but missing time with friends and missing building relationships. With your personal worth so intrinsically linked to your work, when sales and mergers fall over the personal toll is heavy. Very heavy.

            I got out from under that heavy blanket. I lost friends to the same (suicide or excess). I have friends still in that mindset. It makes me sad now, seeing them working flat out, to the detriment of having a meaningful life. They don't say it, but you can see it in their eyes - it's not jealousy, it's more a kind of regret, sadness and emptiness. They have money, that's what their target was, but it's never enough and no amount of money fills the hole of long term emotional fulfillment.

            • @blwnhr: Definitely agree. I usually try to do some hard work studying for a few years, then rest a few years and apply the knowledge on the job. If you're the type of person who likes to learn you'll probably do alright no matter what you do.

            • @blwnhr: Firstly, I'm only replying because someone else replied to me.

              Well, in my second sentence there I already said: "I'm not advocating an infinite search into wealth". So what you said doesn't apply to what I was saying.

              I am saying people should strive to do good, learn, and bring value to their community. Now, to what degree depends on case-by-case. And I agree with what you said, excess can lead to poor outcomes. However, I also said "balance with safety", so not sure if you misread and misunderstood my comment.

              @Jackson, it necessitates to be an oversimplification. I can't do better than that, because that requires more intimate knowledge of an individual. Besides, even if I shared in great detail what has worked for one individual to someone else, it doesn't really apply because we're all different. It would be like me giving the winning combination to my lottery, after it has been drawn.

              But I agree with your sentiment, that it shouldn't be all on the individual. It shouldn't be a case of Me Vs World. To a large extent it is true, we are born alone and die alone, and have our thoughts to ourselves. I guess the crux of the issue is like a story, or the Hero's Journey: we are born and grow dependent, we develop and strive to be individuals, we then try to build something greater than ourselves (friends, study, job, home, partner, kids), then we use band together as a community to bring value and be guardians of the next cycle, then we deteriorate, eventually retire, and possibly come back to be dependent on the community we helped create. So in your life you should strive to bring value, make money, build a family, and a strong network of friends/relationships. That's what I was talking about when I meant risk and balance. All of that will beat simply having just money, or any single one of those things on its own. The whole is greater than the sum.

              There were two great quotes that helped me in recent years. One is "don't let perfect be the enemy of good", that affected me personally. And the other which is on topic with what you were saying is "If you do what is easy, life will become hard. But if you do what is hard, life will become easy". So success requires challenge, but challenge itself doesn't guarantee success…. hence the element of "luck".

          • +2

            @Kangal: While I agree with a lot of what you said, Its an oversimplification, for which I think the key words I would throw in are "calculated risk". To explain, I know heaps of people who took risks but failed miserably, didn't take any risks and lost out, there's a balance in between where things work out. I can't explain why the risks I took paid off, while the risks some took didn't. At the end of the day, people might just call that "being smart". Some didn't educate themselves at all, some spent too long educating themselves but still couldn't get work, some invested nothing but did OK financially, some spent lots of time learning about investments and went backwards. Not to mention that luck plays a huge part in your life.

            At the end of the day it's the mark of a good society to build systems which encourage all good things, progress, efficiency, output, and also make life simple for people by getting rid of bad thing, like inability to access medical care, employers taking advantage of staff, or 'financial traps" as the OP asked about. Putting everything on the individual is denying the progress of thousands of years of civilisation, we'd all be worse off if we were still covering ourselves in skins and chasing out food or being chased across the savannah

          • +2

            @Kangal: Thanks Tony Robbins!

          • +1

            @Kangal: I believe the idea is to dedicate yourself in providing useful services and products to improve and further humanity?

          • +1

            @Kangal: Not sure if this is common knowledge in other fields, but in IT Systems and Networking Admin, you maximise your earnings by changing jobs every 18 months. Nobody gives raises, but every new job I've had has come with a 10k+ pay raise (last 2 have been 20k, within the last 3 years).

            I don't really want to change my current job because I actually DO get raises (yay for being a part of the education sector).But after 5 years here I'll be looking to change (because I'll be bored, not due to pay)

          • @Kangal: For to the one who has, more will be given, and he will have an abundance, but from the one who has not, even what he has will be taken away - Matthew 13:12

          • @Kangal: Indeed I agree and took action instead of just thinking about it and never doing anything. I started a business, was able to leave my job for it and now it's earning me 3x what my job was paying me 5 years ago and I don't have to deal with office politics nor travel 2 hours to work everyday.

            Have not looked back.

            This is coming from someone who is educated, had a cushy finance job and was told by all those closest to me not to quit my job and just continue the business as a side hustle.

            Business is definitely not for everyone, it's for those willing to put in the long hours, 7 days a week to set something up to improve your life. Not easy but absolutely worth it.

        • +1

          Probably not in Australia, as government debt is relatively low/manageable compared to most of the West..inflation pressures here are also not as high as in the US, UK and many other countries.

          • @acersaurus: We are running an increasingly large deficit with the spending growth outstripping both GDP growth and inflationary forces.

            If anybody believes in investment and the dangers of debt then the above statement should indicate that spending cuts and income (tax receipts) will need to increase.

            • +2

              @Gradesbrah: Well it is about 45% of GDP (gross debt) which is nearly $1 trillion. increasingly large yes but still enviable by global standards. The US had over 100% well before the pandemic. MMT in 30 years maybe, but it's hardly needed in this country now.


              Both major political parties have actually committed to the same "stage 3" tax cuts which will be some of the biggest tax cuts in history.

      • No

        My understanding is that MMT is a theory that needs the central banks/governments to give it a go, it is not something that happens in the background.

        I'm by no means an expert.

        • Yes it does, but in a country with too much debt combined with high interest rates the Government could almost be forced if they cannot pay their interest bill, or face an alternative of default.

          Last time I checked raising taxes wasn't very popular, so I do not think many governments would want to adopt it unless facing a repayments crisis.

  • +70


    • +41


      • +75

        Girlfriend and wife.

        • +42

          At the same time, of course.

        • +3

          Girlfriend happened before the wife. So the trap started at being the gf lol

        • +1

          2 Girlfriends

        • +7

          With child…

          • +1

            @tessel: tessel wins the round

            (dating single mum girlfriends)

            • +3

              @Kangal: Am I too late to yell Penis!

              Not only due to my still-developing immaturity

              But also

              Because it seems that the root of all these sufferings might be we were hooked by our own bait

              Petards, we all are, at times

        • +1

          My wifes girlfriend.

      • +9


        • +5

          Username checks out :(

          • +4

            @spillmill: Lol. Mid-50's, so yeah a bit old, but hardly broke and happily married/never divorced.

            Just "OzBargain broke", i.e. house is worth less than 5 million, salary less than $200 K, no investment cars in the driveway and no (current) connection to bikies ;)

        • +1

          Had a teacher back in the days who have been divorced 3 times… I don't know how he survived to be honest…

          • @WillKillfor5Cents: The wifes richer than him and he signed prenup

            • +1

              @ChiMot: Yea, but paying for 3 lawyers sesh… that's a lot. Had a relative going through one recently, spent almost $100k on lawyers fee.

              Unless he got lucky and all three were amicable divorces with minimal paperwork (probably 10k each lol)

        • +1

          Why is divorce so expensive? BECAUSE ITS WORTH IT !!!!

        • Joke from a divorced person: I asked my wife what she'd like for her birthday. She replied "I want a divorce." I said "I didn't want to spend that much!"

    • +4

      was looking at places to buy, sent through a nice 2 bedroom townhouse… "oh but I want a 3 bedroom one, a 2 bedroom is too small" thinking in my head… it has begun.

      • -1

        to be fair, 2BR is pretty small and you'll be wishing for a bigger place soon if you go down that path

    • What if your partner actually earns more than you do?

  • +65

    Absolutely anything that is buy now pay later, if you cannot afford it now ….wait!

    • People think that BNPL is just free money for now, but they'll spend more on more things because things seem cheaper.

      And then they don't realise that you actually pay a fee if you're late or take too long to pay it off. It's just not worth it unless you could have done more with that money (eg: crypto)

      • +17

        To me it's basically the same as a credit card. People with poor impulse control and financial management are going to shoot themselves in the foot regardless.

        • +14

          Afterpay is allowed in pubs now which I find hilarious haha. Very smart move on their part.

      • +4

        Lol the first half of your statement is all good and then you transition from giving good advice (people aren't aware of overspending and fees) to telling them they could be using that money to speculate/gamble on crypto

        A real headspinning statement

      • +3

        BNPL actually make the vast majority (>70%) of their money from the merchant fees that they enforce. The kicker is that shitty companies like Afterpay don’t allow merchants to recoup their losses via surcharges. Businesses must then either take the 4-7% loss or increase the price of everything, for everyone. If you’re buying something from a business that offers BNPL, there’s a non-zero chance that you’re subsidising BNPL customers.

    • I couldn't agree more

    • -1

      Delayed gratification is a helluva drug.

      • +12

        Delayed gratification is a helluva drug.

        I think you mean, "instant gratification".

      • +4

        I think it's called edging.

    • +15

      I am absolutely against the whole BNPL industry because it is absolutely a poverty trap.

      It is a matter of time before proper rules and regulation will apply to it, as it should.

      • +4

        I'm all for rules and regulations on BNPL but just chucking in the other side. I budget my entire year in an excel file, to the dime (savings/bills/food etc), so AfterPay has saved my butt a couple of times with having to buy medications and once with a new battery for my car, I didn't have the savings at the time but I was able to enter the fortnightly payments into my document and it was a life saver.

        Now I know I'm weird having budgeted that far in advance and I should have savings (working on it), but they can be a life saver IF you know what you're doing.

        But I completely agree that they are too easy and accepted by too many places now that people end up screwing themselves over by not thinking about the payments. I just wanted to add my 2 cents on the good side of them, if you know what you're doing and on a very fixed income (disability pension here) and plan them properly they can be a saving grace.

        • Like pretty much every other financial instrument, if you know what you're doing and are pretty financially prudent there is no reason anything needs to be regulated. The problem really arises when they start targetting vulnerable people: instead of promising to cover essentials at a time of need they advertise instant gratification instead. People start going into debt for crap they don't need instead of borrowing for the essentials.

          Think of other financial instruments out there that needed to be heavily regulated: payday lending, credit cards, personal loans…. anything unsecured. Now think how much easier it is to borrow for BNPL compared to all these others.

          • @CMH: Very true, and I agree these days they are targeting those groups, I joined afterpay when it was new and hardly anyone accepted it, so I guess I got used to it (I've never missed a payment), but yeah I do see your point these days, even more so with some of the other companies that charge crazy fee's even if you do pay on time (OpenPay for example).

            It's definitely too easy to get it, I'll 100% agree there and what's worse is it's just as easy to signup to several of them.

        • -10

          You can't be that great at bugeting if you don't have savings.

          • +12

            @AlanHB: Try living on the disability pension with hundreds of dollars of medications and hospital parking bills and see how you go mate.

            • -13

              @Narull: I know someone with one hand, one leg and one eye that's a successful second hand car salesman. There's lists of people who became famous for overcoming their disabilities to be very successful in their fields (google's your friend here), and plenty more that have not received any recognition for just having a job.

              Just saying there's something everyone can do if they put their mind to it.

              • +14

                @CMH: Yeah, all those people didn't do it while still waiting on surgeries and such mate. Google is indeed your friend, but you will never understand what it's like wondering if you will make it to the next one let alone through it so save ya preaching for someone who gives a damn, I got bigger things to worry about than some moron on here who thinks they know my life better than I do.

                • -10

                  @Narull: @Narull

                  Mate you seem to have enough time to post on ozbargain so take it easy and focus on how to earn a second income.

                  You can communicate well, write complete sentences and make logical arguments ;)

                  Living on the disability is no way long term, wish you the best with your health but it's really in your hands to change this.

                  No one else. Best luck.

                  • -4

                    @dealman: Exactly my point dealman.

                    Anyone can make excuses, but trust me when I say I don't really care what you do. Only you can make your own life better, by accepting that your problems don't stop you from trying to do better. The only thing stopping you are your own excuses, and the sooner you realise that nobody's stopping you from trying other than yourself, the sooner you start trying.

                    Good luck.

                    • +10

                      @CMH: I apologise to you both, I only just saw that you were not the person who said can't be that good at budgeting if I have no savings. I was offended by that comment as I think I'm doing surprisingly well on limited resources at the moment.

                      My mistake 100%, I got a temper I'll admit.

                      Living right now is stressful, and well wanting to continue living as well, I'm fighting cancer and heart problems alone and it is difficult so I have small things I'm proud of (like my budgeting) and I get a bit hot headed.

                      I am working on things for a side gig, it's just difficult to devote myself 100% to something when some days it's hard to even get out of bed due to the pain and such.

                      I thank you for your encouragement and seriously do apologise for being too hot headed. Next surgery is sometime in the next 6 weeks they say, last one didn't go well and hell they have already taken me entire bowel, how much more of my insides they gonna scoop out haha.

                      Again, my bad, and thank you.

                      • +4

                        @Narull: Sorry to hear about what you're going through. Glad to hear even through all that you're still working on a side gig; that's exactly what I was talking about. I do hope things work out for you in every way.

                    • @CMH: I fully expected people to downvote my posts, but for all those that are downvoting I've got a question for you: is wallowing in self pity the better option than trying to make things better for yourself? Woe is me, I have no monies, welfare isn't enough, gib more monies…. Does that sound sustainable or should we advocate for employers to employ people who may be disabled but can fill the role perfectly?

                      • +1

                        @CMH: The answer to your question is: people on disability should be able to live with dignity and not be desperate for money when they have an extra bill/medication/car fixed and so on. It extra unnecessary stress on somebody already going through a rough time.

                        • @Cookiescream: Australia already provides a lot of support to the disabled: centrelink payments, rent assistance, NDIS just to name a few. On top of these, many other charities provide further support: meals-on-wheels, social support programs are the first 2 that come to mind.

                          You can get everything from help with getting your weekly shopping done, getting your lawns mowed, rent, house chores done…. and you think not having enough money is the problem?

                          To me, I think the problem is that the average person on disability doesn't know how to access these programs. While throwing money at people might be the easier solution, it is the most inefficient course of action. It is the lazy policymaker's "easy-way-out" of any problem: lets just throw money at it.

                          Centrelink provides enough money for anyone on it to survive IF you take into account all the other means of support available.

            • -7

              @Narull: I also apologize if my comment was initially harsh, but I do think it is correct. I am also sorry that you are currently on the disability payment, but I don't think that necessarily means that you're obligated to spend all your money.

              Perhaps a better response should have been "if you have the ability to pay off a car battery via afterpay, you have the ability to save that much too".

        • There's nothing wrong with using these services every now and then for unforeseen issues.

      • +2

        I am absolutely against the whole BNPL industry because it is absolutely a poverty trap.

        Me too, but I still wish I bought shares early in AfterPay.

        • +2

          We should’ve thought about the masses instead of the (lack of) sensibility of it!

    • +2

      its much harder to track compared to a credit card, can easily lose track of payemnts.

      • Yeah that's the BNPL business model.

    • Wait for what? Time is way too more valuable than money.

    • I say this for larger purchases too, like a new car… but some people say its "different".

      • Houses too? How would that have worked out?

    • +2

      I only use BNPL if it has cashback attached to it ($20/50 for latitude pay)

    • +1

      Exception being a house which rises in price faster than your salary.

    • +1

      Yes and no for BNPL.

      Personally, I've used BNPL to spread across the payment for many months with only paying the management fee.

      Say you buy an item worth $2,000. Putting it on credit card will at best get you 19% interest rate per year = $400.

      Put it on ZipMoney with $6 per month, that's $72 per year.

      Disclaimer: I do have the money to fully purchase the item, I just choose not to because I can use that money elsewhere.

  • +39

    "I need a renovated house and $50K+ SUV because I'm planning on having a child soon"

    • -9

      i need to rent bigger house with 2 carpark because i have many kids and cars (but cant afford a mortgage even small one)
      but hey, what i want is what important, centrelink is there to help
      i like cars and kids so others doesnt matter, let the rich support us with their tax

      • +6

        i like cars and kids

        Be careful with how you say that.

      • +5

        (profanity) right off with this privileged bullshit

    • Did bought a new house , still thinking about which SUV to buy 😅

    • Haha the SUV part always makes me laugh. How would you fit a tiny baby and a pram in a car that isn't big enough to have a post code?

  • +54

    Social media making people feel like they need to keep up with the Jones'

    • +41

      See a friend with a new C63AMG and think he's living the life.

      What you don't see is him paying two times the value of the car on the loan, 50% of his salary each month, and eating frozen dinners while it sits in the garage because he can't afford the petrol.


      • +15

        At least he spent it on OzB's favourite appreciating asset!

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