What are the biggest financial traps in our current society?

clearview on 12/11/2021 - 14:58
Last edited 13/11/2021 - 07:22 by 1 other user

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.

Financial

Comments

      • Ghost47 on 12/11/2021 - 15:43
        +20

        There’s two types of people who own new cars: rich people and broke people.

        • SupeNintendoChalmers on 15/11/2021 - 14:52
          +2

          An old saying, 'money talks, wealth whispers'

          • R4 on 15/11/2021 - 16:30

            @SupeNintendoChalmers: Or as my mate from Georgia says people who talk about money are generally all hat and no cattle!

        • R4 on 15/11/2021 - 16:29
          +1

          Right now, many new cars are cheaper than used cars - if you can get them!

          I used to believe the logic behind buying 2nd hand rather than new, but when new cars are freely available, with capped price servicing, 5+ years warranty etc, that logic doesn't necessarily hold true.

          Each to their own though.

      • boomramada on 12/11/2021 - 22:26

        But he drives a AMG not s Toyota and life is short 😆

      • johnmatrix on 16/11/2021 - 08:13

        I bought a 2007 Aston Martin DB9 2 years ago for $93k without a loan, they're selling on carsales now for $120k. I would have lost more money buying a shitbox or an "affordable" car. Just a little bit of good luck for once in my life.

        • coffeeinmyveins on 16/11/2021 - 09:16

          that'll be the covid tax and isn't normal though.

          I don't see how you'd "lose" money buying a normal car though. If you bought a car for 30k it would probably be worth let's say, 25k now, and you'd have 60k leftover from the difference with your aston martin to do other things with (investments for example).

        • Tleyx on 23/11/2021 - 21:09
          +1

          I think land cruisers would of gotten a better return that that

          Some are doubling in price

    • clearview on 12/11/2021 - 15:38
      +20

      Indeed, social media is creating false fiction of life.

      • sparkles on 14/11/2021 - 10:52

        True, the majority of the influencers have cars on lease or loan. They are selling their soul for the free use of a car.

    • apsilon on 12/11/2021 - 15:45
      +3

      Social media is just the latest and perhaps easiest way to see what lifestyle people are pretending to have. The saying "keeping up with the Jones'" has been a saying and a goal for many for over a hundred years.

  • Muzeeb on 12/11/2021 - 15:12
    +21

    Over extending just to say you have an investment property that is actually bleeding every cent you make.

    • Drakesy on 12/11/2021 - 16:33
      +9

      Shhh
      Domain, Realestate.com.au and the Real Estate industry lobbyists will shut you down.
      https://binvested.com.au/property-investors-lose-money/

      • 191919 on 12/11/2021 - 17:27

        :eyeroll:

        • Kangal on 12/11/2021 - 19:27
          +1

          People don't realise that as house prices increase and earnings drop, that difference actually goes somewhere. It doesn't go to landlords (most of the time), and it certainly doesn't go to renters.

          That money ends up as profits for the Big Banks and Fake Estate Agents. We're talking trillions.

      • petrichor on 15/11/2021 - 20:41

        This can't be right. Anyone who has bought in the last 10 years is laughing from the capital gains increase. Negative gearing combined with depreciation means you can be negatively geared and have positive cash flow. The leverage available on houses means the gains compared to any other investment have been phenomenal. My only regret is that I wasn't greedy and irresponsible and didn't go in on this government backed Ponzi scheme that is the Australian housing market.

        • Brick Tamland on 16/11/2021 - 09:19

          I am not sure it works that way… if you are negatively geared it means you are losing money. To negatively gear you need to have a very good income to sustain the losses to make bank when you sell later on.

          • secondstory on 16/11/2021 - 23:41
            +1

            @Brick Tamland: I think they mean when the depreciation is large enough it's like fake losing money, but it doesn't really do much unless you earn too much money so get taxed heaps it can help offset your taxable income a little.

            I half made up these numbers but:
            - If for the year your house depreciates 5k and your expenses (including interest repayments) are 18k but your income on the rental is 20k
            -> you are actually 2k positive but it looks like a 3k loss on the books.

            Pretty much I think it's rich people do this at a larger scale with a bunch of properties and the "losses" reduce their taxable income and they enjoy paying less tax. Then later down the track they can sell after prices have gone up. Sounds nice but doesn't work that great for the average person.

            I might be wrong but that's how I thought it worked.

    • drprox on 13/11/2021 - 11:49
      +3

      You haven't made it until you have debt on 2 properties!

    • Brick Tamland on 16/11/2021 - 09:16

      yes, I've seen this a few times. For some reason people that are already stretched jump into an investment property because of their nice fat equity and then literally live on the precipice of financial destruction. Hey it might pay off but geeze its risky stuff.

    • magic8ballgag on 15/01/2022 - 12:50

      every cent you make.

      I'll be watching you…

  • Peter Enis on 12/11/2021 - 15:12
    +125

    Coming to OzBargain to save money.

    • Stalker on 12/11/2021 - 15:54

      ^ This. :D

    • petrichor on 15/11/2021 - 20:43
      +1

      I remember years ago seeing a Xiaomi umbrella on ozbargain for 40 dollars or so, and people saying how absurd it was that a 40 dollar umbrella is a bargain. Now there are constantly 1000+ dollar phones on the front page.

      • cuteseal on 16/11/2021 - 14:37
        +1

        And cars… lol.

    • secondstory on 16/11/2021 - 23:50

      Spend to save!

  • dtc on 12/11/2021 - 15:14
    +27

    The biggest financial trap is the belief that (a) you need to live in Sydney or Melbourne and (b) also have a detached house with a backyard. Most of the world survives fine without detached housing and while its a nice thing to have if you are lucky enough, its not an essential thing to have if it forces you into misery and financial risk

    • coffeeinmyveins on 12/11/2021 - 15:16
      +33

      yeah let's all live in shoeboxes and have a 2 hour commute!

      • mbck on 12/11/2021 - 15:34
        +5

        I think with WFH a lot of people realise that and have moved out!

      • Ghost47 on 12/11/2021 - 15:39
        +8

        No let’s all move away from our friends and family and start over in a new city!

        • dtc on 12/11/2021 - 17:28
          +11

          No one has ever done that before so you are right, its a very brave soul who risks dragons by venturing outside of their place of birth

        • cadwalader on 13/11/2021 - 16:48
          +1

          Great advice! It has certainly helped me buy a nice property at only 3X annual income

      • cadwalader on 13/11/2021 - 16:43
        +1

        Nah, everyone can live in quarter acre blocks with a 5 minute commute!

      • jrowls on 14/11/2021 - 17:17
        +1

        I think the idea is more that instead of living in a detached house in Campbelltown (or worse, Bingara Gorge) you live in an apartment or townhouse of equivalent price that's either walking distance to work / lifestyle / essential services, or a short public transit trip away.

        Problem is everyone has been sold an Australian Dream of the detached house and backyard that ceased to be rational or feasible 30 years ago.

        • macrocephalic on 15/11/2021 - 17:34
          +2

          I live in a suburb with small blocks. Our block is uselessly small, so we just play in the green areas around the estate. Most people don't need much space, only a small number actually use it, most just have a space that they have to mow all the time. Medium density housing and large shared green spaces are much better.

          • jrowls on 15/11/2021 - 18:47
            +1

            @macrocephalic: 100%! Glad you're finding it okay. It's just simple efficiency - providing lots of small open space per resident is going to be more expensive (not to mention harsher on other inputs - i.e., fertiliser, hours of work, equipment production etc) than providing a few big open spaces for a bunch of residents.

          • petrichor on 15/11/2021 - 20:45
            +2

            @macrocephalic: As you said your block is uselessly small. Medium density is the worst of both worlds. We need to push governments for taller high rises (with proper green space planning) in the city and around train stations that lead directly to the city, and less urban sprawl. Glad you can enjoy green space around you. I am seeing the green space in my suburb sold by council to housing developers who cram flats and units onto them.

            • macrocephalic on 16/11/2021 - 10:19

              @petrichor: When I say medium density, I mean either townhouses or small blocks of apartments, preferably around a central green space. Too built up and you can lose the sense of community, but individual detached housing isn't sustainable or efficient.

    • weezlebub on 12/11/2021 - 15:52
      +6

      hahaha, melbourne & sydney suck

      • tonaye-aye on 13/11/2021 - 13:26
        +3

        from Sydney, can confirm lol

      • Gnosh on 13/11/2021 - 19:57
        +2

        "Location
        adelaide" :P

    • [Deactivated] on 12/11/2021 - 20:32
      +2

      You're right, as a society we need to learn to live in shoeboxes unfortunately. Less land clearing, less commutes, and more efficient water/electricity supply.

      • snooksy on 13/11/2021 - 10:08
        +1

        Can’t put solar and rain tanks on an apartment. Also I plant many trees on my block. Dense Cities are heat sinks

        • [Deactivated] on 13/11/2021 - 10:29
          +2

          Heat sinks but at least it's only that area rather than globally. Besides, green cities are becoming more popular.

          Can't put solar but can have more carbon neutral electricity supplies. Besides, not very many people have water tanks anyways because you don't really need it. The main cost of water is the supply to each house rather than the actual cost and supply of water itself. You reduce the need for these things.

        • DrScavenger on 14/11/2021 - 03:55

          Do you want affordable housing? Support high density buildings then. Because thats the only thing to reduce property prices. You don't have to live in one. Just don't vote against it when they want to rezone a single family block to a high density one

          • Shiny Mew on 14/11/2021 - 13:21

            @DrScavenger: The best way to reduce property prices is to adopt a 2 child policy and a net zero immigration policy, and ban property investment. Much more sensible, and much better for the environment also. At this point, every extra person being added is decreasing the average Australian's quality of life.

            The only thing the Commonwealth Government gives a shit about is outright GDP (which, because we make next to nothing ourselves anymore, apparently means endless population growth and building houses for those people to fill). In their myopic pursuit of total GDP maximisation, they forget that Australia is already rich enough, and that we are rapidly losing our quality of life (including enjoyment of private open space) due to overpopulation.

            It's incredibly sad that, for people whose job industries are metrocentric (ie where they would need to endure a 4-hour roundtrip commute if they were to move), the only people who can provide their child with a backyard big enough to even ride a bike in (ie more than a quarter-acre) are the rich ($1 million plus properties). My parents and everyone before them were comfortably able to buy at least quarter acre an hour of their jobs, and on one income only. They weren't forced to live like cattle no matter how hard they worked.

            At the projected rates of population growth and corresponding decreasing land size, there's not much for my and future generations to look forward to.

            • DrScavenger on 14/11/2021 - 13:48

              @Shiny Mew:

              1. 2 Child is not enough, since replacement rate is 2.1
              2. Net zero immigration policy is absolutely dumb and unrealistic
              3. Instead of banning properties as investment you can make it unfeasible as an investment.
              4. How do you want to pay pensioners if you don't want to add extra person? Unless you literally want to decrease average Australian's quality of life.

              Australia is one of the least dense developed countries in the world. You can enjoy vast private open space in the country.
              Times change, you cannot have it both ways. If you value personal space so much then you won't work at the city/cbd, you can still work in metro/suburban regions.

        • jrowls on 14/11/2021 - 17:18
          +2

          Cities can be dense and have loads of green space. Every single street should be covered in trees and parks should be plentiful. If all of the urban footprint of current Sydney was mostly small apartment blocks and townhouses with actually well-utilised parklands and street trees, I would estimate our heat island effect would be lower than now. Sprawl = more land paved for roads etc.

      • leiiv on 13/11/2021 - 22:50
        +1

        True, but we all could have really nice shoeboxes. Green building with solar panel and rain tanks. Common garden for use by everyone. Cheaper body corporate fees. Cheaper rates.

    • brendanm on 14/11/2021 - 21:37

      not an essential thing to have if it forces you into misery

      Living in an apartment would be misery for me, so I'm good with detached housing.

  • wiipantz on 12/11/2021 - 15:20
    +18

    Private Health Insurance

    • Gradesbrah on 12/11/2021 - 18:19
      +3

      Depending on income.

    • nephilim on 12/11/2021 - 18:41
      +9

      Everytime I have defends private health insurance I get downvoted, but found it was great for my wife.
      Free dental clean every 2months, $20 45min massage and such. Plus private hospital birth with 5 nights stay and female related issues done quickly (polyps as a example, imagine your partner not wanting to have sex because of a polyp that can take up to 2 years to heal lol public health)

      • Bargain Slut on 14/11/2021 - 20:22
        +1

        Comes back to the concept of paying for things you don’t need/don’t use. Private health has legitimate value for a lot of people, I need at least a basic level of cover due to income levels. The incremental spend I tack on for extras I pretty much claim back I’m it’s entirely, gym memberships, physio, sunglasses etc.

        Having more or less insurance than you need (which is a hard thing to guesstimate) is the trap. Read through your policies and consider what makes sense, blindly paying for it is a waste of money but I too think that for many it can have value.

    • CheeseBeans on 17/11/2021 - 14:30

      Combined with MLS and the (small amount) of value I get back from extras (dental) having it is an absolute no brainer… Should I have to have it for the tax reduction, no… 90% of my medical expenses are medicare items anyway, and the balance (asides from dental) I've generally had to foot out of pocket.

    • sternocleido on 30/11/2021 - 12:13

      Ummm, have you seen the wait lists for elective surgery or endoscopy in public hospitals? They are literally measured in months to years unless emergent (hint - knee replacement = not emergent, hernia repair = not emergent) vs weeks in private. Yes it's expensive, but in the covid era private insurance is more valuable than it ever has been. Next time you speak to a specialist, ask if they have private insurance….

      • Oofy Doofy on 03/12/2021 - 14:10

        I don't know why anyone would neg you when you're absolutely right. There's a lot of ignorant people around, haha.

  • 2jzzzz on 12/11/2021 - 15:23
    +7

    Get out of Melbourne and Sydney. I can't comprehend repaying those mortgages, let alone small blocks and commuting. Get out and see how much better Aus can be

    I did buy a 2nd hand C63 AMG, but novated leased it, had my uncle who is a MB trained tech service it and sold it for more than I paid. Still never lost money on a car

    • Pcosmic on 13/11/2021 - 20:23

      True…but that's where the jobs are

    • d3ft on 14/11/2021 - 03:54

      What's your secret to not losing money on cars?

      • mezje on 15/11/2021 - 12:29
        -2

        Get lucky I guess. If you bought pretty much any iconic JDM car in the last 10 years now you will have tripled or quadrupled your money. Then came COVID and all second hand car prices rose.

        Getting a good price on a used car, servicing and maintain it yourself or through friends cheaply and having a good ad makes it pretty easy to not lose money unless you put a huge amount of ks on a car.

        I have owned 6 cars (I'm 27), never lost money and made money on the majority.

  • mbck on 12/11/2021 - 15:34
    +14

    Ozbargain.

    10 pairs of shoes, 20 pairs of socks, under wear..

    • Caped Baldy on 12/11/2021 - 15:43

      Eneloops

      • RSmith on 12/11/2021 - 18:20
        +1

        In the underwear

    • baldur on 13/11/2021 - 08:31

      20 pairs of socks are not plenty though unless you wear a pair for a week.

    • citybargainhunter on 15/11/2021 - 13:48

      Only 10 pairs of shoes?

  • Cluster on 12/11/2021 - 15:51
    +45

    Buying stuff you don't need, with money you don't have, to impress people you don't like.

    It's a tired old cliche, but it's absolutely true.

    Biggest trap is having high personal debt through spending on rapidly depreciating goods. I know someone up to his eyeballs in debt, but he won't hesitate to buy consumer goods costing $1k.

    • Caped Baldy on 12/11/2021 - 15:54
      +2

      Like having the latest and greatest phone every year!

      • io on 13/11/2021 - 01:19

        I recently bought iphone 7 128gb as I am a apple fanboy. I am as happy as an iP13 user. And I know exactly what I am missing.

      • foxpants on 15/11/2021 - 14:58

        Sometimes this is manageable, like say you can salary sacrifice a phone a year through your work, you could end up getting it for over 40% off RRP. Lets say you then can sell said phone ~1 year later for potentially what you paid upfront, then just rinse and repeat the cycle. I tend to upgrade every year as I love a new gadget, give my old phone to wife, then she gives hers to her mum, so instead of 3 separate upgrade cycles, I just get a new phone and the hand-me-downs continue.

        Generally speaking though, I'd say you're correct, the vast majority of people have 0 need for the latest and greatest phone every year, but there may be incentives or circumstances that make that very manageable.

    • 42 on 14/11/2021 - 00:01
      +1

      Buying stuff you don't need

      Sounds like ozbargain

  • orangetrain on 12/11/2021 - 15:54
    +6

    Living in NZ instead of Australia

    • mattkenny on 13/11/2021 - 18:23
      +1

      NZ - a great place to holiday. Bloody expensive place to live.

  • dust on 12/11/2021 - 15:56
    +5

    Pokies and pay day loans. F*** them!

  • Cluster on 12/11/2021 - 15:56
    +22

    Another key financial trap that hundreds of thousands of Australians (possibly millions) fall into is gambling. You're playing against the house, you won't win long term, that's just the way it is. You can't beat the vigorish.

    The winning move is not to play the game.

    • Stopback on 12/11/2021 - 16:58
      +4

      Lottery like I get maybe doing it once per year but

      Nah I'll enter competitions that I will never win.

      1 in 100 million odds yeah lol

      20 dollars a ticket some people buy every week.

      So 1000 dollars. Might as well buy Bitcoin etc.

      • Zondor on 15/11/2021 - 08:51
        +1

        I get my fun out of planning what I'd do if I won. It's worth the price of the ticket.

    • Commander Shepard on 12/11/2021 - 22:09
      +7

      Yep. I think Apps like SportsBet are doing far more damage then Pokies, Casinos or Online Poker. Especially because its so accessible. I know multiple people who spend a big chunk of their paychecks on SportsBet.

    • io on 13/11/2021 - 01:23

      Absolutely right! Gambling is mathematically designed to return the player at less than 100%. So the player will always lose.

  • SF3 on 12/11/2021 - 15:58
    +15

    Lending money to a "friend".

    e.g. https://www.ozbargain.com.au/node/649126

  • tsunamisurfer on 12/11/2021 - 16:05
    +15

    For a man, the biggest financial trap is getting married. Men stand to lose more on average.

    One other big financial trap is the need to climb over each other for real estate, the amount of properties selling over asking is quite amazing.

    Another trap is borrowing without the appreciation that interest rates go up in time.

    • Stopback on 12/11/2021 - 17:00
      +17

      Defacto. Two years.

      Nothing is safe but escorts.

    • RecklessMonkeys on 13/11/2021 - 12:09

      How so?

    • warkolm on 13/11/2021 - 13:54

      lol

    • secondstory on 17/11/2021 - 00:52

      In marriage, homemakers can stand to lose more in the long run especially if kids are involved. Pretty much, he has to be worth the risk of ruining the rest of her life, career and body for it.

  • cloudy on 12/11/2021 - 16:10
    +3

    Under estimating the power of compounding.

    I still remember the the day I was taught compounding, most people do not.

  • pharkurnell on 12/11/2021 - 16:41
    +2

    Payday loan companies.

  • Stopback on 12/11/2021 - 17:00

    Cheap stuff companies sell which cost more in time and money in the long run.

    Also mobile phones. Unless you got an only fans or insta and making cash it's like 300 dollars a year for a phone.

    The fact that going out and spending 100 plus per person on a meal is now the norm.

    • buckethat on 13/11/2021 - 13:43
      +6

      Since when is $100 plus per person on a meal is normal??

      $300 a year on a device you use every single day, is actually not bad at all.

      • skittlebrau on 14/11/2021 - 13:09

        Seems pretty doable if you're buying an iPhone and then selling it each year, especially if you have access to salary packaging at work.

  • rektrading on 12/11/2021 - 17:32
    -3

    Coming to a corner near you.

    What is driving U.S. inflation to a 31-year high? The reasons and solutions are complicated
    Staff and wire reports 8 hrs ago
    Kyle Rittenhouse sobbing shows what's wrong with America
    Myanmar court sentences US journalist to 11 years in jail
    Staff and wire reports 8 hrs ago

    With inflation at a 31-year high, Americans are feeling the pinch in just about every facet of daily life.
    https://www.msn.com/en-us/money/markets/what-is-driving-us-i…

    • Kparky on 14/11/2021 - 21:14
      -2

      Go Brandon go !

  • rektrading on 12/11/2021 - 17:34

    UK growth slows to 1.3% in the 3rd quarter as supply chain disruptions and inflation hit
    Harry Robertson
    Nov. 11, 2021, 03:30 AM
    https://markets.businessinsider.com/news/currencies/uk-gdp-q…

    .

    New Zealand Inflation Surges to Fastest Pace in 10 Years
    Matthew Brockett 03:42 AM IST, 18 Oct 2021 05:41 AM IST, 19 Oct 2021 Save
    (Bloomberg) — New Zealand inflation surged at the fastest pace in 10 years in the third quarter, reinforcing bets that the central bank will keep raising interest rates.

    The currency rose and bond yields climbed to the highest level in almost three years after data showed the annual inflation rate jumped to 4.9% from 3.3% in the second quarter. Economists had forecast 4.2%. Consumer prices advanced 2.2% from three months earlier, Statistics New Zealand said Monday in Wellington, exceeding the 1.5% median estimate.
    https://www.bloombergquint.com/business/n-z-inflation-surges…

  • t_c on 12/11/2021 - 18:05
    +6

    Spending money on anything. Learn to enjoy the simple things in life like tepid tap water

    • dust on 12/11/2021 - 20:34
      +7

      I mean the fact that we have high quality, available, cheap drinkable water straight from the tap is definitely not a simple thing!

      • vinnychase on 13/11/2021 - 09:24
        -4

        Lol Indians now have much faster home internet than us (albeit a small percentage of the Pop have it) but they still haven’t figured out tap drinking water

  • cashless on 12/11/2021 - 18:06
    +1

    Life insurance, income protection insurance, medical insurance

    • Gradesbrah on 12/11/2021 - 18:23
      +9

      Insurance has a very specific value proposition, for many it is not worth it, for others it is. I happily pay 1% of my income to hedge against my death and maintaining the standard of living I currently provide. That is what insurance is. Just like me sacrificing time to do things I dislike to reduce my risk of death and losing time off my life. It is insurance.

    • Stopback on 12/11/2021 - 20:42
      +1

      single person i see, but yes, most income protection isn't worth it

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