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

    • rektrading on 13/11/2021 - 15:23

      A mortgage is the cheapest retail loan available to normal people.

      Paying it off before the contract expires doesn't make financial sense.

      • haggertm on 13/11/2021 - 15:45

        Which bank do you work for? Haha just joking. You could pay off your home loan and then use your own money to do whatever it is that you want to do, instead of paying others to use theirs.
        I would personally rather be debt free then have a "cheap" debt.

        • rektrading on 13/11/2021 - 15:52

          I understand that the majority of mortgage hodlers have the mindset to pamp everything into their loan, set and forget. I on the other hand can do more with $50 p/w investing in assets than paying off a 5% interest rate loan.

          • haggertm on 13/11/2021 - 15:56
            +2

            @rektrading: You may be able to but the majority of people may not be able to. I guess it comes down to the individuals appetite for risk.

        • macrocephalic on 15/11/2021 - 17:27

          Cheap debt allows you to assume a small amount of risk and earn more money. Have a look at the concept of debt recycling your mortgage. The stock market on average returns about 7% per year, but mortgage rates are under 2%.

        • murp0274 on 22/11/2021 - 21:47
          +3

          Don't forget there's such a thing as good debt!

          Why pay off a home loan that's at 2% interest, when you could put the money into an ETF with 5-6% return?

          • haggertm on 22/11/2021 - 21:58
            +1

            @murp0274: I guess I am talking more about people who aren't investing their spare money.
            You would be surprised how many people spend every cent of their pay check.
            Pay increase = lifestyle increase.
            I will say though, I am considering putting more money into super rather than paying off my mortgage, after considering the responses to this thread.

      • ymmf on 14/11/2021 - 16:48

        I agree. But if you are 40 years old starting a 30 year mortgage what would be the exit strategy?

        • rektrading on 14/11/2021 - 18:52

          The exit plan is to pass the assets off to ones children. They can then choose to pay of the debt or use it as an ELOC.

          • ymmf on 14/11/2021 - 18:54
            +1

            @rektrading: Japanification here we go!

            • rektrading on 14/11/2021 - 19:14
              -1

              @ymmf: Generational wealth is the name of the game. The top 1% have been playing it for centuries.

              Jan 03, 2009, changed that. People using 21st-century technology can now break free from their 9 to 5 jobs and accumulate assets that can give them generational wealth.

              All it takes is for people to change their mindset. To be open to the possibility that there is a better way to make money. A way that let them store their time in assets rather than trading their time for a small amount of fiat money while their boss gets all the cream.

        • macrocephalic on 16/11/2021 - 10:14

          The exit strategy is to service the loan until retirement, downsize/sea-change/tree-change to a cheaper property, and cash out the capital gains from your family home.

          As much as I hate the way the property market works in Australia, it's been a very good investment in the last 20 years.

  • serpserpserp on 13/11/2021 - 15:09
    +1

    Ozbargain

  • Hangryuman on 13/11/2021 - 16:13
    +1

    trap as in an unexpected downfall injury for the unwitting - I'd start with any offer too good to be true

    unsolicited offers - scams like 'we were in the area - we've got a load of fresh bitumen and can do you a special deal to resurface your driveway for $6000' - cheap now, they dump the bitumen and do a bad job, then muscle you to pay $60,000 while standing over you as a retired person living alone

    anything that's 'FREE!' - you will pay for another way - as an 18yo I paid a small refundable deposit for a 'free' flight outback to look at blocks of land - great potential if there was water (there was no water) - they said these are selling fast, and we can only hold it for you if you sign this holding document' - I asked 'this is not a contract?' - they 'no it's not a contract' - 'are you sure??' - 'no it's not a contract'

    flew back - bumpy Cessna - forgot about it.

    next day - phone call - expected to pay the large amount of money because 'you signed a contract'

    you bastards - I called up my contact a heavyweight lawyer - who made one phone call, and they quickly yessir we'll send to refund cheque in the mail immediately sir !

    so don't sign anything unless you know what you are signing.

    getting married ? even without - NSW defacto maybe 2 years they can take half your assets - 'a man chases a woman until she catches him'

    get rich quick ? the gambling known as business tends to look with disfavour at the business known as gambling

    addiction to drugs or alcohol ? feel good for 5 minutes - spend the rest of your life spiralling downhill into crime, prison and early death ? sure, why not.

    spending more than you earn - “Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery” - Charles Dickens, David Copperfield

    borrowing money to buy consumables, etc., etc.

    • buckethat on 14/11/2021 - 01:38

      .. or read before you sign

      • Oofy Doofy on 16/11/2021 - 21:31

        Lol if you have to sign, date or initial anything, it's a contract of sorts.

  • baldur on 13/11/2021 - 16:47
    +2

    parking by all means, anywhere. why do we have to pay when we don't drive our cars? we already pay while driving.

    • askbargain on 13/11/2021 - 19:15
      +3

      Is it alright if I park at your house for a couple months?

  • lukamotiv on 13/11/2021 - 19:39
    +4

    I think not learning the basics of investing in the stock market in some ways will set you back. Having everything in your savings account means going backwards thanks to inflation. Now I'm not asking everyone to become Warren Buffett, but just put in abit of time and research into things like ETFs, interpreting basic financial statements etcs rather than scrolling through social media could go along way. Ozbargain is exception to the rule.

    • macrocephalic on 15/11/2021 - 17:30

      Warren Buffet actually recommends people use index funds.

      Unless you know something that the market doesn't (insider trading) then you can't continually beat the market.

      • ln28909 on 16/11/2021 - 14:19
        -1

        This is only for billionaires, it's hard to beat the market because good opportunities only has a limit on the amount that could be invested

        If you only have a few hundred k to mil, it is easy to beat the market

        • Hearthstone on 17/01/2022 - 07:40

          don't kid yourself, keep track of your performance for 10-15 years then compared
          a lot of people confused luck for skills, if you have a couple of good years that doesn't mean you beat the market over the long run
          if you stretch out into 10-15-20 years the market leaves most people behind and if you into speculation and have a good year or two it will leave you for dead

          if you can consistently beat the market, you can becomes very rich very fast and you don't need to work

  • 91rs on 13/11/2021 - 21:18
    +4

    Afterpay \ Zip basically any of those loan repayment companies who offer credit on everyday stupid consumable things like food and clothes etc.
    Much of it seems very predatory in the way its offered and the availability for things that shouldn't need to be financed.
    Yes these CAN be used wisely but the majority of users are the people who don't have the money to spend in the first place, its just a debt trap.
    Yes credit cards could be seen as similar if you're not paying balances out completely but the amount of online stores that offer splitting payment for trivial items in to 4+ payments seems over the top.

    • sauce2k on 16/11/2021 - 17:06
      +1

      For me it's a psychological thing (and I know it sounds dumb) - I don't like seeing a whole chunk of money to go out at once, so I rather it comes out gradually. I only buy what I can afford.

  • Trying2SaveABuck on 14/11/2021 - 00:32
    +5

    In no particular order off the top of my head
    Buy now pay later
    Signing up to monthly charity donations most of the money ends up chewed up in 'admin fees'
    Credit card interest
    Personal loan interest for crap you dont need ie paying 9% interest on that Range Rover might not be a good idea
    Not reviewing your home loan/insurance/ electricity/gas/internet etc annually for the best deal
    European or other high end cars - parts, servicing etc. All expensive unless money isn't an issue in your life why would you want to pay. More for this?
    Buying your lunch instead of packing it
    Getting drunk out ie buying drinks at a bar has a massive mark up
    Buying coffee for $5 daily
    Dating - males are still expected to foot the bill for loads of crap keep dates cheap until you know she is keen lads
    Any sort of collecting- ie pokemon cards, magic cards etc
    Playing the lotto or any form of gambling esp all these bs home lottos popping up
    Paying for parking anywhere
    If you invest in shares using expensive brokers ie Comsec (same with crypto)
    Illegal drugs - that coke addiction will leave you broke

    • buckethat on 14/11/2021 - 01:39
      +1

      If you invest in shares using expensive brokers ie Comsec

      Oh man that one hurt.. I really have to move my shit out of Commsec.. But its just so damn convenient to transfer my money into the account immediately..

      • Trying2SaveABuck on 14/11/2021 - 08:25

        It is a laziness tax i was using westpac for a few years till i realised id spent about 500 in fees when i could of spent half that

  • sajidmib on 14/11/2021 - 01:27
    +10

    The sooner you learn that saving $10K is harder than making $10K, the better.

    • buckethat on 14/11/2021 - 01:41
      +1

      Wow, first time hearing that and jesus is that true.. That one really got me thinking for some reason.

      Thanks guy

      • Slippery Fish on 14/11/2021 - 14:17

        You only earn what you keep

        • citybargainhunter on 15/11/2021 - 14:02

          it's not how much you make it's how much you invest.

          • Slippery Fish on 15/11/2021 - 14:32

            @citybargainhunter: You should invest in my wealth friend. For every dollar you invest I get a dollar richer. It's perfectly balanced.

    • mdavant on 14/11/2021 - 04:23

      And that budgeting wisely is very easy and less time consuming, and can be more effective than working more

  • mdavant on 14/11/2021 - 04:22
    +5

    The need to maintain your image.

    Cars
    Clothes
    Trinkety stuff

    Be happy with who you are and save a motsa

    The earlier post I read was right - ignorance of the effect of compounding

    But

    Failing to live in the now is also a trap
    As is dying with too much money

    Another is failing to place a value on your own time. I see many people who are dying, regret that they worked (or other time sinks) their life away

    • buffalo bill on 14/11/2021 - 17:47

      Correct. I've seen a few people on their death bed and not one of them said they wished they worked more overtime.

      • magic8ballgag on 15/11/2021 - 09:24

        Of course they didn't, why would they?

  • altomic on 14/11/2021 - 09:52
    +10

    engagement rings.

    my wife's ring was valued (for insurance purposes) at $14,000 (we had it made with white gold and diamonds that were from estate jewellery so ring cost us $500)

    prior to travelling O/S many years ago we didn't want to take that ring so I bought a $5 aliexpress ring - 2ct "diamond" on stainless steel.

    that ring received more compliments than the original.

    • umoddbro on 15/11/2021 - 10:09
      +7

      The diamond industry itself is a scam

    • PurchaseAnxiety on 16/11/2021 - 21:27
      +1

      I bought myself two wedding bands off Amazon for $60 total (bought two to get free shipping). I was worried my wife to be would be mad for cheaping out on something that holds a lot of significance, but she was just happy that I was happy. Later saw a local reseller flogging the exact same rings off for $400 a pop.

  • rentonc on 14/11/2021 - 13:46
    +3

    Encountered a guy running a payday loan operation in Indiana 25 years ago. He was making so much money, he just kept opening more and more branches in all the surrounding towns. I couldn't believe it was legal and thought it would never be allowed in Australia. Now here we are and it is happening.

    • io on 16/11/2021 - 18:33
      +1

      payday loan is a disgusting thing.

  • rektrading on 14/11/2021 - 14:14
    +1

    The legacy financial system is the trap.

    https://twitter.com/natbrunell/status/1459263839212503041?t=…

  • Vote for Pedro on 14/11/2021 - 14:34
    +2

    The biggest trap?

    The wealthy convincing the middle class to push down the poor

  • daclaw on 14/11/2021 - 15:07
    +3

    Buying an overpriced craphole hoping for capital gains

  • paradise on 14/11/2021 - 16:32
    +1

    bitcoin fixes this

    • buffalo bill on 14/11/2021 - 17:49

      When I buy crypto, I make sure I buy into legit projects in their infancy.

      Buying exit liquidity for others (in any market) is also a trap.

  • Dack Smith on 14/11/2021 - 16:52

    Anything financial market and stocks

    Taxes

    Online and mobile gaming

    Exotic cars

    People have too much money but no common sense

  • buffalo bill on 14/11/2021 - 17:21
    +5

    Being a wage earner is the biggest financial trap.

    Work harder and longer hours to pay more tax. Pay for study to increase earning potential to pay more tax. Get new job to earn more, pay more tax.

    Society is geared against those aspiring to obtain assets - towards those who already own or inherited assets.

    • Logical on 14/11/2021 - 22:37
      +1

      Yep, get a second job and bam, no tax free threshold and pay higher tax rate from day one

      • Halc on 15/11/2021 - 17:01
        +3

        you realise even if you do get two tax free thresholds you still have to pay it back come tax time right?

        • macrocephalic on 15/11/2021 - 17:12
          +3

          All those people saying that [lack of] financial literacy is a trap are correct it seems

        • baldur on 15/11/2021 - 22:02
          +1

          no he doesnt realize. most people dont realize this.

  • saltypete on 14/11/2021 - 18:44
    +3

    The gambling bug. In all of its various forms. 🪲
    Including shares you don’t understand and unbelievable returns.

  • pipe on 14/11/2021 - 19:43
    +1

    The biggest trap in this new world order is thinking the government got your back. Soon you will own nothing.

    • inasero on 16/11/2021 - 08:31

      And you will be "happy"

  • Stevecro on 14/11/2021 - 20:34

    hiring escorts

    • buffalo bill on 15/11/2021 - 00:28
      +3

      The odd escort to "quench the thirst" can be a lot cheaper than marrying the wrong person. The goes for a male or female.

  • scbrother on 14/11/2021 - 21:51
    +2

    Home broadband. We could just have every second house in the street pay and share WiFi. It makes even less sense in an apartment building where people are only a few metres way from each other yet dont share WiFi/broadband.

    • umoddbro on 15/11/2021 - 10:02

      If only the internet here wasnt so s@#$, imagine a whole block sharing a 50-100Mbps connection. Also what if your neighbours are hogging all the bandwidth that would drive me insane, I'd rather pay to have my own internet connection.

      • macrocephalic on 15/11/2021 - 17:10
        +3

        You already share the bandwidth, but you share it at the node rather than the modem.

    • OzChick on 20/11/2021 - 12:00
      +1

      I am of the same opinion about home tools/equipment. Like each house has a lawn mower. If we can all put in a bit of money for the maintenance and repair for one, which a whole street could use, we’d save a bit of money. But our society is not capable of that, there will always be the one person that will abuse the system, unfortunately.

  • Logical on 14/11/2021 - 22:34
    +3

    Ongoing subscriptions, eg Amazon Prime, Netflix, Stan

  • shortgum on 15/11/2021 - 00:43

    telco Circle Life

  • mrhanky71 on 15/11/2021 - 09:12
    +4

    Our education system is a financial trap. Alot of subjects and courses are better learnt through real life coaching amd mentorships rather than taught by some uni lecturer who has never left uni and been in the real world.

    For my particular industry, I learnt more on the first day of the job than i did spending 4 years in uni. But now I have a mountain of student debt I need to pay back.

    • Shiny Mew on 17/11/2021 - 08:20

      Indeed, unless my children are absolutely keen on a particular career that requires university qualifications (eg medicine), I'll be encouraging them to pursue a trade or a career where the self-taught or learned-by-doing can thrive (eg IT).

  • umoddbro on 15/11/2021 - 09:54
    +1

    Housing size is a big financial trap, the bigger your house the more you want to fill it with useless junk. A bigger couch, bigger tv, larger wardrobe, more clothes.

  • ErlichBachman on 15/11/2021 - 10:07
    +4
    • Buy now pay later products
    • Default superannuation products
    • Youth bank account marketing eg Dollarmites having a cool character called 'Cred', subliminally normalising credit to youth without cognitive ability to overcome a bank's insiduous marketing power
    • A lack of financial literacy taught in schools. Yes the parents play a role, but what about those kids who's parents lack the financial skills themselves? It's ridiculous that kids are made to spend years learning how to measure a circle or work out the side of a triangle, yet financial literacy eg tax etc is not touched on when it is going to impact every single person. The school system is a joke and needs a massive overhaul. 3 main things it should focus on are financial wellbeing, taxation and healthy food choices. They atleast do PE for sport.
    • Gambling advertising being allowed all over tv - you can't watch sport without it saturating the experience. It's also on primetime tv. Kids can't watch sport these days without it getting hammered into them that gambling is 'normal'.
    • 900dollaridoos on 15/11/2021 - 14:08

      This comment should be a pamphlet. Great points.

  • ankor on 15/11/2021 - 10:27
    +1

    I'm surprised no-one has mentioned mobile phones. The top samsung and apple offerings are just under 2k. Selling the phone at the end of its life cycle usually results in some form of disappointment, especially on ebay or facebook or scumtree due to either timewasters, theft, high fees or scams.

    I'm not one to throw stones though because 1.5 years later from my pixel 4XL, I have now splashed out on a pixel 6 pro.

  • Big Lenny on 15/11/2021 - 10:41
    +3

    home loan and ownership - modern slavery

    • YRT on 16/11/2021 - 13:23
      +3

      If you owe your country tax, they should provide you with (basic) healthcare, accomodation & education.

      Responsibility goes both ways, though the ruling class thinks not so

  • Refinancerloans on 15/11/2021 - 10:49
    +1

    In my opinion the biggest financial trap is actually your own discipline.

    We live in a transparent time with data and the information pretty much weeding anything of no value out quickly. Credit cards are fine, if you pay them off and never pay interest. Home loans are no problem, if you buy smart, refinance often and be on top of your credit report. Student loans…..well debatable, but look for an industry that has high demand and less supply.

    Will the system take advantage of you, or will you take advantage of the system. Really that is upto you. (Yes I know their are 1 / 1000 outliers of the system screwing you as well)

  • Eeples on 15/11/2021 - 12:10
    +1

    I think home ownership has become a debt trap.

    If you have a low income any credit can be a trap; especially when the credit does not require a credit check.

    EDIT: I pay almost everything with a credit card (no annual for for the rewards and may it off almost each day. So, for me, credit cards is not a trap but for others (in particular lower income earners) I am sure it is.

    • rektrading on 15/11/2021 - 12:14

      Credit checks discriminate against the disadvantaged and exclude them from the legacy financial system.

      • Eeples on 15/11/2021 - 12:18

        I am speaking about non-credit-check credit…. surely they are trappy for the 'disadvantaged'?

        EDIT: discriminating against a person who can't afford the credit is a quite proper, one would think.

      • CMH on 15/11/2021 - 16:01

        I'm curious, which essential service is unavailable to those who fail credit checks?

        I agree lots of luxuries can be out of reach, but if they don't think you can afford those luxuries, and you need to borrow to buy them, well you can't afford them.

        • rektrading on 15/11/2021 - 16:12

          It's to my understanding that utility companies like electricity, gas, water and telco run credit checks before accepting signup.

          Could someone that works in the industry confirm?

          • CMH on 15/11/2021 - 16:19
            +2

            @rektrading: Telco is the only one, but only if you're buying a new phone with the plan. Pre-paid is always an option.

            As someone who just moved I to a new place I can tell you I did not authorise any credit checks for electricity gas or water.

            • rektrading on 15/11/2021 - 16:27

              @CMH: Thanks.

              • Hargen on 30/11/2021 - 13:06
                +1

                @rektrading: When i signed up for my first power bill year ago I was given the option of either a credit check or $300 holding deposit.

                There is always an option for those who couldnt pass credit check for essential functions.

  • citybargainhunter on 15/11/2021 - 13:52
    +2

    kids

  • R4 on 15/11/2021 - 16:24

    MMT is a concept that may or may not be right. Personally I'm not sure.

    My Masters economics professor used to drum into us that if we didn't understand an economic concept that we were reading about, take it back to basic principles - things that are known to be so - and you'll get your answer.

  • eek on 15/11/2021 - 16:28
    +2

    Children. They're hideously expensive.

  • macrocephalic on 15/11/2021 - 17:08
    +6

    The biggest financial trap is consumerism. I know this is kind of hypocritical seeing as I'm posting it on a site dedicated to finding shopping bargains, but, most of us have everything we "need". There are things which might make us happier, but a lot of those things won't actually make us happy. We spend our money on them anyway, and then have to work more to get more money to spend on things we don't need - rather than just doing something which actually would make us happy like doing some exercise or spending some time on our hobbies.

    • inasero on 16/11/2021 - 08:32
      +1

      But some hobbies are really expensive!

  • CuteWittleCorgi on 15/11/2021 - 23:48

    Gym memberships

  • Tiredman on 16/11/2021 - 09:55
    +5

    If you need to save up for weeks and months or take out a loan for a new phone, a new bag, a new watch, or even a Bali holiday you probably should cut back or not do it at all. I can't understand people living this way. For me if i can't afford to buy dozens of these without any financial stress, i will just forget about it.

    I know people who finally have $50k in their bank after years of saving and then proceed to throw all of that onto a brand new $50k car. Not saying it's wrong but not something i'll do.

  • creesy on 16/11/2021 - 14:27

    BSC

  • Ozschmargain on 16/11/2021 - 22:21

    Biggest financial trap is not buying Bitcoin. L A S E R E Y E S

  • Dack Smith on 17/11/2021 - 07:06

    Capitalism itself is a financial trap.

  • Shiny Mew on 17/11/2021 - 08:10

    A mortgage in Melbourne or Sydney. Not sure if it could strictly be called a "financial trap", but they certainly cause a world of financial pain, and for people (over the past 18 months) who have had to borrow at unprecedented levels, will do so to the day they die (unless runaway inflation erodes the real value of their eye-watering mortgage debt, which may be one of the only levers left for the FedGovt and RBA to pull to continue to get people to buy houses and prop up their and donors' property portfolios).

    As soon as I'm not tied down to my city due to family obligations, I'm out of here. A lot of friends feel the same way.

    • Hangryuman on 17/11/2021 - 12:25
      -1

      'As soon as I'm not tied down to my city due to family obligations, I'm out of here.'

      ah - the urban dream - free and easy life back to nature in the country !

      good luck with that - nature is a battle with insects and weeds, as someone who spent a day with 6 friends sweaty with machetes found we only achieved a tiny clearing in a lantana overgrown block of some hectares.

      sea and tree-changers typically find they miss city life conveniences, and end up driving to the city for supplies, missing their city social life, then wondering how much it would cost to return, only to find to their dismay they can no longer afford it after the changeover costs of buying and selling and missing the higher dollar value of the capital growth of the city which does not tend to occur away from the city.

      Tip - 'you always take the weather with you' - if you're not happy here, chances are you won't be happy there.

      'what are the people here like ?' - 'what were they like where you came from?' - 'nasty, terrible'/'lovely, friendly' - 'they're like that here too'

  • Wolfofwallstreet on 17/11/2021 - 10:28

    I graduated at SNU with a double degree in Finance and Economics. Still debating whether I should give some investment advice on here or not. 🤔

  • Brodo Faggins on 14/01/2022 - 23:31

    Bump on this post. Australian finance, economics & taxation are a rort. So are Banks & Super. So are our trash education systems (and the price tag it comes with).

  • SlavOz on 16/01/2022 - 00:49
    +1

    Surprised nobody has mentioned moving out/renting while you're young. When it comes to traps that you can get stuck in with no easy way out, this has got to be up there. Too many people get pressured into moving out in their late teens or early 20s even if they don't need to. Aside from the financial burden, it's a rort. You're not "independent" when your landlord is paying your insurance and maintenance, and you're not "free" when you can't even change the curtains or doorknobs without their permission.

  • Hearthstone on 17/01/2022 - 06:23

    There is no financial trap, there is just lack of planning and self control

    there is nothing wrong with credit card or buy now pay later, you can use a lot of these services to your advantage
    for example I only use buy now pay later when they offer extra discount for pumping the purchase through bnpl payment

    credit card I got a Citi Premier which they offered me fee free for life and I got reward points using it so I put everything through the credit cards
    paid off each month and get rewards points for it, that work out to be a thousand worth of bunnings vouchers or equivalent each year free.

  • YepYeppers on 17/04/2022 - 18:11

    AfterPay

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