FOOL'S EYE VIEW
Does Your Lifestyle Make you Poor?

By Jane Mack (TMFJane)
September 24, 2002

The other day a friend was asking me when our new book was coming out. Yes, in case you haven't noticed The Motley Fool has just produced A Girl's Best Friend is her Money – on sale at half price if bought through the Fool and perfect for any woman who wants some financial independence and an even more perfect present for any man who'd rather like his wife/girlfriend/daughter to handle her money better... Etc etc etc.

Anyway, this friend was asking me what had set me on the road to financial virtuousness (!) because, she confessed, she was rather hopeless with money herself and didn't know how to stop running up her credit card. Every time she managed to pay it off, she promptly went shopping again although she has recently found herself modifying her behaviour because she's been shocked to discover that her new boyfriend is even more of a profligate spender than she is.

So I told her the one about putting a credit card into a bowl of water in the freezer – the one with the lowest interest rate, naturally –and chopping up the rest. If you accept that you have little self-control then you must surely remove temptation, n'est ce pas?

She hadn't heard of that one and thought it was a rather good idea. If you've got to wait several hours for your one and only credit card to defrost, then you've gained a bit of time to ponder on whether you really and truly want that Prada handbag/DVD player/long weekend in Paris. Well, of course you want it – you wouldn't be standing there running the ice tray under the hot tap in an effort to get the credit card out, would you? Or as one enterprising Fool once admitted, you wouldn't have ensured that you had carefully placed the card the right way up in the tray so you could simply read the relevant numbers through the ice!

It rather defeats the object though.

The trouble is we live in a society where, for reasons I don't quite understand, not only do we want to keep up with the Joneses but we quite often succumb to the hard sell. In fact, last night when I went to collect my battered old Peugot 205 from having its annual medical, I was very tempted to whip out my chequebook to buy a stunningly beautiful Mercedes that was sitting on the mechanic's forecourt. If I had accepted his offer to drive it round the block, I might very well have fallen for it. Fortunately, I managed to remove myself from the object of my desires and then spent the rest of the evening trying to analyse why on earth I wanted a rather flashy, mint condition Merc in my driveway when I only ever use my car to potter off up to the local supermarket every now and then.

It's being able to define the difference between want and need, isn't it? I wanted the Merc for some reason – maybe I wanted my friends to be envious - but I didn't need it.

I was still pondering this thought earlier today when the post arrived. According to the bank that caters for 'life's little surprises' my excellent payment record means they are pleased to offer me a loan that will help me really enjoy the next five months. The fact that I haven't had a loan for years makes me wonder how they know I have an excellent payment record and, frankly, I think I'm quite capable of enjoying the next five months without their help but apparently I can have a cheque today and if I borrow £4,000 it'll only cost me £97 a month. The added bonus is that that I only need to make one repayment in the first five months and I can have a month's payment holiday every single year for the term of the loan. They'll just add the payment holiday money on to the back of the loan for me. Aren't they nice?

I can easily see people falling for this one. Five months is a long way away – as long as I make one repayment, I don't have to worry about paying any of it back until next March! Hey, I could buy the Merc and have plenty left over for a fortnight's holiday in the Canaries over Christmas.

However, if I borrowed that £4,000 then by the end of five years I'll have paid them £1,771 in interest for the privilege – and that's without taking any payment holidays after the first five months. I could buy a second-hand Merc for that! It's a good job I'm a bit suspicious about hard selling and that, at heart, I'm not really into flash cars or keeping up with the Joneses. And besides, I know there are far better deals around that charge half of their 14.9% interest rate.

Talking of the hard sell, as far as our new book is concerned, I am quietly confident that there are rather a lot of women out there who may not necessarily want it – but they surely need it – my friend included. There's a difference!

More: Personal Loans | Credit Cards | A Girl's Best Friend is her Money