I've got a good'un!

[merry3irwin]

My parent's friends live in Melbourne. I  live in Sydney. Houses here are considerably more expensive, which makes this story all the more unbelievable.

They are married with three kids. She doesn't work and he's a credit analyst making something like 160k/yr (dripping with irony). Up until a few months ago they lived in a four bedroom house somewhere in Melbourne (worth something like 500k). They sold it but didn't make too much of a loss on it. We were all having a conversation (my parents, them, and myself), and somehow their finances came up. Long story short, they are in so much debt they need to save up for purchases around 100 dollars. They need to save before making such a purchase! At this point they were actually smiling and laughing about this, all while I tried to hold my jaw up from disbelief.

The other week my mum tells me that they've moved. I rolled my eyes immediately. She went on to tell me that they upgraded to a new house worth 750k!!! And this is the kicker: The house is now so big that she can't handle the cleaning responsibilities herself. So they have hired not one, but TWO FRIGGIN MAIDS!! At this point I said one thing to my mum. " They'll be working until the day they die."

I still cannot fathom how it's possible that people can be this ridiculous.

[gooki]

Shakes head in disbelief.

[Hugh H]

Wonder what's the percentage of couples like this out there.

[Gin]

I have found that most people feel the need to keep up or be better than the Jones's.  There are other people who feel they will not live a long life so they live it up.  Sounds like your parents neighbors are more of the first group. 

[totoro]

Something does not add up here.

If they have to save for $100 purchases but can finance a $750 000 house -the math does not work - nor does it work for paying two maids. 

In Canada, at least, you need a percentage of cash for a down payment and there are limits on borrowing based on income. 

Seems unlikely they were serious when they said they need to save for $100 purchases.

[cdub]

They need to save before making such a purchase!

Well that part is actually a good thing... you should make sure you have the money for a purchase in cash before you buy it. Although that doesn't correlate with them buying a $750k house though.

[oldtoyota]

How can they buy a house if they have to save up for $100 purchases? Maybe they were deflecting how much they are worth or maybe they have other sources of income.

[LalsConstant]

I do not want to go into detail typing on a phone but I have known some people who were chronic debtors who would regularly make moves like this, where the math just did not add up yet it happened anyway.

First realize these people often misrepresent actual numbers.  This is not done out of malice or lack of arithmetic skills but out of rationalization.   When I was drowning in debt myself I floundered between poor pitiful me I can't improve my situation because of this excuse or that one and "that's only another 40 bucks a month I can afford it".

Depending on what mood they are in when they assign numbers to things you get different numbers.

Second people who stay in debt for a long time are often masters of using the system to their advantage.   I knew one fellow who was such a shrewd negotiatior with bank officers he kept his debt rotating for years without fraud.  I know more examples where the people just lied to get more credit (and rationalized doing so in classic white collar crime style).

When your whole life is debt you pick up some skills that are sometimes regretful and learn to perform amazing mental gymnastics

[merry3irwin]

Sorry guys, in hindsight I think the saving for $100 purchases might have been in insecure jest. They were no doubt in debt though. Sorry for the error, it was a few years ago.