Thursday, March 27, 2008

How to Get in Financial Trouble!

Real or a lie?
If you crave luxuries in life like expensive watches, jewelry, designer handbags but cannot afford them - what do you do? You rent these luxuries, pay a huge premium and if you are truly addicted to your luxuries, you buy them. Is this an isolated phenomenon? According to Portfolio.com, this trend where people cannot afford to buy luxury items, so they rent is on the rise. Enterprises like Bling Yourself and From Bags to Riches, that specialize in jewelry-rental, handbags and other luxury good rentals are seeing an uptick in business.

So who is jumping on this financial runaway train? Presumably there are two kinds of customers lining up at these shops.
"Aspirational buyers trading up to a product or lifestyle they cannot afford or consumers who can afford to buy but want more choices."
Greg Shove, C.E.O. of Halogen Guides, a luxury-trend tracker

Is this bad financial judgment? Absolutely! You end up paying way more than most of these depreciating assets are worth. Not only is there a financial cost associated with such decisions, there is moral hazard. In my view - if you can't afford it, you really need to think hard about buying anything on credit or worse renting it. In other words this syndrome is called - living beyond your means. And when you exceed your financial limits - it can only lead to financial stress and pain.


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1 comment:

theWild1 said...

I know some people that live WELL above their means, and you just know it will come crashing down eventually.