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How to Identify a Money Fool

A fool and his money are soon parted  

We live in a wicked world. Our quest for wealth largely depends on smart financial decisions we make throughout our lives.Our financial habits play the key role to shape our financial well-being.

I wanted to narrate two examples to show how most businesses thrive by preying on the low financial intelligence of a money fool.

They fall into low payment trap.

Last week I received several calls from the local Honda dealership. Apparently, a sales woman was trying to talk to me about a fantastic deal on a new Honda Accord. After several voice messages, I returned her call to find out about this time-sensitive fantastic deal.

Me:  Hello Lisa. I am returning your call about the new Honda Accord.

Lisa:  Thank you. I have an amazing deal for you. You will love it.

Me: Great. What is it? I am very happy with my Honda that I am driving now.

Lisa:  Well, I can offer you a superb deal to drive away a brand new Honda. And I know that you will love it. How much do you pay monthly?

Me: Um, $550 per month.

Lisa:  What if you can drive a brand new Accord with the same payment. Wouldn’t you love to do it? You really deserve it.

Me:  Really? How’s that  possible? New Accord with all the features should be way expensive than what I drive now.

Lisa: I can stretch payments for up to five years. With your trade-in value, you won’t have to pay anything out of your pocket. Isn’t that awesome? You will be making same payments, and driving a cool car.

Me:  It would be awesome if you can keep my payment same. By the way, I don’t owe anything on my car. I always pay cash. So, here’s the deal. Since I’m impressed with your offer, I am going to come now. I will trade in my car and drive the new cool Accord as long as you keep my payment same, which is nothing. You can stretch the term to five years. Are you excited?

Needless to say that she hung up. I am still waiting for her call to get my new Honda Accord. I am optimistic.

There are two  kind of people: Those who pay interest (AKA money fool) and those who earn it. (AKA wealthy)

They have low financial intelligence.

A friend of mine buys home appliances and electronics in bulk from major liquidators around the nation. He offers lease purchase to retail customers through his retail stores.

I visited his store as I wanted to buy several flat screen TV sets for my hotel. I noticed that he had advertised this flat TV set for $19.99 per week lease to purchase option after one full year for $1.  I also noticed that he was getting good response for these TV sets.

Me:  This is incredible.  At $19.99 per week, it costs $1039.48 to own this flat TV set.

Friend:  That’s correct. But, I am taking risk with these people. They pay me $19.99 deposit and $19.99 first payment in advance.

Me: Anyone can buy these TV sets from Amazon or Best Buy for much less than $500 on any given day. And prices are falling.

Friend:  You are absolutely right.

Me:  What is your cost?

Friend:  You won’t believe it. It’s $80 per unit.

Me: What kind of fool would pay more than a thousand dollars for a $80 TV set?

Friend: People who want it now; and who can’t wait till they have money.

You can become rich if you learn to earn interest and delay your sense of instant gratification. There are too many money fools to make you rich. I guarantee it!  

Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like. — Will Smith

Readers: Have you dealt with a money fool lately? What was your experience and lesson learned?

(Photo Courtesy:Phil Shirley)


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Comments (43)

people who borrow to buy or (same thing) buy on time are basically saying:

“Oh, this TV (or whatever) costs $500? Gee, I’d much rather pay much, much more!”

My dad used to buy a new car every five years. He’d pay cash and as soon as he drove it home he’d begin making monthly saving deposits toward the next one. Interest was being paid, but not to the bank. It was being received from the bank.

That’s smart Jim to deposit payments and wait till you have enough cash to buy a car, or — for that matter — anything else.

I’ve met a couple. One fellow I know seems to want to keep moving homes. Closing fees, moving expenses, new furniture, time off from work…. none of that seems to want to enter his noggin for consideration.

Money fools are plentiful in this wicked world 101C! :)

When I first moved out on my own I wan’t brand new furniture, so I decided to go to rent a center. I paid probably close to $1500 for a what I am sure is a $300-$400 couch. I’ve paid the price of not wanting to wait. It was actually a good learning experience for me, because I will never do it again.

Smart thinking Katie. We all have made mistakes in our lives. Money fools keep making it repeatedly. Rent-a-center is in business for long time. That proves my point. :)

With today’s rediculously low rate of return on investments, paying cash is definitely the way to go. However, when I purchase something on credit, I compare my rate of return with the interest rate I’m being charged.

Currently, I have an investment account that pays me 5% on my cash. I purchased a new car recently and financed 50% at a rate of 2.5%. I’m earning 2.5% more on my cash is this case so it makes sense.

That’s nice JW. However, the gist of this article is not to spend anymore money on stuff that goes down in value(liability). It’s even worst to pay interest on these things. You’ve made wise decision if indeed you need to buy a new car. But, in the example I cited, I was lured into buying a new car that I don’t need. :)

Hi JW….

cash earning 5% is exceptional these days. can you share with us how you have it invested?


It’s an employee benefit savings account. I wish I could find external accounts offering the same rates, but of course, that’s unheard of these days.

One wonders how a fool and is money got together in the first place……….

Anyway, Shilpan, another great post!

That’s certainly something to ponder. In most cases, fool is spending money before he has it. A sure way to invite misery.

lol. Our stupidity makes me laugh sometimes.

A better question I have is this type of deal immoral? I’ll eventually write a post about peer-to-peer lending but I’m not sure that’s moral either. Should I willingly help somebody go into debt to pay for something?

I know the burden that debt played in my life and I’m not sure it’s very moral to help other people do the same.

It’s a great business idea though….

I agree with you Jason. I wouldn’t do this business for the reasons you’ve stated. Sadly enough, these kind of businesses prey on the ignorance and foolishness of those who don’t know what they are doing.

Ha – these are great! The first one cracked me up. She must have been pretty confused by your response! The second one has always been very interesting to me. I’ve never understood how Rent-to-Own or Payday Advance places that charge ridiculous premiums continue to exist. But then I remember that there are a great deal of “fools” that support this market, and thus money is made. Great write-up!

I had fun talking to Lisa. Agreed that Rent-to-Own centers exist because of those who can’t wait to spend money they don’t have. :)

The Honda saleswoman in your story assumed that you were one of those naive customers with little or no financial education.

The problem with many of these companies is that they assume that everyone is financially unsavvy. On the contrary, people are more savvy today then they were years ago. Unfortunately, there are still far too many people who fall for these so-called “great deal” sales pitches, and end up paying for it big-time in the future. And, it’s large due to their financial ignorance and need for instant gratification.

Well said Anthony, as always!! I don’t think I can add any more to your thoughts.

good point Anthony….

…and I’d wager the saleswoman herself was equally financally naive making Shilpan’s response all the more confusing for her.

Agreed. She was baffled. She didn’t understand why I wanted to pay cash when the dealership was offering very attractive rate. :)

Loved the stories from the trenches 😉
I loved the punch line too. Nice read. For me it’s simple… if there is doubt then there is no doubt, i walk away. I keep asking questions until i get answers, if i don’t get answers i have doubts, and when i have doubts there is no doubt, i walk away.

I cherish your wisdom, Alik :)

So true!
I drive by a cash advance place on the way home from work every day – and every single day, there’s people in there standing in line. I look at them as I drive by and wonder what their story is… I wonder how on earth they’ve ended up there. The fees are insane!

I also think about these folks. If only they can understand that happiness has nothing to do with spending money you don’t have. Thank you for stopping by.

We like to laugh at one of my co-workers who insists on having ALL of the newest tech gadgets.. An iPod 1, 2, *and* 3?? A new PSP, and then a PS Vita. And he has to have that new Mac Book, right?

I know this guy doesn’t make any more money than I do, so he is no doubt a money fool.

He certainly has all the qualifications of a money fool Jefferson! You can improve your finances simply by learning NOT TO habits from this guy. :)

I am pleased to say that I stay away from those people! Best. Pic. Ev-ar. at the top of this post. You couldn’t pay me enough to wear that outfit.

I agree with you AJ. It’s best to stay away from those who can influence you negatively.

I cringe every time I drive by a rent to own store. I can’t believe there are people that actually pay those ridiculous prices!

I agree with you Paul. It’s insane to invite slavery for the momentary pleasures.

Would not buying clothes from outlet make you a money fool? they have insanely good prices compares to the mall.

Agreed, but focus ought to be more on the big ticket items like cars, electronics etc. IMHO

Ha! These people in their fancy clothes are such good negotiators that they will agree to pay twice as much to have it now. These foolish behaviors can be contagious though, so it’s best to stay away.

Well said John. Only thing they don’t know is how not to mortgage their freedom. :)

The TV thing was crazy. THe other thing is that people just don’t do the math sometimes because that takes time and they want it NOW.

It’s all about the payment syndrome. What seems cheap on a weekly basis adds up to a big number over the time.

Another one is refinancing a 30 year mortgage when you have 28 years left on your current mortgage. After closing costs and adding another 2 years of payments, you are oftentimes losing money on that deal.

Absolutely. Mortgage brokers advertise low interest rates to lure those who do not take time to calculate cost of refinancing.

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