There has been an insidious practice going on for decades. That is the practice of transferring wealth from the lower classes to the upper classes. The movement started subtly, but it has escalated dramatically over the last decade.
For a generation, there has been a push for normal consumers to consume more, update what they have, and modernize items that are still functional. If you are old enough, you remember the must-have avocado-colored refrigerators that became “out of style” and needed to be replaced by must-have copper-tone-colored refrigerators that became “out of style” and needed to be replaced by the must-have almond-colored refrigerators, and so on. Needless changes in appliances, fashion, automobiles, and even furniture drove the economy forward while depleting consumers’ bank accounts.
Then there is the “You deserve it” campaign, fueled by high-interest-rate credit cards, easy-to-obtain loans, and now BNPL companies like Klarna. These vehicles change the physical presence of money to an abstract concept. They removed the friction of taking money out of your purse or wallet. Now all you had to do was tap a card or fill out a form. It became easy to spend “a little more” to get something perceived as of higher value. You wanted to spend $100 on a winter coat, but the $250 one is so much nicer! Use your credit card. You live paycheck to paycheck, but don’t your kids deserve that $10,000 trip to Disney? Use Klarna. Your neighbor just got a new car, now you want one too, but they are so expensive. The salesman will help you out by lowering your monthly payment by extending your loan to 8 years. Who cares that the interest rate is 20%? By the way, the average car payment is now $767/month, the average loan term is around 6 years, and 35% of car loans are now over 6 years. Think about that, then add costs such as repairs, normal operating expenses, and insurance.
Planned obsolescence is another method to get you to spend more. In 1924, the companies Philips, Osram, and GE formed a secret group called the Phoebus Cartel and reduced the lifespan of lightbulbs from 2,500 hours to 1,000 hours. They fined each other for manufacturing longer-lasting bulbs. It is known that Henry Ford would send his engineers to junkyards to see which components of his cars lasted the longest, so he could shorten their lifespans.
My house was built in 1984, and I bought it in 1989. The former owner left the original almond-colored fridge. I felt I needed a stainless steel one, so I moved the old fridge into my basement, where it served as a second fridge until last year, when it finally failed. That was over 40 years of service. I’m currently on my 4th stainless steel fridge upstairs, and one of them lasted only 3 years before I had to replace it.
If you have a perfectly good Windows 10 computer, you are now out of luck, as Windows 10 is no longer supported. Just upgrade the software? Well, probably not, since your device likely doesn’t have the newer computer chips required for an upgrade. You will need to send it to a landfill, even if it is working fine. You will be forced to buy a new computer.
I have heard the same for cars, which have become ever more complicated with features that most don’t need or want. Major components like the CVT (transmission) regularly fail, with astronomical repair costs. Some feel it is just easier to buy another car after a catastrophic failure. They will roll their negative equity into their new car loan, placing an even greater debt burden on themselves.
Companies are making it ever more impossible to repair things. Do you want to save a few bucks and replace your iPhone’s battery at a non-authorized repair shop? Good luck; it will never calibrate as well as one that was more expensively replaced at Apple. When you go to Apple, you may be told that it would be just easier to buy a new phone for $1000. Want to get that failed CVT transmission replaced at a better price by going to a local mechanic? Well, that may not be possible, as the install requires “calibration” using a computer and very expensive, exclusive software that only the dealer may possess. I had a stove that was around 10 years old that stopped working. When the repairman came out, he noted that the problem was the main computer board. The bad news was that those boards were no longer available. I had to buy a new stove. My mom used the same stove for 25 years, and it then moved with us to become a basement stove in our new home. It was very simple and 100% mechanical. It just kept on working. Her simple stove and my computerized one did the exact same thing: they cooked food. However, mine was unfixable. Was that worth a digital display? I don’t think so.
We are constantly barraged by ads, with the average consumer seeing anywhere from 4,000 to 10,000 per day. They are everywhere, from social media sites to email to text messages to regular media to posts that look like content but are actually ads. They all want you to buy items you don’t need and likely won’t make you happy beyond a short dopamine burst when you buy and receive the product. Psychologists call this the Hedonic Treadmill. You buy something and feel good. That fades, so you buy something again and repeat the process over and over. Each hit has a smaller happiness return, so you need to buy more and spend more. Can’t afford it? Use your credit card!
We are moving into a new phase of selling as we are all now being monitored and cataloged. Devices like computers and smartphones record our searches, the web pages we visit, the posts we write, and how much time we spend looking at each item. We are conned by influencers to buy products, and by advertisers who push us to do the same in any way possible. We buy unnecessary things on credit cards that have an average interest rate of 23%. The average consumer has around $11,000 in credit card debt. If their credit card has a 23% intereste rate, they will owe an additional $18,000 in interest if they make the minimum monthly payments. Think about that: that $100 item will actually cost you $280, and it will be long gone by the time you pay it off.
We are constantly being psychologically pressured to buy, often for items we think we must have but that have little ability to improve the quality of our lives. Money is being siphoned from those who have less to those who have more, and they use that money to influence our politicians to escalate this process further. That is certainly the case with the “Big Beautiful Tax Bill,” which gave some small, very temporary concessions to the average citizen, but permanent, large tax benefits to the rich. How did this do this? By taking away money that helps the less fortunate. Cuts in SNAP, cuts in Medicaid, cuts in lunch programs for kids, cuts in hospice care for the poor, cuts to agencies that keep us safe, and so on. Everyone is not a welfare queen; the vast majority of people are just trying to get by. However, it is convenient to find a negative poster child if you want to divide the country. How sad it is that it is so easy to hate.
Our current government has eliminated extended student loans for many expensive-to-obtain professions, including advanced practice nursing, physical therapy, occupational therapy, respiratory therapy, physician assistant, speech-language pathology, architecture, and social work. If you are not wealthy, you may need to dash your dreams or subject yourself to predatory private loans. Beyond the impact on the student, this result is the overall reduction in the number of these professionals who better our country with their skills and training.
There is another wealth drainer that has entered the picture: the subscription service. This device isn’t new, but it has grown and mutated over the last decade or two. In the past, we may have had a newspaper or magazine subscription. Every day or month, we would receive a tangible object at our home. That seemed worth it.
When I was growing up, virtually all television was free (with advertising). We only had a few channels, but they were enough. Cable TV was reserved for rural parts of the country where TV signals were weak. Cable was then a subscription service that used large antennas to receive weak TV signals and rebroadcast them to consumers who would otherwise be unable to receive any TV. In the 1970s and 1980s, a new type of cable TV was introduced. Exclusive channels available only with a subscription. Now, you need cable TV to watch the latest documentary or TV show. Something that was once free now had a charge. Yes, there was the promise of more choices, but I remember many times when I surfed through all 100+ channels only to realize there was nothing worth watching. I gave up cable TV over 10 years ago and have not missed it.
Cable has been replaced by streaming services. Netflix was under $10 and offered an amazing number of movies and shows. Over time, the price has crept up, and we now pay almost $20/month for less content and have to subscribe to additional streaming services to supplement Netflix.
I’m a photographer, and in the past I used Adobe products to edit my photos. Adobe Photoshop was an expensive program, but once you owned it, you had it for life. In 2013, Adobe moved to a subscription model in which users were charged monthly to use the software. I saw a dangerous trend and switched to different software. Adobe has continued to push this trend with escalating prices and hidden fees that can add up to an astronomical amount if you decide to cancel your subscription. Part of the subscription deal allows Adobe to use your images to train Adobe’s AI software. You pay to use the service, but Adobe uses your creative content for free? Yep.
The popular word processor, Microsoft Word, launched a subscription program in 2011. Now there are many subscription programs, including Apple products that were once free, like Pages and Keynote. Companies may argue that this means that you always have the latest and greatest software version. However, word processing programs were perfected decades ago. Most additions amount to options that are neither needed nor wanted.
Everyone wants to get into the subscription model as consumers continue to rent items they previously bought. Here are some other egregious subscription examples.
-BMW now charges $18/mo if you want their seat to heat. $10-$15/mo for the steering wheel to warm, $15/mo for automatic high beams, and $50/mo for adaptive cruise control. My former 2014 Ford included all of these features in the purchase price.
-My Subaru requires a subscription if I want to remotely open my car doors with an app. That subscription is also necessary to receive service reminders with important prompts, like when it is time to change the oil. My former 2008 Honda Fit included free service reminders.
-Want to use your Samsung TV to display art? That will cost you $50/year to view their curated JPEG images.
-On Tinder, but not being noticed? For a mere $499/mo, you can become an elite member with a chance that Tinder will push your profile a bit more.
-Pantone colors are the standard in printing. They are often used to maintain a brand’s integrity. You always see the exact same blue and yellow when you look at a Best Buy Ad, or the exact same red in a Target Ad. Those are Pantone colors. Many use Adobe software to create all sorts of printed material that must be standardized across many documents. Pantone colors were available in the past, but are now a subscription if you use an Adobe product. Now you have to pay an additional $15/mo, or all current and past work will turn black. This is on top of the standard Adobe fees, which now can be as much as $100/mo.
-HP printers tried to charge home users a per-page subscription to use their printers. You could buy the printer, have ink in it, and still not be able to use it if you reached the number of pages your subscription allowed.
-Do you want your $100,000.00 Mercedes to have full acceleration? Releasing the remaining 25% of the engine’s power will cost you $60- $90/mo. That is just a software switch. The subscription doesn’t add any additional hardware to the car.
There is also a model for subscribing to use a car. This would be different from a lease.
Most of these newer subscription types charge you for things you once bought and used forever. Now, you have an everlasting ongoing charge.
When I was growing up, my parents operated on a cash-only basis. Bank cards were being introduced in the 1960s, and many companies were mailing them at random. I remember my father cutting them up and throwing them in the trash. The concept of automatic credit just didn’t make sense to him. We didn’t update things; we fixed them. When some things broke, we did without. When clothes became worn, we patched them. We had food, shelter, and clothing, and I never worried if there would be dinner on the table. It was always there. We had an old fridge with a tiny freezer. Yet my mother managed to feed 7 people every day. That fridge was only updated when a relative replaced their larger fridge sometime in the 1970s. Why did they update it? Because it was seafoam green, and that color had gone out of fashion. We continued to use that fridge for years and celebrated the fact that the freezer compartment was not only bigger, but even had its own door.
My dad usually bought my uncle’s old cars. They weren’t stylish, but they ran. If you wanted coffee, you didn’t go to a cafe; there was a pot brewing on the stove. Birthday cakes came from our Sunbeam mixer, not a bakery. A winter coat may be a Christmas gift, and that was if you were lucky. You learned how to delay gratification and didn’t depend on a new purchase to make you feel better about yourself.
If you look at all of the above consumer tactics, they either make you feel bad about yourself or what you have, or they offer a solution. Solutions often for a problem that you didn’t realize that you had.
It is easier to extract the maximum amount of money from a consumer if you can separate them as much as possible from the actual process. Tapping a credit card is not the same as pulling bills from your pocket. Buying something on credit eliminates delays and allows the consumer to spend well beyond their means. Subscriptions of any type are easily forgotten, and it is simple to slowly increase their costs over time. The average person pays over $1000/year in subscriptions, and that number feels low to me.
It is critical to remember that all of these services exist to benefit shareholders, not the consumer. They are designed to make you spend more and to increase the cost of an item well beyond a normal purchase price. Klarna, a BNPL service, lends you money that you pay back in installments. The service is free, or is it? If you default on making a payment, you will be charged a late fee. How many miss a payment? Over 40%. If you need to take out a longer loan, be prepared for an interest rate up to 35.99%! That is higher than credit cards, which have an average interest rate of 24%. Those companies want you to be late on payments, as it means more money for them. They get richer, and you get poorer.
Debt traps you. People stay in jobs they hate, live in places they would rather not, and feel hopeless even when they earn a decent salary. Take a massive mortgage, two huge car payments, all the regular payments from utilities to health insurance, and add Klarna debt, credit card debt, and payday debt. Mix in the costs of kids’ summer camps, sporting camps, music camps, and all of the expenses needed to raise a child in modern times. Add loans needed to remodel so you can keep up with the Joneses. Add student loans or unpaid medical bills from an emergency room visit. Mix in all of the subscription services, some that you still pay for but have long forgotten. Now sprinkle in inflation, increased gas prices, higher taxes, and utility bills. You can see that a simple problem that costs money to fix can throw a typical family into economic ruin. Cars break down. Car repairs are often well over $1000, and many are much more. Only 45% of Americans have enough savings to pay for a $400 debt. Think about that, it is easy to spend $400 at Costco; most emergencies are much more expensive than that.
So what can you do?
-First, you must do a fearless inventory of your debt. Write down where your money is going.
-Start to reduce your expenses. Eliminate all unnecessary costs. Get rid of all unused or rarely used subscription services. Look at ways to reduce your other costs. I have several posts on how to reduce expenses, a number of which emphasize simple tactics such as cooking at home.
-Focus on reducing your debt, rather than that next new purchase. There are many tools available, some of which are free.
-Remove buying apps, like Amazon, from your phone.
-If you decide to buy something online, institute a 24-hour wait period before you press the “buy” button. Before you press the button, ask yourself, “Do I really need this?”
-Move towards non-subscription models. There still exist non-subscription word processors, photo editors, and presentation programs. Over-the-air TV and radio are free. You can drive a car without heated seats.
-Consider eliminating subscription services that you do use. I currently have Apple News, which I like. However, I can get the same news for free by doing a little hunting and using free services, ranging from websites to over-the-air TV and radio.
-Avoid BNPL options like the plague.
-Consider putting your credit cards in a drawer, reducing their availability.
-Move more and more to a cash model. If you are using cash, you are forced to reconnect the product with the cost.
-Need a vacation? Save for it. Can’t afford Disney? Go where you can afford. Your kids will not be traumatized for life if they don’t have an audience with the mouse. Some of our favorite vacation memories involved camping trips.
-Use what you have.
-Stop trying to keep up with the Joneses. They don’t care.
-Stay away from influencers and reduce your overall screen time.
-Find free/low-cost experiences. Play a board game with your family. Have a potluck dinner party or movie night with snacks, or go to a free concert. Explore options like inexpensive plays at your local high school or college. Utilize your public library, which can not only lend you books, but also DVDs, magazines, audio books, and even music CDs (if you have a CD player).
-Check your credit card statement and think about each purchase that you made and how you may want to change in the future.
-Understand the psychology of selling. Understand that an unnecessary purchases will yield a very temporary “feel-good” impact. In the long run, they will likely make you feel worse.
-It is better to have fewer things of good quality than many things of poor quality.
-Critically assess large purchases. Do you really need a new car? Is there a more economical way to get that college degree? Do you have to update your furniture?
-Put your energy in people/relationships rather than stuff.
-Celebrate each day. Write a gratitude list.
Peace
Mike
