The UTruePay Blog

Following on from my first post about common sense, I thought it would be nice to elaborate on my feelings about the satisfaction relating to actually manifesting that common sense. In other words, the satisfaction that you get when you actually hand over the cash or transfer funds that your have to pay for an item in its entirety without credit cards and loans and overdrafts involved.

If you’re anything like me, you’ll notice that there’s actually a great deal of satisfaction for paying for something in full, in its entirety, on the day you take delivery. The reason is that it then actually belongs to you. It does not belong to the bank. There is no balloon, no residual, no interest charges, and no dreaded monthly repayment. The transaction is complete – it’s yours and no-one can take it away from you. And if it’s something you really desired, that’s a great feeling.

However, I recognise this is not always possible or indeed practical. People need houses, cars, food and healthcare (amongst many other things), and they need them legitimately and quickly. Responsibly-used credit facilitates these things (thankfully).

But more to the point, this paradigm of “no-credit” requires saving, and THAT requires patience and discipline – and there can be life-arguments (e.g. “we could all die tomorrow”) that mean sometimes you want/need to buy and experience things NOW, which perhaps you don’t have all the resources to afford. But after witnessing the heartache resulting from this global recession, I can see that many people used such life arguments unwisely, and the satisfaction they received from bringing forward their purchases was far less (and in many cases lost completely) than the satisfaction they would have received had they saved, waited and handed over the real cash instead.

A few years ago, I had friend who always said he would buy a Ferrari F40 (yep, not just a Ferrari, but an F40 – one of the top-of-the-line models). This had been a childhood dream of his, and he would literally obsess over it day after day, year after year. Now after years of graft and saving money, he reached a point where he could have quite comfortably financed (a portion of) the purchase of the car. We all suggested that he should – he could finally complete his dream! After all, he had worked, saved, grafted, and made some (frankly ludicrous) sacrifices just to get to this point. It had already been a long, tiresome slog. But he point-blank refused to finance any part of it. No, he wanted the satisfaction of cash. He would wait and he would complete his dream without the monthly payment and just hand over the cash. He said it would make the victory sweeter. It would make the car HIS, not the bank’s. We all thought he was crazy, to be honest. It’s not as if he wouldn’t pay back the bank. But there was no way he would do it.

And then one day, some time after he had first hit this point, a bright red Ferrari F40 came to our office, and I finally understood. A guy that would cycle to us to save money, even in the dripping wet, drove in, in his own Ferrari F40, and it was HIS! It was incredible. All his; all his effort, work, savings and graft. Not some bank loan. Not some balloon. Something real. Something with TRUE satisfaction.

At the end of the day, it was just a car (albeit an awesome one), but it was a fabulous moment for him and for us. In that brief moment, I understood completely why his dream could only have come true by doing it the hard way; the proper way. I understood how he must have felt handing over resources that he actually had, and how any other way would have spoilt it for him.

It was perhaps not so economically relevant a few years ago, but now, in this post credit-crisis world, this paradigm, which was mistakenly abandoned and forgotten, would do well to be remembered. It’s going to be much more satisfying if YOU really pay for it.

My friend still enjoys his insane Ferrari F40 every weekend but wants something faster!

Economists, politicians, financiers and people far more qualified and smarter than I am have given us all many detailed (and accurate) reasons regarding the intricacies of what caused the collapse of the global economy. No doubt, they’re all absolutely correct; but amidst “collateralised debt obligations” and “sub-prime securitisation”, I wish they would get down to the real heart of the issue in a way that applies to us all and that everyone could understand.

Essentially, people stopped employing common sense when it came to “buying things.”

Good old-fashioned common sense – having the resources to pay for a good or service in its entirety and on delivery. Common sense is spending a little less than you earn. Common sense is saving money (if required) to fund a big purchase, and it’s working a little harder to earn the money to pay for those things which are currently out of reach. It’s a paradigm that deep down we all know we should deploy whenever we’re spending money. Basically, it’s “cutting your cloth to fit.”

But along the way, it’s become massively overwhelmed by the excitement of the great facilitator – credit. Credit, when deployed with common sense, has many wonderful advantages (e.g. from funding new enterprises and developing businesses to genuine wealth creation and, quite literally, saving lives!). But in our Western economies, credit wasn’t used with common sense – it killed common sense. Credit meant that we could pay for items, lifestyles and consumption that we simply couldn’t otherwise (or actually) afford. We all knew what we were doing, but common sense was suppressed by the excitement of the purchase which credit facilitated. Our consumption lost all correlation with common sense – with the resources we ACTUALLY had at our immediate and current disposal. We abandoned common sense so much, that somehow, we even conveniently forgot that credit has to be repaid; effectively, that the credit we were using to fund our stupidity was the result of the common sense of many others – in this case, about 1.3 billion Chinese savers whose glut of savings was being loaned out to us by Western banks!

The financial trauma, wealth destruction, and most importantly, the emotional and personal heartbreak resulting from lost jobs, lost savings, broken businesses, depleted pension funds, shattered industries and debt ridden governments from this global economic crisis is all down to the collective absence of common sense.

It sounds so patronisingly obvious, but the next time we all hand over that credit card, sign that lease agreement, take out that mortgage, or apply for that loan – next time we (supposedly) PAY for anything, just consider whether the excitement that credit brings isn’t overwhelming our innate common sense. Because one thing is for sure: it’s so much more exciting to hand over the hard earned funds you ACTUALLY have, knowing there’s no interest charges, no default, no comeback and that it’s yours forever (instead of the bank’s) than simply handing over the common sense of people in a continent many thousands of miles away.