When a place to live is a way of life

As I’ve mentioned before, I live in a Connecticut city that is convenient for people who work in New York. Naturally, over the years property developers have seized on this and erected various apartment buildings within walking distance of the train station, many of which market themselves as “luxury” complexes.

A home would seem to me the type of good that stands on its own merits, the demand for which can’t be impacted much by clever marketing and hype. Though I’ve never been a home owner, I’d assume the main factors people take into consideration in making a purchase would be things like the quality of the construction, the attractiveness of the school district, property tax rates, the prevalence of crime in the area, proximity to public transportation, etc. That’s different from a car, for instance, which is a good that lends itself to all sorts of marketing and branding opportunities that don’t really have much to do with the car’s specs or performance. For many of us our choice of car is about style and personality. The point is that it seems easier for an individual, rightly or wrongly, to make a public statement about oneself to others by means of a car than it would be to signal the same thing by one’s choice of apartment building.

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The tyranny of bad personal finance

A loan with no interest? That pretty lady with the cash makes a strong case.

A loan with no interest? That pretty lady with the cash makes a strong case.

If you work in Midtown Manhattan like I do, you may have seen this sign. It’s for a pawn shop which has employees man street corners in the area holding up this advertisement. Since I started working in Midtown a few months ago, I’ve been fascinated by it, because I think it captures a lot of what’s wrong with personal finance in America.

The reason this sign is so spectacularly horrible is that it combines the concept of “liberty” with a too-good-to-be-true offer of a no interest loan. It asks of the passerby, Why are you toiling away, living so meagerly, while you could have freedom by means of a fistful of cash?

Of course, money doesn’t buy liberty, at least not a complete sense of liberty. But even more basic than that truth is the fact that there is no such thing as an interest-free loan, at least not one offered by pawn shops that intend to, you know, stay in business. The concept of “no free lunch” applies very well to finance: you have to pay something in order to borrow someone else’s money. Usually that something comes in the form of an interest rate, but it can also be a fee, something you already own, your labor, whatever. In this case, it’s probably a fee. So though there’s no interest rate on the loan, you’d better believe you’re paying something to borrow the money.

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