Training the next generation of foolish Ponzi borrowers

In its simplest form, a personal Ponzi scheme is borrowing money to pay debt service: acquiring new debt to pay old debt. It’s a path to disaster.

Carpe diem — “Seize the Day” — The first Ponzi

Have you ever wondered why people make foolishly irresponsible financial decisions? Sometimes the mistakes are made in ignorance as people learn from their own mistakes, but sometimes this ignorance is willful and people don’t want to learn a truth that might adversely impact their pursuit of short-term gratification.mini_bernie_maddoff

People make bad financial decisions because they want to pursue their short-term (and short lived) pleasures at the expense of long-term goals and wants. People want instant gratification, and lenders learned to use this instinct to enslave people from a young age. Not long after people discover debt, they also discover the “sophisticated” financial management technique known as Ponzi borrowing.

Personal Ponzi Schemes

What does it mean to run a personal Ponzi scheme? Aren’t Ponzi schemes the advanced financial management crime of sophisticated money managers like Bernie Madoff? Not really.

A Ponzi Scheme is any investment where the returns come not from the investment but from the capital contributions of new investors. If you change the terms slightly, a Ponzi Scheme is also any debt where the payment of debt comes from borrowed money rather than current wages. In that respect, personal Ponzi schemes are easy to begin and grow. Anyone can borrow money to pay debt, right?

The first step toward going Ponzi is to embrace a lifestyle choice of instant gratification. Some Millennials already learned to be completely self indulgent, and the “experts” are teaching others how to do the same.

If You Have Savings In Your 20s, You’re Doing Something Wrong

Lauren Martin, Sep 16, 2015

Lauren Martin is a Senior Lifestyle Writer at Elite Daily. After graduating from PSU, she moved to NYC to write fart jokes at Smosh Magazine. Making her way to ED, she now writes riveting commentary on nude pics, condoms and first dates.Absolutely-Fabulous-HELOC_approval

I don’t have any savings, but I also don’t have any wants.

I don’t know about you, but I like to enjoy my life. I like to go out to eat, buy clothes I don’t “need” and spend money with friends on memorable nights out.

This goes back to a piece of advice a very successful friend gave me: “Don’t save money. Make more money,” he nonchalantly stated, pushing me into a taxi.

Nobody in the history of the world has ever increased their income faster than their ability to spend it. The world is full of pro athletes and lottery winners who end up broke and bankrupt shortly after wasting their windfalls.

Unlike most things people tell me, this advice did not go in one ear and out the other; it stayed with me and changed the way I look at everything from my career to my savings.

Before this piece of advice, I was frantic. I was always doubting and always feeling guilty. I lived in the most exciting city in the world (also the most expensive) and had yet to experience it.

I was trying to save, which meant trying not to eat. I wasn’t going out with friends, had yet to go to a club and had never seen the inside of a taxi.

I couldn’t enjoy my life because I was too busy worrying about my bank statement. I was too busy watching my savings instead of savoring my youth.

stupid_and_irresponsibleNeither extreme is good. As both Aristotle and the Buddha pointed out, a happy life is lived at the middle ground between the extremes.

Why did I feel so guilty about spending money on myself and my life?

When did our 20s start to feel like our 40s? When did we get weighed down with the same pressure and stresses as a woman with four kids and a second mortgage?

We don’t have kids. We’ll be renting for the foreseeable future, and we have no problem eating McDonald’s when we’re skint.

She will certainly be renting if she isn’t saving.

I’ve recently figured it out: This pressure, this third-party stress, is ingrained within us. It’s this looming doom our parents carved into our unconscious, only to come out anytime we make an impulse purchase or have to spend the night without Netflix.

In other words, she was raised with good morals and a proper understanding of what it takes to succeed in life.

But like most things our parents have ingrained in us, we must consciously work to push it out. Because while they may have the best intentions, they don’t always have the best insight.

Wow! Just, wow.HELOC_Shopping

They want us to save because it provides us with a safety net, but that’s exactly why we shouldn’t. Their need for us to have a safety net is just a giant metaphor for the difference between our parent’s generation and ours.

Her sense of entitlement is shocking.

They were getting married at 20 while we’re just getting our first apartments. They were saving for kids while we still want to be kids. We’re on different schedules, different paths and totally different savings plans.

We’re taking our time growing up, refusing to be shackled by mortgages and diapers. We’re not trying to live with safety nets; we’re trying to live on the edge. …

But she fully expects that safety net to be there when she fails.

When you’re too worried about your bank statement, you’re not making your own

When you live your life around your retirement fund, you may as well retire now. You can’t make a mark on the world if you’re too cheap to live in it.

Refusing to give yourself the luxury of enjoying your money negates the whole point of making it.

If this were a parody, it would be genius, among the best I’ve ever read; however, she is serious in her advice.stupid

When you’re saving for yourself, you’re refusing to bet on yourself

People who are saving in their 20s are people who don’t set their sights high. They’ve already dropped out of the game and settled for the minor leagues.

WTF? People who are saving in their 20s are the only ones with any chance of reaching the major leagues. People who don’t save will never create the opportunities to swing for the fences.

Your 20s are not the time to save; they’re the time to gamble. $200 a month isn’t going to make the dent that a $60,000 pay raise will after spending all those nights out networking.

LOL! Networking? ROFLMAO!!!

When you have something to bank on, you have nothing to reach for

When you have nothing to lose, you have everything to gain.

You’d be surprised at how cautious people get with just a few thousand in the bank. This isn’t the time to safeguard — it’s the time to bet all your chips and hope to make it big.

When you live your life by numbers, you strip yourself of poetry

What memorable experience does money in the bank give you?

Owning real estate is its own rewardIf you save enough, money can buy you experiences not available to those living paycheck-to-paycheck.

How well-rounded can people become sitting at home, watching their limited funds gain interest?

Life is to be lived, not watched from the inside of your rent-controlled apartment.

When you die, you can’t take your money with you.

When you’re acutely aware of your mortality, it makes spending money that much easier. Those who don’t plan for the future aren’t planning for their death.

I hope they are planning on a life of work or poverty in their senior years because that’s what awaits them.

When you deprive yourself, you don’t learn how to TREAT YO SELF

It’s good to be cautious and plan for unexpected events. It’s also good, however, to learn how to release and destress. Everything works out, and if you’re smart, able and had a job once, you’ll have one again.

Don’t waste your youth worrying about expenses when you should be worrying about experiences.


When you care about your 401k, your life is just “k”

When you’re 40, you’re not going to look back on your 20s and be grateful for the few thousand you saved. You’re going to be full of regret.

You’ll regret the experiences you didn’t take, the people you didn’t meet and the fun you didn’t have because you were too worried about a future that came and went.

Since Ms. Martin has so eloquently prepped her audience on how to think and behave irresponsibly, allow me to complete their training, and their journey to the dark side will be complete.sophisticated_borrowers

Going Ponzi

The Ponzi lifestyle is a slow seducer offering tempting pleasures. Most people take cautious steps toward the Ponzi lifestyle, but once people with the mindset exemplified by Ms. Martin discover Ponzi borrowing, they often embrace it as a sophisticated financial management technique.

Introduction to Ponzi

Ponzi borrowing is the practice of borrowing money to make debt-service payments. For example, credit card companies accept cash-advance checks from other credit cards as payment. By borrowing from one credit card to pay another, no wage income is required to pay the bills; thus it’s free money.

A Taste of Ponzi

Ponzi_wineEveryone should try paying credit card bills one month with borrowed money. Once people discover how painless the process is, they often eagerly embrace it, particularly if the debt is held against a personal residence that goes up in value, providing more free money.

The Comfort of Ponzi

Once people discover Ponzi borrowing, their stress levels often go down because they never have to worry about having enough money to pay the bills. It’s far easier to simply borrow more money than working hard and trying to earn more money.

The Sophistication of Ponzi

The best part of going Ponzi is the smug sophistication Ponzi borrowers feel. Ponzis watch others work hard and sacrifice, yet Ponzis don’t believe they have to. Ponzis believe their sophisticated financial management techniques make them intellectually superior to the fools who work to save money rather than spend it. Plus, Ponzis get to live better on less income, so they are smarter, more financially sophisticated, and they live a better life.

What’s not to like?boiling_debt_oil

Ignore the weight of Ponzi

At some point, the growing pile of debt starts to cause worry, but this shouldn’t be a big concern. Ponzis have faith that some lender somewhere will extend them the credit they need when they need it. Faith is a powerful antidote to foolish concerns about hitting a credit limit.

Outspend the Joneses

Truly successful and abundant people are concerned with impressing the neighbors or keeping-up-with-the-Joneses. Spiritually evolved people elevate themselves above others and seek to elicit jealousy. The jealous procure an enduring power; through consumerism and comparison, they revel in the emotional payoffs when  other people want what they have.


What kind of life do you want?

I had fun in my 20s. Not as much as many others around me, but I never felt my life was particularly out of balance. I emerged from my 20s with an advanced degree, a decent job, and by today’s standards a small amount of student loan debt.

About a third of the population lives like Ms. Martin suggests, spending every penny as it comes in. This group will spend their senior years working and complaining about how little Social Security provides them. The group that learned different lessons and made different choices will enjoy a stress-free retirement with a much higher standard of living.

How much are you willing to sacrifice today in order to enjoy a better tomorrow?

[hat tip to Ben Lane and Hamilton Nolan]

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