My experience is that they're just bad with money.
They only look at the monthly cost. There's no consideration given to the lifetime cost. Sometimes it's an inability to make the calculation, sometimes it just never occurs to them, and sometimes it's deliberate avoidance.
Further, when examining the monthly cost, it's often done with an eye towards the most optimistic scenario. "I make X in a good month, I spend Y if I eat mostly ramen, therefore I can afford to pay X - Y per month on my new toy." There's often no consideration of normal fluctuations, let alone emergency expenses.
The above probably comes across as blaming the poor, but I really think a lot of it comes down to education and culture. People just aren't taught what these deals really cost, or how to budget, or how to spend less than you earn. And then it's hard to have crap furniture and a junky car when your neighbor, who you know makes no more money than you do, has a nice new couch and a sporty car.
I've seen this in action. I've lived it a little, but fortunately not much. I'm trying real hard not to be disparaging even though I may not have completely succeeded.
Our culture (and the culture in the US even more so, apparently) is very focussed on consumerism. Couple this with a bad educational system and a very liberal attitude to markets and this outcome shouldn't come as a surprise to anyone.
Indeed, and bad in the sense that it generally doesn't teach this sort of thing. Or prepare individuals sufficiently deal with a lot of life situations.
But at least they know trigonometry! (If they even graduated higschool)
I know a guy who is smart, well educated and gainfully employed, yet he cannot do financial math for his life. I used to try to educate him about these things but after a while I gave up. He was either unable or unwilling to learn those lessons.
Well. In this case, he may just don't want to care too much about financial math because he does not have any financial issue pressing him to consider that part.
Paul Erdős might not care about his own financial status as well, but that does not mean he will pay all he has to buy an iPad.
It could be, but there are a frightening number of people out there who earn big incomes but still live beyond their means and aren't able to do the math (or make the changes) needed to fix the problem.
It's surprisingly easy for this to be the case. I'm not particularly great with my salary, entirely because I don't have any pressures. I'm in my early 20s, near the 6-figure threshold and it's easy to fuckup. You think, well I should be living in a nice place, I make enough money right? So you lease a penthouse. So you've got this nice condo, you need new furniture, right? Then your car you've had since college starts acting funky, so why not just buy a new one? Been there, done that. I mostly broke even on my expenditures and maintained my savings, less a downpayment on a new Civic, but you could see how things could go wrong when you get into that mentality. Now consider the similar case but with folks with little earning power. Worst case, I could break my lease and live somewhere cheaper. Worst case, they're on the streets.
They only look at the monthly cost. There's no consideration given to the lifetime cost. Sometimes it's an inability to make the calculation, sometimes it just never occurs to them, and sometimes it's deliberate avoidance.
Further, when examining the monthly cost, it's often done with an eye towards the most optimistic scenario. "I make X in a good month, I spend Y if I eat mostly ramen, therefore I can afford to pay X - Y per month on my new toy." There's often no consideration of normal fluctuations, let alone emergency expenses.
The above probably comes across as blaming the poor, but I really think a lot of it comes down to education and culture. People just aren't taught what these deals really cost, or how to budget, or how to spend less than you earn. And then it's hard to have crap furniture and a junky car when your neighbor, who you know makes no more money than you do, has a nice new couch and a sporty car.
I've seen this in action. I've lived it a little, but fortunately not much. I'm trying real hard not to be disparaging even though I may not have completely succeeded.