A Texas woman racked up huge debt from cosmetics and Pokémon cards while spending 20% ​​of her income on car payments.Hammer responds


debt-driven consumption

Avery likes to splurge on cosmetics, Pokémon cards, and live concerts, all while paying a large monthly fee for his car. Unfortunately, some of these items have become too expensive in recent years.

According to Apollo Global Management, the average price of a concert ticket soared from $90 in 2018 to $120 in 2023. However, many younger fans end up paying higher prices on the resale market, where tickets can sell for thousands of dollars depending on the artist's popularity.

These dizzying prices have not dampened Ivory's enthusiasm. Despite all the debt, she plans to attend more concerts later this year.

“I'm going to meet 21 pilots and Melanie Martinez,” she told Hammer. “I'm so excited.”

But she couldn't afford those concert tickets, so she signed up for various buy now, pay later (BNPL) schemes.

Research from the New York Fed shows that “financially vulnerable” borrowers (borrowers with credit scores below 620 and who have been denied credit in the past year) are more likely to subscribe to multiple BNPL plans.

Combined with her passion for Pokémon cards and cosmetics, Ivory's expenses often exceed her modest annual income of $44,000. This meant that several of her bank accounts were regularly overdrawn, and some of her credit cards had outstanding balances as high as $5,000.

Avery's biggest financial burden is her Toyota Camry. The outstanding balance on the car loan is $31,972, and her monthly payments are $652. However, Avery's income cannot sustain her current payments.

“Twenty percent of your take-home pay is spent on this car,” Hammer calculated. He believed the car was only worth $21,000, meaning it was flooded with at least $10,000.

He warned that Avery's situation was spiraling out of control, and she acknowledged her lack of financial knowledge.

Financially naive

Avery's financial naïveté and poor mental accounting were at the heart of her growing debt load.

She claimed there was a “way” to manage her various accounts and work through her pay schedule to maximize her credit score, but Hammer discovered she was borrowing money from some accounts to pay off others.

“You're not taking advantage of credit, they're taking advantage of you,” he said. “They own you.”

To make matters worse, Avery admits that she rarely monitors her account.

“To be honest, I never really checked my finances,” she said.

This is not uncommon. According to a financial literacy survey conducted by the World Economic Forum, as of 2024, only 50% of U.S. adults will have the skills needed to manage their personal finances.

Fortunately, Hammer believes it's not too late for Ivory to save his situation. He suggested replacing her car with a cheaper model and sticking to a strict budget – meaning no unnecessary expenses – to pay off her “bad debts”. If she starts “grinding” immediately, he believes she will be able to lift the burden in two years.

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