Thursday, April 23, 2009

A Plan that Starts With Debt Isn't Much of a Plan

Hat Tip: Ateres

A reader kindly pointed me to this story on VIN regarding new wedding takanot in Belzer kehillot and Israeli Litvish Kehillot. YWN recently reported a similar story regarding the Belz community.

The Belz wedding plan has three parts:
1. A Gemach the will send $25,000 to each mechutan with a "easy payback" plan.
2. List of costs that that will be reduced, applicable to all.
3. Joint purchasing power to reduce wedding and appliance costs.

My reader was impressed, but I personally don't see a plan that involves the couple's respective families indebting themselves to a tune of $50,000 as much of a plan at all even if this "plan" is an improvement.

And I don't care that the $25,000 loan is interest-free. There is nothing "easy" about paying back a $25,000 loan, especially if you are the parent of a super-sized family and plan to be marrying off one child after the next child. The average Chareidi family in Israel is 8 children I believe. How many families can realistically pay back $25,000 or $200,000?

I HATE debt. If I were to write a takana regarding weddings it would read as follows:
  • Do not spend a penny more on wedding expenses than you have in currently available in cash.
  • Let modesty rule the day regardless of how much available cash you have.
How's that for a takana?


Tamiri said...

For many, many, many (did I say many) families in Israel, the installment plan is THE only way for them to purchase anything at all.
I am not commenting on this plan, just on how things are done in Israel. The buying power ratio to average earnings is pathetic.
Many of the rules of budgeting in the U.S., including sales and coupons and whatever don't apply here.
I also can't imagine anyone would need $50k for a wedding here. You can (probably, cause I haven't had the experience yet) easily get by with $20K without having to serve sardines on matza.

Tamiri said...

By "anyone" I mean a family without money to spare.

Jay(led) said...

When I grew up, saving money was a virtue. However, now when I stress that money needs to be saved even more than ever, what I hear in return is "why are you so cheap" or "where's your bitachon".

Where does this lead to? Well, we have a family wedding coming up and each of my teenage daughters are renting gowns that are cost more than $500 - that was not a typo - $500 each...just for a one-evening rental!

Although the baal simchah insists on paying for this egregious show of wealth, I heard over the grapvine that he is borrowing money to pay for this shindig. I am not allowed to open my mouth in protest by the various factions in the family who already labeled me as a "cheapskate" and one who "lacks in bitachon".

Aren't we living in (to quote the Gemara) an "olam hafuch". This is extreme madness.

And yes, you guessed correctly - I live in Brooklyn, where people spend money they don't have on things they don't need to impress people they don't like.

alpidarkomama said...

You can easily get by on $20K for a wedding???? Very easily!!!!! We "got by" on $5K, had 120 people, and trust me, everyone had a grand time.

A wedding dress can be had for $100, and donated afterwards.

I think we've gone mad.

WILD APPLAUSE for this new takana.

rosie said...

I made one of our children's weddings in Israel and it was very, very cheap. What was not cheap was getting the family to Israel and staying there. The young couple started life with used furniture and appliances.
To alpidarkomama, 120 people would be a small wedding to most large-family frum Jews. Part of the problem in making weddings in large families is that each parent of the chosson and kallah has numerous married siblings with children. Add that to their parent's generation and the friends of the chosson and kallah and friends of the parents and the crowd can be much larger. The obvious answer and the point of many of these takanas, is the limiting of who gets served a meal.
Jay(led), I can sympathize with you having also made weddings in Brooklyn, but anyway MAZEL TOV.!!!

Anonymous said...

I HATE debt.
ok-but keep un mind that the reasonable assumption of debt fuels greater economic growth both on a personal and community level.
Joel Rich

Anonymous said...

The 50K is not necessarily for the wedding. Alot of times the parents are expected to give a downpayment on the young couples apartment, and the young couple afford the important. So about 15K for wedding, 30K for aptmt and another 5 to fill the fridge. It's crazy that the parents buy the kids an aptmt, but that's the way it's done.

Orthonomics said...

I like ownership, although holding parents hostage to buying an apartment for shidduchim is a practice that should go the way of the do-do.

This whole system is showing itself to be more and more unsustainable every day. It is amazing it hasn't collapsed already.

Anonymous said...

"I live in Brooklyn, where people spend money they don't have on things they don't need to impress people they don't like."

That has got to be the most profoundly true statement I've read in a long time. That's the situation, exactly.

Ezzie said...

Friends stopped by Shabbos afternoon, and I mentioned some of the answers people were giving on the Jewish Economics Survey to what they felt were the biggest problems in the frum community and what advice they'd give.

My friend said "all those are good reasons, but there's really just one thing: 'STOP BUYING THINGS YOU CAN'T AFFORD!' Ugh."

Thinking said...

Sorry SL, but to understand the Takanas and why they work you have to have a little deeper understanding of how the Chassidish community works and how decisions are made. Belz is a perfect example of why Takanas like this work.
1) When the Takana comes from the Rebbe, they are kept. The only Belz wedding that will not follow the takanos are the rebbe's own. The reason being that everyone wants to attend the rebbe's simchos.
2) The amount that was set has to be one that would allow even "wealthier" families to keep the takanos without feeling that they aren't getting what they want.
3)You don't have to take the loans, but a g'mach is an interest free loan. If you do have to make 8 weddings over a 15-20 year period this might be a way of spreading the cost over a more manageable period of time. Think of a home purchase, who buys there house outright? It is just too much money to be able to come up with, but at least you don't have to pay interest.
4)There are some great pieces there that you have not highlighted. The "vort", the "aufruf", sheva brochos, limiting what shtreimels can cost (they can be in excess of $3K!)

IMO this takanos are amazing! And, unlike here in america, or with most of the litvish or mo world, they will be kept.

Orthonomics said...

Thinking-I never claimed the takana won't work. I am saying that Orthodox communities accross the board are far TOO addicted to debt. Yes, paying back $25K interest free is easier than paying back $25K on a credit card! But just like you note, the wealthy don't have to borrow. The man of modest means in the end still becomes indebted and still has to figure out to pay the loan back.

Limiting the price a streimel is nice. Getting rid of the extra parties is common sense (who has time for one event after another? especially when you have to find time to repay loans).

I am just here, once again, to promote my own view which is "We" are too addicted to debt!

Anonymous said...

Jay(led) - I am not allowed to open my mouth in protest by the various factions in the family who already labeled me as a "cheapskate" and one who "lacks in bitachon".[space]

Someone needs to remind them about the issur of relying on miracles lechatchila. Because that is, in essence, exactly what they are doing - relying on miracles.

Anon - ok-but keep in mind that the reasonable assumption of debt fuels greater economic growth both on a personal and community level.[space]

This isn't really true at all for most personal and community debt. On a business level, reasonable assumption of debt often fuels growth. For example, you borrow money to buy equipment and the loan costs you $1,000 a month, but the equipment produces goods that earn you $1,500 a month. But borrowing money to spend on consumption, like weddings, doesn't generate any growth at all personally, and hardly any growth at all at a community level. It does help support caterers and wedding halls, etc somewhat, but not much growrth opportunity.


JS said...

"This whole system is showing itself to be more and more unsustainable every day. It is amazing it hasn't collapsed already."

It hasn't collapsed because they keep finding suckers who donate money to these communities. I'm amazed that MO and other non-charedi Jews donate to these communities under the guise of tzedaka. In my view this isn't tzedaka it's fueling someone's bad habits - almost like giving tzedaka to fuel a gambling addiction.

Personally, I can't wait for this nonsense to collapse. My wife and I live frugally and save money so I couldn't care less what others do or what problems and stress they have from their "lifestyle choices."

What does bother me is when their poor behavior infringes on my trying to lead a good life. Yeshiva tuition is the primary example of this. Prudent, frugal people who work hard for a living subsidizing many people who spend and live lavishly.

How about a tekana saying this: "Debt may only be used to finance the purchase of a home or education." If an emergency arises (fridge breaks) gemachs should be set up to take care of this. There would be more than enough money for these emergencies if the communal money wasn't wasted on feeding 500+ people for 4-5 hours on a wedding. If you don't have the money, the tekana should be you have a small wedding where people bring food and music and liquor, etc.

Chaim B. said...
This comment has been removed by the author.
Ariella's blog said...

I completely agree with you. I would suppose, though, that people may think of it the same way they do of other large purchases. For example, man people take the finance plan to buy a new car or opt for a 2 or 3 year lease rather than saving up just enough to buy a used one. So it would be consistent for them to finance a more lavish event than they could afford to pay for out of pocket.
We know a couple that is actually well off who picked up some credit card debt when paying for their son's vort and wedding. They opted for quite a few extras, including someone of celebrity status in the frum world to sing at the wedding. They probably were sold on the "once-in-a-lifetime" argument that makes people think this is the time to lift all budget constraints.

I want to commment on where the money comes from but will do so on the next post where some people riased the issue already.

alpidarkomama said...

"To alpidarkomama, 120 people would be a small wedding to most large-family frum Jews."

Yep. This frum lady with a large family had a small wedding. Imagine that. :)

Ateres said...

Of course I agree with the principle that it is better not to purchase anything on credit except a home or well-planned, sound investments.

However, not everyone is as good at managing money as you are, and making a number of even simple weddings could eat up almost anyone's savings. Therefore people WILL go into debt to finance a chasuna, and the gemach allows them to do so without putting it on a credit card.

Also, many very frugal people, particularly in Israel it seems, simply do not have the money to save for weddings while trying to support their families. This definitely does require a change in the system, however it is unrealistic to expect wedding takanos to fix the whole system.

In fact, by making the takanos reasonable in the eyes of the community it is more likely that they will be listened to, which could perhaps lead to stricter takanos later.

Zach Kessin said...

What I want to know is where is the money for the loans going to come from. Someone has to put it up, and at $25K per kid that is a LOT of cash, maybe over a million, and it will need to have more added on a regular basis as there are no profits from interest and at least some percentage of the loans will not be paid back on time or at all.

The plan does not sound viable.

Zach Kessin said...

A very late comment, but I was thinking about this, where are they going to get the seed money for this. At $25,000 per family they will need tens of millions of dollars to do this on a community scale.

Secondly since this is an unsecured debt there is no way to enforce collection, so it is probably safe to assume not everyone will pay the loan back or pay it back quickly. So the fund will need to continue to raise money on a regular basis.

Orthonomics said...

Exactly, Zach. The "plan" is a bit like swiss cheese.