Credit cards are so dangerous because it erases the need of keeping up with how
much cash you have on hand.
Which is the money you have available to spend now without borrowing any
money. Over the years the lines have become blurred between what is actual
cash on hand and cash on credit.
The credit card companies wanted it to get this way, because they understood
from their research that individuals were spending about 15% - 40% more on their
purchases if they used a credit card.
Spending cash on credit or spending money you don't currently have is a very
dangerous habit to start and to break!
This seems so simple and easy to explain but I've tried telling my friends and
family about it and they just don't seem to have an understanding about how they
have been trained to have an opposite feeling towards spending money they
don't have yet.
Most people use a credit card with the purpose of not having to carry large
amounts of cash. Most people start out using their credit card and paying all or
most of their balance off when they get the monthly statement.
Soon after they start either get another credit card or they max-out their current
card and they get another credit card. Regardless of the reason they are starting
to get in the habit of spending money they don't have. Usually they will start
paying only the minimum payments because they haven't taken into account all
of their other bills and living expenses.
For most people this is the point of no return, because they have gotten
accustomed to a certain lifestyle and they are unwilling to downgrade their
lifestyle. So the next step is to go out and get more easy credit.
For some weird reason they never realize that they are spending future income,
i.e. income they haven't earned yet on current purchases using credit.
So the next phase in the transformation of their mindset is the ability to make the
minimum payments. Instead of saying to themselves can I afford this, they say"can I make the monthly payments?" If they can they will buy it.
Now I'm speaking from personal experience. Before my wife and I stopped using
credit we wouldn't even think about all of our other monthly payments we would
just ask ourselves if we could handle that specific monthly payment.
If we thought we could we would buy it. Looking back I explain this type of
reasoning as "we'll always find a way to come up with it" reasoning.
We've all been taught that no matter what, as long as we were hard workers
somehow someway we would make things work out. And honestly because of
the positive mindset things usually did workout. But what happens when there’s
an emergency? The car broke down, medical expense that's not covered by
insurance, dental bill, job loss, etc.
What happens then? Most start to use the easy credit or credit cards to pay the
bills. This is the start of the downside of the use of easy credit and credit cards.
It's called "debt surfing". Borrowing from Peter to pay Paul.
My advice to you and I'm speaking from personal experience, start your financial
life over and forget about what people may think. |
