Since our topic this week is credit, it would be pretty reckless if we didn't take a day's post to hazard against reckless use of credit. Nothing makes payday less satisfying as knowing you have to spend the whole check paying down credit cards.
Create a budget that supports your values and follow through by keeping your spending in check. Implement a cooling off period for purchases over a certain amount. Sleep on it. Don't let credit be like this cow I came across in Alabama. Out of the pasture and looking for trouble.
Here's one tactic I use, which may not work for everyone, but I'll share it anyway. When I'm on Etsy--we all know I get on Etsy--I find things, countless things, that I just adore. There are cute cards, wooden boxes, old books, chunky oversize knit blankets, you get the picture. And I want them all. So I put them in my shopping cart and keep shopping. Once my eyes are tired of screen-staring, I click on my shopping cart and look at the total. Regardless of how much it may be, less than $10 or more than $100, I go through each item and decide whether I still want it. How often will I use it? Do I have a place for it really? Do I need it? Is there room in my budget, or have I already spent that month's allotment? Is it more important to me to buy it or is it more important to me to own a house one day? Inevitably, I end up deleting almost everything from my shopping cart...and, if I'm honest, I usually delete all of it. It's just not worth it to me.
Maybe that's an updated version of window-shopping.
Whether you're prone to impulse-buying or pinch pennies like a pro, I hope you enjoy today's throwback to 1999 when Nancy heard an economist tell her just how much Americans were spending. Spoiler: she was shocked.
Recently, I heard an economist state that Americans spend, on average, 105% of their income. Surely, I misunderstood. I asked him to repeat the statement. He stated that American spend, on average, 105% of their income.
How do you spend 5% more than what you have coming in? Simple. Just say, "Charge it."
Americans have become a debt-laden society. We don't just live from paycheck to paycheck anymore. We live from minimum payment to minimum payment. Our standard of living is higher than our parents, but we are living on the edge. Bankruptcy is one small missed payment away and planning for the future is totally out of mind.
Our parents sacrificed and deprived themselves to give us everything we wanted. And we have learned our lessons well. We have bigger homes, fancier cars and more gadgets than we know what to do with. We eat microwave dinners and drink instant coffee. Life in the fast lane has led us to expect instant gratification. And we wonder why our children are so spoiled.
There is a push in our society to live on credit. Every day, I receive solicitations in the mail for credit cards. All I have to do is sign on the bottom line and return a card. I get "checks" in the mail that are actually cash advances. Just sign and I'll have all the cash I need.
Each night, our dinner is interrupted by telemarketers offering another avenue of credit. Every time I sign onto my computer, I see a dazzling screen offering me credit.
The message is that there is no end to the availability of money. It's a bottomless pit.
It's a pit, alright. A deep, dark, can't-get-out-of-it-with-a-bulldozer pit. Spend yourself into debt because you can't wait one more minute for that thing that you just can't live without. That thing that ends up in the back corner of your closet. Instant gratification leaves you empty and can leave you in deep financial trouble.
One step too far
And now, the final blow: The IRS has just announced they will start taking payments for taxes by credit card. And they'll only charge you an extra 2.5% fee for doing it. This is insanity. All the government is doing is putting the collection burden on the credit card companies. And these companies are more than willing to take this on because of the big interest payments they'll receive.
Some people say charging your taxes is better than having your wages garnished. Some people say you can use your tax bill to build up frequent flyer miles.
Some people say this will stop those awful IRS agents from going overboard.
I say hogwash!
Paying taxes is a civic responsibility. It is not an unexpected expense. It is a certainty. The very people who will take advantage of credit cards to pay their taxes are the ones least able to afford to do this. This will only delay the inevitable and exacerbate their situations.
Over the last two weeks, I have met with two families with similar situations. Both had an aging parent. Both families thought of their upbringing as "meager." Both talked of their hard-working, self-sacrificing parents. And both sets of children were shocked to learn their parents had managed to tuck away hundreds of thousands of dollars on limited incomes.
They lived on less than 100% of their income and saved the rest. Their homes were paid for. Their cars were paid for. They used credit cards sparingly and wisely.
There is a lesson to be learned here. 100% is more than enough for anyone.
--Nancy Lottridge Anderson, Mississippi Business Journal, March 15-21, 1999