This blog post was initially going to be about the necessity of a credit card. I experienced an incident with my daughter at a local car rental place that left me feeling that credit cards were essential.
I teach my children to stay out of debt and here we were being told that they could not navigate in society without it. I left that place thankful that I had my last two credit cards, and advised my daughter to open up a secured card to avoid a repeat scenario. I decided from then on, I would teach responsible credit card behavior instead of abstaining from credit cards.
Let’s be honest, no one plans to get in overwhelming amounts of credit card debt. In fact, all of my clients stated they opened a credit card for emergency purposes only. The problem is, emergencies are subjective. If teaching responsible credit card behavior worked, then why is consumer credit card debt at an all time high?
Today, I realized that teaching responsibility is important, but teaching abstinence is mandatory. In fact, being completely out of debt is not an elusive dream, it can be done! Close your eyes and think about it. How would your life be different if you had no credit card payments? There are people who are living that way, and they are average working people like you and I; and guess what, they rent cars-hassle free!
I take it back, you do not need a credit card to navigate in this society, you need cash, and lots of it! A credit card is other people’s cash on steroids. You’ve got to jump through hoops to get it and pay a hefty price to use it. Should life happen such as a job loss, or medical emergency, and you cannot afford the payments, they will make your life a living hell. Therefore, why not have your own cash on steroids? So guess what I did, I shredded my last two credit cards!
Credit cards are for people who do not have cash. Many are advised get credit to build credit. Herein lies the problem; you only need credit when you do not have cash! What if you saved the cash to make the purchase? What if you had the cash to buy that furniture, pay for that plane ticket, or respond to that emergency, why would you need a credit card?
Now I know you are wondering how to live in these United States without a credit card; Here are some tips:
- Develop a budget. You will not know where your are going without a map. Your budget is your GPS (Global Positioning System). Make sure you do a monthly budget and stick to it. This will reveal if you have a cash flow shortage or a spending problem. That will also inform you if you are using credit cards to solve one or both of those problems.
- Save money. It is important that you incorporate savings into your monthly budget. Try to start with 10% of your net earnings, and increase from there. If you cannot start with 10%, start with 5%; something is better than nothing. The end goal should be a savings account with 3-6 months of expenses.
- Begin to use cash. Using cash forces you to take notice of how much you are spending. Studies show people spend more when using credit cards than cash. You should withdraw cash for budget line items that are not paid automatically from your checking account like food, gas, clothing, lunches, and personal care items.
- Identify why you are using credit cards. Is it a cash flow problem or a spending problem? If so, then you need to do something to increase cash flow, decrease spending, or both. You may need to get a better job, a part-time job and decrease expenses, such as cable, cell phone, or groceries. An honest budget will help you identify the leaks so you can begin the patchwork.
- Commit to never using credit again. Cut the cards. Yep, I said it. Shred all of them, and begin a debt-elimination plan. You probably will not pay them off as quickly as you charged them, but make a pledge to yourself to live in peace, free from debt and get your entire family on board.
Credit cards are a crutch. They do not allow you to take responsibility for handling your money. Trust me, if you have the cash, you do not need credit cards.